Both the right and left are angry with President Obama for the way bank bailouts were carried out. Almost everyone knew the banking system had to be popped up with government money after its operators nearly destroyed it and the rest of the economy as well. But the bailouts came with no strings. In essence the banks got public money to do with what they liked. And in case you haven’t noticed, what they liked has made banks (and bankers) richer and the rest of us less so.
Which brings us to a major Republican issue in this election. Perhaps their biggest issue. The theme that more income tax breaks must be allocated to the richest among us because this will lead (supposedly) to investments that produce jobs and greater prosperity for all.
A bit of good economic policy? No. Hogwash, actually. But for the purposes of this article let’s accept this notion as fact with one necessary corollary — something we learned the hard way from the bank bailouts. Since more income tax breaks will put hundreds of billions more into the pockets of the rich ($37,000 more per million of income by some estimates), and this new wealth will be ‘rescued’ from the public purse, it must all go directly into job creation. And at tax time, the recipients of this largesse will have to fill out a new tax form proving as much, or return their new tax break money to the Treasury
The manner in which the further enriched rich create jobs via new job creating income tax incentives would of course be critical in whether or not they have to return their new tax breaks. The money can’t just expand their personal consumption by say, adding extra rooms to their Palm Springs estate and employing workers to do the job.
Yes, this is a kind of job creation, But any group getting income tax breaks would have more to spend on personal consumption, and there is no special benefit in just giving rich folks more to spend on themselves. And since proposed extra income tax breaks for the rich will have to come at the expense of smaller government programs for middle class and poor Americans which reduce their own consuming capabilities, just giving the rich more to live bigger at others’ expense is at best a zero sum game and at worse plain morally despicable.
More money for the rich via income tax breaks that go into stock market churning, or into investments in private equity and hedge funds, are also questionable job creators. They might led to more jobs. They might not, and in fact lead to more layoffs of existing jobs.
How, then, could new income tax breaks for the rich and very rich qualify as specific, provable, job creation for the purposes of an IRS audit? It’s impossible to say. The truth is that this is a purely faith-based bit of economics.
Americans voters would have to say to themselves, in effect: “We trust you, rich folks, to take all the extra money we’re giving you at the expense of many existing government programs that help the rest of us to create new employment for us and trickle some prosperity down our way.”
Obama had that kind of trust in banks and Wall Street with their bailouts. Do you have the same kind of trust when it comes to the very rich using all the new money coming out of your own pockets to create jobs for you rather than create a still better standard of living for themselves?
What’s that old saying: Fool me once, shame on you. Fool me twice (or endlessly) and I’m a fool who deserves whatever he gets.