Thursday, September 8, 2011

Tax cuts for the middle class

By Bob Confer

In an attempt to stave off financial ruin and strengthen the economy, Washington has invested more than $2.5 trillion in the economy since 2008 in an ongoing series of bailouts that continue to this day. $1.6 trillion has been spent on the purchase of private-sector debt and mortgage-backed securities from private enterprises and Fannie Mae and Freddie Mac. $330 billion was dedicated to insuring bad debt and risky investments undertaken by those same enterprises. Over a half trillion more was put into the expansion of lending to the financial industry. It doesn’t end there: There’s still another $10 trillion in promised support out there yet to be utilized.

There has been so much attention paid to – and so much money thrown at – unscrupulous financial institutions that the powers-that-be seem to have forgotten about the most important part of our economy: the middle class. This has led to well-deserved derision from the people. Every time Washington has opened its wallet over the past 3 years, there has been a collective cry from the masses: “What about us?”

But, that question is a little disconcerting. We aren’t deserved of a bailout. No one is. Not the banks. Not the auto industry. Not any one of us. Bailouts are a recirculation of other people’s money or the creation of debt. It’s wrong to steal from Peter to pay Paul. It’s as equally corrupted to saddle future generations with mountains of debt. So, we can’t think of economic salvation in terms of unlimited unemployment benefits, tax credits, government-sponsored training and stimulus packages. If free money was wrong for the banks, why on Earth would it ever be right for us?

Instead of having access to other people’s money, we need access to our own money. That’s the magical elixir for what ails us. We’ve been told time and again that consumer spending makes up 70% of our economy. So, it only makes sense that the consumers be empowered to spend. To make that happen, we have to put more money in the pockets of the middle class. We needs tax cuts. Not gimmicky tax credits that require kids or mortgages. Not tax cuts that have a defined sunset just a few years down the road. No, we need honest-to-goodness permanent cuts of reasonable size.

To start, it would behoove Uncle Sam to cut the tax rates (and the accompanying federal spending) by 5 percentage points per each bracket. That would put an extra $2,000 into the pockets of a family that earns $40,000. A $100,000 household would have another $5,000 to spend. That would put billions back into the productive sectors of the economy (where it belongs) which would incite the sale, production and transport of an equal amount of products and services and, therefore, put people back to work. Then, they too will spend.

Spending begets growth, which begets more spending and growth. It’s elementary economics. Increased personal spending is the very best way - the only way - to jumpstart the economy and put people to work. It’s really that simple.

Why this hasn’t been done is utterly confounding. The furthest that Washington has gone with this recently is the temporary suspension of a portion of the Social Security tax. That was a flawed plan from the start because it was good for only one year and it cut the revenues for a Ponzi scheme already destined for bankruptcy.

It’s no wonder that the once-indestructible Barack Obama is suffering from low approval ratings as the unemployment rate lingers above 9% and families everywhere (both the unemployed and the underemployed) struggle to get by. It has become painfully obvious to even his most ardent supporters that the man doesn’t have a clue about what makes our economy work. Neither does our equally inept Congress. There’s little hope for our economy until the political class can see the economic value – and social importance - of the working class.

Bob Confer is a Gasport resident and vice president of Confer Plastics Inc. in North Tonawanda. E-mail him at


This column originally ran in the 12 September 2011 Greater Niagara Newspapers

No comments: