Any bargain for the middle class would be nice – let alone a grand one

by Russell's Rants

Originally published June 30, 2013

Today the president proposed a “grand bargain for middle-class jobs” – offering Republicans to swap a lower corporate tax rate for a jobs program that would invest in education, training and public works projects. The corporate tax rate would be cut from 35% to 25%, and paid for by closing those infamous loopholes that allow some big companies to pay nothing in taxes . In exchange, Congress would authorize $50 billion in new infrastructure and education spending. If successful, Obama’s initiative would be the first new injection of fiscal stimulus since December 2010 right after the mid-term elections returned control of the House to the Republicans.

President Obama Makes Economic Policy Speech At An Amazon Fulfillment CenterIn past negotiations with the Republicans, Obama’s only leverage has come from the threat of higher taxes. In the New Year’s Eve 2011 fiscal deal, Obama obtained a payroll tax holiday and extension of unemployment benefits (good fiscal stimulus), but only because he agreed to extend the Bush Tax Cuts for another year. His original “Grand Bargain” talks with John Boehner over the summer of 2011 collapsed because the Republicans couldn’t accept any tax hikes on the wealthy. And the New Year’s Day 2013 tax deal essentially traded the expiration of the Bush Tax Cuts for the upper 2% for making those cuts permanent for everyone else.

The problem is that since late 2010, the president has been unable to gain any new fiscal stimulus programs. Instead, he has been saddled with Sequestration won by the Republicans as their prize for not allowing us to breach the Debt Ceiling – leaving it up to the Fed Chairman Bernanke to keep the recovery rolling with his monetary expansionary policy. But sequestration has resulted in slower economic growth and only proven, as if it were needed, that austerity in difficult economic times is bad policy.

So will the lure of corporate tax reform be sufficient to entice Republicans to do something positive for working class Americans? Probably not, at least initially since Tea Partiers only want the government to move in one direction: downward. But the Tea Party’s prime issue, the deficit, seems to be waning as the nation’s balance sheet improves along with the economy. And it’s an election year, so members of Congress may actually want something they can brag about to the folks back home. Remember of Paul Ryan and others in his caucus were decrying the American Jobs Recovery Act — the original stimulus – but at the same time asking for stimulus spending and bragging about it back in their home districts?

We could use some more pump-priming in the form of infrastructure, education and training spending, and there is certainly the need for those programs in the country. The middle class could use just a good bargain. It need not be grand.