Stimulating the Rich

A couple of weeks ago, the House of Representatives passed (218-216, largely along party lines) a proposed package of "economic stimulus" measures, strongly supported by Bush, that adds up to a stunning array of gifts to big corporations and the wealthy.

It contains $70 billion worth of corporate tax cuts this year alone, geared to big rather than small companies, and yet another "rebate" payout gimmick to individuals, this one attached to cuts that, again, are overwhelmingly skewed to benefit middle and upper income taxpayers. (In case you didn't notice, this year's $300 "rebate" gimmick was actually an advance payment on your income tax bill for next year. Seriously. Your overall tax bill did not change a bit--only the timeline with which you shelled out the money.) For the laid off and unemployed, nothing.

One of the most notable provisions of the newly passed House bill would repeal the corporate alternative minimum tax, a 1986 law intended to close loopholes big corporations had been using to escape paying income taxes through the use of deductions. The House measure would not only end the law, but refund to corporations taxes they have paid as a result since 1986.

According to the Congressional Research Service, of the $25.4 billion the repeal and resulting refunds would cost this year, $3.3 billion would go to seven companies, including IBM ($1.4 billion), General Motors ($832 million), and General Electric ($671 million). Another provision would reduce the top rate on long-term capital gains taxes from 20 percent to 18.

Opponents of the bill and even some Wall Street analysts and economists have pointed out, to no avail, that giving cash back to companies that already have lots of cash on their books will not stimulate the economy. Indeed, the recession seems to have been brought on by too much corporate spending on computer equipment, new factories, new store outlets, etc. There's simply not enough consumer spending going on to support all that extra corporate capacity.

Hence the idea of tax breaks for consumers. We're supposed to take that money and spend it to help boost corporate profits and use some of the excess corporate capacity. But this year's $300 per taxpayer rebate had no measurable effect at all in boosting the economy, even before September 11.

Democrats in the Senate are pushing for spending some money on government infrastructure projects (like roads, schools, public transit, railroads, etc.), giving tax rebates to the working poor, and extending unemployment benefits. The White House and Senate Republicans are open to the last two proposals, but are adamant about not spending any more on infrastructure (unless you count $300 billion in excessive defense spending as "infrastructure"). While Senate Democrats have almost successfully fought against the repeal of the corporate alternative minimum tax, some type of AMT "relief" is still likely to pass, along with other gifts to big businesses. And other tax breaks for the wealthy, like cutting the 27% tax rate down to 25% next year, are almost a given.

There's plenty more, some of which may not survive the Senate, but which sets the tone, and the agenda, for how Congress is responding (after they come back out from under their beds) to the first direct, truly devastating attack on the U.S. mainland in nearly 200 years. We will eradicate terrorism by helping big companies make more money. Funny how this works. I'd love to see the flow chart on this one.

On the same day that the House passed its pig-feeding law, Bush Administration officials began testimony in House and Senate hearings in support of an effort to underwrite the insurance industry. That industry took a huge hit with the September 11 attacks, but it also happens to be flush with money. And the Wall Street Journal reported last week that insurance companies have been using September 11 as an excuse to jack up insurance rates, thereby increasing their profits even more.

Nevertheless, lawmakers have agreed that federal support is necessary to help bail out insurers in case of catastrophic losses from future terrorist attacks in this war. But the Bush proposal is for the federal government to cover 80% of all attack-related industry payouts from the very first dollar. It limits overall losses the industry could incur in 2002 to $12 billion; after that, the feds cover everything. And if there are no attacks, of course, the profits will be enormous. The approach is essentially socialism for the rich: the public assumes the risk, the private sector gets any profit.

All of those tax cuts for the wealthy (aren't we all supposed to be sacrificing?) and sweetheart deals for big corporations exacerbate the tremendous hit the federal budget has already taken from September 11's fallout and the ensuing war effort. It's telling that our political leaders--especially Republicans--can't think of any other way to respond than their inevitable instinct to give their country club buddies more money, while freezing out not only the working people hurt by the recession, but even those hurt as a direct consequence of September's attacks.

If this was a day in the life of Capitol Hill, and we've been promised a long war, then the public had better get busy. The last time a foreign power launched a wholesale attack on our mainland, in 1812, Washington DC was sacked. It's happening again.