Republicans: Stop Obstructing the Recovery

Op-Ed by Andre Eggelletion

According to the Washington Post, President Obama’s economic team is considering a massive round of tax cuts for small businesses, a possible payroll tax holiday, and a permanent extension of the research and development tax credit. This proposal is in the very early stages of talks, and could infuse hundreds of billions of dollars into America’s faltering economy. According to tax experts, permanently extending the research credit would cost roughly $100 billion over the next decade. And depending on its form and duration, a payroll tax holiday could save businesses more than $300 billion in taxes.

Unlike the Troubled Asset Relief Program (TARP), which was introduced in 2008, and bailed out the banking system, a tax cut proposal such as this would provide a targeted boost to small businesses and individuals. Major problems in our capital markets came to light in the last year of the Bush administration. The collapse of Lehman and the near collapse of Bear Sterns sent shock waves throughout the financial markets, and signaled an economic collapse of epic scale. Though the TARP and TALF programs are widely credited with stopping economic Armageddon, they did nothing to create jobs or provide relief to cash strapped individuals and businesses seeking credit. Republicans characterized these programs as a failure because they did not restore vitality and confidence to the U.S. economy over night.

My guess is that Republicans will label this new tax proposal as another wasteful stimulus measure, and will try to obstruct this initiative, just like they have done virtually everything else. If they stay true to their modus operandi, they will reject any and every idea this president has proposed, out of hand.

I support the Obama administration’s economic team on this tax cut if it can be implemented in a budget neutral way. I support it because direct help for the working class and the small businesses that employ them is essential for any recovery to become sustainable. Under current austerity measures of the banking system, a tax credit would help improve the balance sheet of these struggling small businesses, thereby helping them gain access to the credit they so desperately need.

As for research and development; until the United States understands what former Fed Chairman Alan Greenspan finally talked about in his book, “Age of Turbulence,” we will not fully rebuild this beleaguered economy. Greenspan talked about the economic principle of “creative destruction.” A perfect illustration of the creative destructive forces of capitalism was seen when the automobile was created, and the horse and buggy era was destroyed. I like manner, labor markets in Asia have virtually made the American labor market obsolete. China and India will continue to emerge as the world centers for manufacturing. The factory jobs that have been gradually outsourced, and the industries that have been off-shored over the last 30 years are gone and they are never coming back. Again, the United States must make serious investments in research and development to promote the dawn of a new economic paradigm. If these investments are budget neutral, I welcome them.

Finally, a payroll tax holiday would be a welcomed idea by everyone; particularly in the midst of an asphyxiating recession/depression. I believe the president has a chance to implement these tax cuts and investments in a budget neutral fashion now that the Iraq War is over. According to former Chief Economist for the World Bank, and Clinton economic advisor Joseph Stiglitz, the Iraq War and all of its associated costs will total $3.2 trillion. When the savings of ending the Iraq War are combined with the expiration of Bush’s tax cuts for the rich, the tax cut proposal should not add to the deficit.

I believe that sooner or later the reactionary obstructionism of the GOP will hurt them more than they know. If they try to reject a budget neutral proposal that will provide tax relief and invest in the new American economy, the Party of No will be saying no at the most advantageous time to save this country. They would stop the best idea I’ve heard in a long time to do something of real substance to advance the American economy into the 21st century.