President Obama took his case for jobs to Chattanooga, Tenn., yesterday, with an Amazon warehouse as a discordant backdrop. The president repeated his powerful case that to rebuild the middle class, we need a serious long-term strategy that includes investments vital to our future – in rebuilding our infrastructure, providing world-class education and training, capturing the lead in the growing green industrial revolution, seeding research and development in cutting-edge industries.
Obama is setting the stage for the next round of brutal budget negotiations that will begin when Congress returns in September. In the fall, Congress and the White House must find a way to agree on how to keep the government open and to lift the debt ceiling, thereby avoiding a global financial breakdown.
Obama is attacking the austerity politics that, although discredited in theory and in practice, remain the Republican fixation. He scorns the “meat axe” across-the-board sequester cuts that slash muscle as well as fat. He details vital areas for investment and jobs. He lays out various ways to pay for these measures, arguing correctly that the resulting jobs and growth will continue to bring down a deficit that is already half what it was as a share of the economy at its height, and coming down faster than any time since the demobilization after World War II.
Alas, in Chattanooga, the president also called for a “new grand bargain,” suggesting that the two parties work together to reform corporate taxes in a “revenue neutral” fashion – closing loopholes while reducing rates – so long as the money generated “from transitioning to a simpler tax system” be used “for a significant investment in creating middle-class jobs.”
Essentially, the president once more embraced the Republican position that corporate tax rates should be lowered and some loopholes closed in a manner that asks the corporations to contribute not one cent to deficit reduction or to vital investments.
But he suggests that the income generated in the transition – a small, one-time tax on the nearly $1 trillion companies have stashed in tax havens abroad to avoid paying any taxes, as well as revenue from corporations front-loading income to claim exemptions before they expire – be used to provide modest sums for infrastructure, education and the like.
Republicans, of course, rejected the plans out of hand. They want to take a meat axe to government services. They rail against any new investment in infrastructure or education or energy. They argue that not a penny generated by corporate tax reform should go to anything but lowering corporate tax rates. Corporate profits are now setting new records as a share of the economy. Corporations are sitting on some $2 trillion in cash. Multinationals have reported nearly a trillion of that abroad to avoid taxes. Yet Republicans continue to peddle that old trickle-down snake oil – the companies just need a little more money to begin creating jobs.
But Americans should hold onto their wallets every time the president starts talking about a “grand bargain.” Once again, the White House is offering a pre-emptive concession. The president previously embraced “revenue-neutral” corporate tax reform, instead of demanding that corporations pay their fair share of taxes. Now he’s endorsing some kind of one-time “fee” on the hundreds of billions multinationals have stashed or reported abroad to avoid taxes. The level of the “fee” is not specified, but is likely to be far lower than the normal tax rate. This constitutes a preposterous massive tax break for the very multinationals that have used tax havens and gimmicks to dodged paying their fair share of taxes. That’s like giving Mitt Romney a tax break for “wintering” part of his fortune in the Cayman Islands. Not surprisingly, Americans for Tax Fairness immediately chided the president for his concessions.
The White House essentially argues “Don’t worry, be happy. Republicans won’t accept this anyway.” The president is just showing that he is reasonable, willing to negotiate and demonstrating how extreme Republican obstruction is.
No question the Tea Party-dominated Republican Party is still in the midst of its Inquisition phase. But the White House strategy of preemptive concessions is remarkably wrong-headed.
It abandons arguments that the public should be hearing. The president is right to be arguing about jobs, even though Republicans dismiss him out of hand. And he should also be railing about global corporate tax dodges, and demanding that corporations as well as the rich pay their fair share.
Worse, eventually an agreement must be reached in the coming months to keep the government open and to lift the debt ceiling. The Republican would-be Torquemadas demand that the price of lifting the debt ceiling is repealing Obamacare. That is preposterous.
So the Republican leadership (something of an oxymoron these days) will have to cobble together an agreement that likely will depend on Democratic votes to pass the House.
They are likely to offer the president some mix of measures that he has endorsed in one negotiation or another – revenue-neutral corporate tax reform, a chained CPI that will cut Social Security benefits, raising the eligibility age on Medicare, means-testing Medicare, accepting a one-time “fee” for corporate profits stashed abroad – a massive tax break – and using the money to reduce the more ridiculous sequester cuts (particularly for the Pentagon). Then they’ll demand further concessions.
Every concession becomes the starting point for that final deal – from which Republicans then inflict further pain.
The president is right to make the case again and again for the investments we need to generate jobs now and build the foundation for a stronger economy long-term. But his call for a “grand bargain” and his pre-emptive concessions are a miserable way to set up the brutal face-off that will begin once more this fall.