Sunday, May 29, 2011

Eric Cantor on Taxes

Naturally, we already know House Majority Leader Eric Cantor's take on taxes: cut them, with special emphasis on cuts for the rich and for corporations. Yesterday's speech called for a 25% maximum rate, with the usual trickle-down rationale — let the rich and the corporations keep more of their money and they will, as Republicans like to express it, "invest in America." This is supposed to lead to rapid job growth.

As usual, the basic premise is fallacious. Top tax rates in the United States already are extremely low. Corporations are, in common parlance, "sitting on mountains of cash." Why? Thanks to low demand caused by high unemployment and concomitant excess productive capacity, it doesn't make sense to "invest in America."

As for wealthy individuals, they certainly are looking for places to invest the extra cash they pocketed thanks to the Bush tax cuts and their unconscionable extension under Obama. The sad fact, though, is that American business and industry doesn't offer very satisfactory returns on investment these days. Surplus funds are more likely to go to faster growing parts of the world like India and China, used for commodities speculation, or sunk into the new social media bubble. (Social media companies, by the way, provide very few new jobs.)

What we need — contrary to both Republican and Democratic talking points — is more government spending, because the private sector just is not coming through. If we can pick up employment — in infrastructure improvement, education, health care, environmental preservation, and other areas where we need lasting, long-term improvements — demand for private sector goods and services also will grow.

What we don't need is European style austerity programs. They're only making things worse in Europe, and they are beginning to have the same effects here.

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