As the much-hyped "fiscal cliff" looms, there is talk about "comprehensive tax reform" as part of a deal to achieve deficit reduction.
For Republicans and their allies who want to minimize the taxes paid by rich people, this is one strategy: Keep tax rates on rich people at historical lows while supposedly closing some loopholes. These loopholes may or may not be closed, or the changes may collect more revenue from people who are not in the top 1 or 2 percent. But the whole debate misses the boat in so many ways. First, the "fiscal cliff" is a scam. As a number of economists have noted, nothing much really happens to the economy if budget negotiations go into January. What does happen is the bargaining positions of the president and his Republican opponents shift in favor of President Barack Obama.Before the automatic tax increases and spending cuts kick in with the new year, the Republicans can say that Obama wants to raise taxes.In January, however, Obama can say, "I want to lower taxes for 98 percent of Americans, and the Republicans are holding your tax cut hostage to win more money for the richest 2 percent." This change of political terrain would also free hundreds of House Republicans who have signed the Grover Norquist pledge to not raise taxes, to make a deal.The idea that reducing the federal budget deficit or public debt should be a priority -- especially at this time -- is just wrong, as a matter of accounting and economics.Any deficit reduction that takes place while the economy is this weak will simply cause more unemployment and reduced income for Americans. And contrary to popular nonsense about America "ending up like Greece," the U.S. doesn't even have a public debt problem. Net interest on the federal debt is currently less than 1 percent of our national income, the lowest it has been in more than 60 years. And it's the interest burden that matters, not the big numbers like $16 trillion that are thrown around in scare stories.The real priority of both the lame-duck session and the new Congress should be creating jobs.We have more than 22 million people who are unemployed or underemployed, and the percentage of unemployed who are long-term (out of work 27 weeks or longer) has been at record levels.There is considerable research showing that unemployment lowers life expectancies, increases physical and mental health problems and divorce rates, lowers the educational achievement of the children of the unemployed and has other terrible social costs. There is no shortage of work to be done: Climate change is a reality, and the country needs to invest in its energy infrastructure to reduce fossil fuel consumption. This includes public transportation, the electrical grid, renewable energy and education.The government can borrow at almost no cost and can -- as the Federal Reserve has done to the tune of more than $2 trillion since 2008 -- even create money, with no ill effects in this weak economy. All that is lacking is the political leadership.Mark Weisbrot is the co-director of the Center for Economic and Policy Research.Have more to add? News tip? Tell us
