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Tom Ferguson: Tax proposal shows conservative economics have been a disaster

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PAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I’m Paul Jay, coming to you today from Toronto. And Monday morning in Washington, President Obama elaborated his jobs plan. Here’s a little bit of what he said at a press conference at the White House.

PRES. BARACK OBAMA: When you include the $1 trillion in cuts I’ve already signed into law, these would be among the biggest cuts in spending in our history. But they’ve got to be part of a larger plan that’s balanced. And that’s why this plan eliminates tax loopholes that primarily go to the wealthiest taxpayers and biggest corporations, tax breaks that small businesses and middle-class families don’t get. And if tax reform doesn’t get done, this plan asks the wealthiest Americans to go back to paying the same rates that they paid during the 1990s, before the Bush tax cuts.

JAY: Now joining us to talk about President Obama’s speech is Tom Ferguson. Tom is a senior fellow at the Roosevelt Institute. He also teaches at the University of Massachusetts Boston. Thanks for joining us again, Tom.


JAY: So what’s your take? President Obama has come out and, I guess the White House would like us to think, swinging, and he is going to make the issue taxing the wealthy–he doesn’t want to use the word rich. What do you think of his elaboration of his jobs plan?

FERGUSON: Well, okay. I mean, I’ve got several thoughts. First of all, hey, let’s look on the bright side: we’re not Greece. We haven’t reached that ignominious state yet where everything is being cut And the state, actually, just this morning, apparently, the finance minister there said, well, the tax system couldn’t deliver any more taxes, which has got to be, you know, a real original. But, you know, it’s also, I think, a better–this proposal or this set of proposals is less outrageously imbalanced toward the wealthy than his earlier stuff this summer. And it’s just–it’s worth meditating on this just for a second. You know, I mean, the truth of the matter is is it’s–we’re lucky we still have elections, in the sense that it’s quite plain that the president’s earlier effort to act as, you know, not a liberal Republican but a conservative Republican, wow, it bombed flat. He’s trailing in the polls. You know. I mean, he’s fallen just about in every measure by–across the board. And pretty plainly, this is, as it were, a recalibration. I still don’t like the plan that much, frankly. I still don’t see why we can’t–I mean, to put it as simply as possible, the White House is saying that they think they’re getting, you know, one dollar in taxes for every two dollar of cuts. I don’t understand why that ratio isn’t different. Why not one to one? I mean, after all, in the last 30 years, you know, we are constantly reminded by every new poverty and income statistic that comes out, the top 2 percent of the population have done fabulously well. I still think that the–what they’re asked to pay now is not enough, considering how much they’ve gained over the last 30 years. But, you know, I will rejoice that the advice that a lot of people, myself included, gave them in public, that they’d better not come after Social Security directly, is–they’ve apparently heeded that. And they sort of backed off their worst cuts on Medicare and Medicaid, although they’re still talking rather large, unspecified cuts over time.

JAY: Alright. So in terms of the tax increases, it seems to be that he’s trying to focus on loopholes, not raising the income tax rates. Now, I guess there’s a sort of a threat of that, by saying he wants the Bush tax cuts to expire if they can’t get get this done through loopholes. But is loopholes really enough?

FERGUSON: I’m glad to see that the White House this time has a provision in there. The claim is they want to tax millionaires at least at the rate of average Americans. I assume that means that things like carried interest, that deduction for private equity and hedge funds, for example, is going to go out, and that the sort of capital gains special tax rates ought to just–I mean, ought to go out on the basic levels of income there. But, you know, the truth is, nobody really seems to really know what they’re proposing [crosstalk]

JAY: I mean, it’s hard to put some real numbers on this. But to a large extent this is all about positioning for the 2012 election, ’cause the Republicans have already made it clear they’re not going to agree to any tax increases anyway, and I don’t see how they back down from that. So what is the actual process now with this congressional committee that has to come to some agreement or there’s this doomsday machine kicks in?

FERGUSON: Now, Paul, I think this is actually worth talking about for a second. This was one of the problems with the budget accord that, you know, raised the debt ceiling. I think I said to you folks at the time that the default position, if the budget Supercommittee in Congress can’t agree, it’s going to look remarkably like a set of Republican positions. The only exception on that is on the defense cuts. But, you know, I mean, there is a lot of Republicans at this point that wouldn’t mind cutting defense. I don’t think that’s anywhere near the check on the Republicans that the check on the Democrats for chopping social programs, it’s going to be roughly equal; I don’t think that at all.

JAY: And not that the Democrats have ever been shy about raising the military budget anyway.

FERGUSON: That’s right.

JAY: Part of this goes back to the deal on the Bush tax cuts in the first place. President Obama, when one [would] have thought he would have had a little more leverage, didn’t draw a line in the sand. He makes the deal on the Bush tax cuts. And now they’re–you know, it’s almost, like, a little late to the game to be talking about closing some loopholes.

FERGUSON: Look, I–just so we’re–I mean [incompr.] talk clinically. I’m not recommending a policy here. But, you know, I think Obama has reached a close-to-Carterization point. That is to say, this administration [inaud.] a lot to me like Jimmy Carter’s. And the thing was that in the waning months of the Carter presidency, a lot of people could no longer hear him. They just disliked him so much for the mix of austerity and sort of foolishness and some of the foreign policy stuff they did that they could not–they couldn’t hear anything he did or said. And I have a bad feeling that Obama’s reaching that point. So–.

JAY: What about the real world? What’s going to happen to the economy over this next year? ‘Cause we’re not likely to see a heck of a lot of stimulus.

FERGUSON: Well, look, it’s obvious that there is a giant hurricane building in Europe. It’s not contained. Nothing anybody has proposed looks likely to contain it. And you could see very plainly just a couple of days ago, when Treasury Secretary Geithner went over there and got his head handed to him by those folks, they basically just told him buzz off and were–I mean, the Austrian finance minister was close to insulting. But it’s obvious that the administration is terrified that a European shock will finish off the American economy and really transmit, you know, both a Lehman–reverse Lehman Brothers, and then a big shock to sort of national income. And, you know, that’s, I think, fairly likely. I mean, these folks don’t have–nobody has the European situation under control. So I think it’s quite plain that you’ve got a bad situation in the American economy right now, but the likelihood of a worse one is fairly good. So, you know, I actually think that the landscape is–may well change quite drastically in the next month or two, more beyond–rather beyond what anybody now anticipates. I mean, the question is, when the European shock hits, you know, is it in the next month, which I kind of doubt? Or is it more like December, which I think is a much better prediction? But, you know, a lot of strange things are happening. You can see suddenly Hillary Clinton polls are, you know, appearing. She’s suddenly nudging onto the front pages of newspapers. It’s obvious that a lot of Democrats are beginning to wish–they can’t say this, but they’d like to have somebody else on the ticket next year [crosstalk]

JAY: Now, in terms of the Republicans, I mean, you know, the Republicans, in spite of all the populist and libertarian rhetoric and everything else and Tea Party members, the fact is that, you know, their traditional and the bulk of their financial support is from, you know, a big, a major sector of the corporate world, the sector of Wall Street and the military-industrial complex and so on. I don’t–these people can’t be very happy about the global economy going into a major recession or depression. Isn’t there a point where the Republicans have to blink? Or are they so wedded to this that the die is set? Blink meaning they see some need for some kind of stimulus here.

FERGUSON: Well, you’re right. I think there are several viewpoints among Republicans, and if you really get hit with a big shock from Europe, there’ll be many more that will be pushing. I mean, look, you know, the government activism, you remember how fast the Bush administration turned to bank bailouts in a real crisis? You can be–it’ll be fun to watch the Republican nominees deal with, you know, further Federal Reserve action. I want to hear Rick Perry on Ben Bernanke if they have to rescue another big American bank, say, [incompr.] or, for that matter, whoever wrote the credit default swaps on Greek debt, you know, which they don’t know, even after Dodd-Frank. But, yeah, I mean, they’ll be, you know, what–corporatism on the Republican side will suddenly get a lot more popular, but I don’t think you’ll see them turn toward big stimulus. I think you’ll find instead sort of a series of Band-Aids. It’ll–look, it’ll probably look, from their–their preferred policy [would] probably look a lot like the Bush policies, you know, in the last few months of the Bush presidency. That was, basically, bailout for banks and not many other people. And I frankly doubt that that’ll change a whole lot on the Republican side, partly from the calculation that, you know, after him, us. That is to say that, you know, Obama will simply be swept away in a disastrous economic tide.

JAY: Dangerous times. Thanks very much for joining us, Tom.


JAY: Thank you for joining us on The Real News Network.

End of Transcript

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