U.S. Tax Cuts: Will Obama End Up Like Toussaint L’Overture?

“The tax plan would extend all of the lowered income tax rates enacted under President George W. Bush, as well as the 15 percent rate on capital gains and dividends, which were due to expire at the end of this month. And it would set new estate tax parameters, including an exemption of $5 million per person, or $10 million per couple, and a maximum rate of 35 percent. All these provisions would last for two years. The estate tax lapsed entirely this year, but was set to return on Jan. 1 with an exemption of $1 million per person and a maximum rate of 55 percent. House Democrats were particularly infuriated by the White House’s agreement on the estate tax, which provides a more generous exemption and lower rate than many of them wanted.”

The Obama administration attempted to justify the extension with claims that that the compromise with the Republicans was the only way to get the Republican Party to agree to a 13-month extension of unemployment benefits for millions of Americans affected by the capitalist crisis. This was a hollow claim because at no point during the past two years did the Obama administration seek to educate the mass of the population on the real consequences of the sharp inequalities that enveloped the society since the dismantling of the safety nets of the New Deal of the last depression. There are those from the progressive camp who argued that Obama did not do enough to mobilize the ordinary working people against the Republican position of tax cuts for the rich. However, Obama had surrounded himself with the ideologues from Wall Street so that he (like Toussaint) believed that supporting the super rich would be the way to recharge the US economy.

TAXING THE POOR FOR FREE LUNCH FOR THE WEALTHY

According to the United States Government Accountability Office ( GOA ), two out of every three corporations in the United States paid no Federal income taxes between 1998 and 2005. These corporations had a combined $2.5 trillion in sales but paid no income taxes to the IRS. In the book, Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense (and Stick You with the Bill) , David Cay Johnson, explained in great details the numerous subsidies granted to the capitalists. What David Cay Johnson did not elaborate on was that on top of the subsidies for insurance companies, banks, oil companies telecommunications or pharmaceutical corporations, there was the major subsidy of the trillions of dollars spent on the military to protect this class. Despite the massive subsidies, the recklessness and chaotic nature of economic relations ensure that this system of capitalism generate repeated and severe crises. Under social democratic capitalism, there is a degree of social solidarity among the citizens provide the conditions for more regulation over capitalist enterprises and for there to be a higher degree of taxation for the capitalists so that the state can invest in social services such as health, education, social services and infrastructure. US capitalists eschewed the social democratic model of capitalism where there was regulation of the rapaciousness of the top capitalists. The US opted for the Friedrich August von Hayek version of capitalism that is based on unlimited free enterprise. This is the idea of trickle -down economics that believes that government should leave the economy to private individuals, and that cutting tax rates for the richest Americans will improve the standard of living for the working class.

Trickle down economics or supply-side economics is the old liberal version of capitalism that maintained that laissez-faire will benefit not just those well-placed in the market but also the poorest. After the economic crash of 1929, this liberal version of free enterprise was shelved only to re-emerge in the era of Ronald Reagan where the neo-liberal version of supply side thinking and economic planning was trumpeted with the view that increases in real gross domestic product are almost always good for the poor. According to this neo-liberal concept of economics and politics, reducing the top tax rate is supposed to lead to economic growth, prosperity, and overall income growth for all through the expansion of the economy with the creation of new jobs. However as Senator Sanders clarified, during the Bush years alone, some 48,000 factories shut down. The US society went from 19 million manufacturing jobs to 12 million manufacturing jobs.

All of the evidence from the Bush tax cuts proved just the opposite to the logic of trickle down economics. By every measure the economic situation has deteriorated for the vast majority of the population. This was at the same time when the top corporations were sitting on 2 trillion dollars that they were hoarding to use in the speculative market for derivatives.

Between 2001and 2003 the top 82 companies in the USA paid no income tax, though they earned $102 billion in profits. The figures from the Citizens for Tax Justice (CTJ) clarified that instead of paying $35.6 billion in income taxes, as the statutory 35 percent corporate tax rate seems to require, these companies generated so many excess tax breaks that they received outright tax rebate checks from the U.S. Treasury totaling $12.6 billion. Overall, data from the past 10 years strongly refutes any arguments that cutting taxes for the richest Americans will improve the economic standing of the lower and middle classes or the nation as a whole. At the same time the top 1 percent now owns more wealth than the bottom 90 percent. The US also successfully exported this brand of neo-liberal economic organization since the era of Ronald Reagan and Margaret Thatcher. This was the counter revolutionary era when the neo-liberal forces decided to wage an economic war against the poor internationally. The election of Obama was inspired by a revolutionary moment when the peoples wanted a break from this brand of counter revolutionary thinking.

The refutation of the trickle down philosophy as defended by President Barack Obama and the Republicans was clearly articulated by Senator Bernie Sanders of Vermont. Senator Sander stood on the Senate Floor for eight hours to outline clearly why another subsidy for the capitalist classes was not needed in the midst of a ‘great recession.’ His eloquence was backed up by the hard figures on the subsidies for the top 2 per cent of the population, whose income has tripled since 1970. Sanders spelt it out clearly that,

“It makes no sense to me to provide huge tax breaks for millionaires and billionaires while we drive up the national debt that our children and grandchildren will have to pay.”

The senator then went on to outline the trillions of dollars that have been doled out in corporate welfare for the rich. What is significant about this statement was the way in which Sanders, an independent socialist senator brought to the fore the reality that the tax cuts represent socialism for the rich. This is how America taxes the poor to offer unneeded free lunch to the wealthy.

SAVING A MORIBUND CAPITALIST SYSTEM

Our present global realities show that American capitalism is a moribund system. The tax cut for rich Americans is one symbolic effort to save American capitalism. Capitalism proves itself to be a system whose workings not only generate repeated and often severe economic crises. It also systematically shifts the costs of that instability down the social scale to the majority in the middle and the bottom. The current debate on taxes is indeed a distraction from realities of both controllable and uncontrollable factors related to the real economy and the “end” of the US consumption led form of economic growth which cannot be created again. Even if it could, the policies of saving the banks and allowing the wealthy to accumulate more wealth only makes it less likely that a consumption based economy can be re-created. The debate about taxes must transcend the revival of a moribund system. The debate should be centered on how to organize society for ordinary people and for the survival of planet earth.

A real debate on the economy needs to include a discussion of the massive military expenditures and the deployment of over 800 military bases around the world. This debate must also include a discussion of the prison industrial complex and the opportunity costs it places on society in terms of resources not invested in education and the millions of youths who are prevented from contributing to the real economy both in the short term (while they are locked up) and over the long term .

A real debate on the economy needs to include discussions about the fact that for decades now, wages have stagnated while productivity has gone up; but the benefits/profits were captured by the wealthiest. This fact of the super profits is another reason for the “break” in the ability of the economy to have sufficient demand. Of course we know that the only reason why this break did not cause a crisis a decade ago, is that the financial sector was able to create a “credit/debt” industries to allow the society to maintain the myth of consumption led growth, while at the same time having fewer total workers and less total wage income. It was this financialization of the system that hollowed out the real economy.

The financial crisis has forever broken this structure. The world has changed.

The realities of the current revolutionary moment dictate that the sustenance of this economic mode of organization is moribund. The urgency to address the global environmental crisis; the beginning of the end of a unipolar world, where the limitations of military might becomes more glaring; as well as the increasing need for a shared humanity in socio-economic organization of society are only few indicators of the non-sustainability of American capitalism.

OBAMA AND TOUSSAINT L’OUVERTURE

From all the economic analyses of 9 years of the tax cut, it is clear that the wealth of the richest Americans did not trickle down to the average America. Neither did it cushion the US capitalism from the economic crisis. It is therefore counterintuitive why the tax cut was an economic prescription. It is even more alarming that despite the economic doldrums orchestrated by the old policy characterized by this tax relief for the wealthy, the Obama administration is extending it by two more years. In the midst of the ‘economic recession,’ the tax breaks for the wealthy meant that the US society is sliding away from the model of safety net for the poor that was carved into the Social Security system of the New Deal. With every day of the economic crisis there is a further shift to an even more unjust economic system where it shifts more of its tax burden onto the shoulders of the majority of the working peoples, especially those at the bottom of the economic ladder. Along with this burden is the added confusion where sections of big capital mobilize poor whites to organize against their own interests. The political mobilization of the conservative forces have been so successful that the discussions on the Bush Tax cuts are carried out to bamboozle the ordinary people and to confuse the working people.

As Barack Obama is trapped by the ideal of liberal economic theory, a major question is whether he can save capitalism. Even a more urgent question is: like Toussaint attempted to take Haitians back to the plantations, would Obama’s attempt to save capitalism not take ordinary people back to the era of ultra-Reagonomics along with the cowboy-like military adventures? What is the moral justification for trying to save a moribund system by pleasing the financial oligarchs at the expense of the working people and planet earth? A serious concern is that if Obama displeases the people to please the capitalists, and yet is unable to satisfactorily please them he may end up like Toussaint L’Ouverture.

The capacity to reverse the political and economic power of the wealthiest US citizens and ensure that Obama does not end up like Toussaint depends on a level of political mobilization that has not yet been contemplated by even those critical of the administration.