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NY Times Opinion: Mixing Economics with Politics - Can Obama's tax cut package promote a faster recovery?

The New York Times

Wednesday, September 8, 2010

Help Business, Not the Wealthy

By: James K. Galbraith

 

The tax proposals released by President Obama are strongly pro-business. They would create a large new tax break for capital investment, extend tax credits for research and development, and — in the infrastructure proposals — they would also begin to rebuild our transportation network.

Mr. Obama wisely avoids describing the new program as a “stimulus package.” Instead, he now emphasizes that economic reconstruction is a long-term task, requiring steady policy, a strategic vision anchored by a permanent national infrastructure fund and a partnership between government and business.

his is an approach with a history. If you go back to the Democratic alternatives to Reaganism in the 1980s, you’ll find many of the same themes.

The economics rests on what we might call — without pejorative intent — a confidence trick. For political reasons, government alone cannot spend enough to restore prosperity. Meanwhile corporations have cash they will not spend because the outlook seems dark. But if businesses can be induced to take a chance, and hire some workers, then the outlook will brighten. What was a self-reinforcing slump could become self-reinforcing growth.

As part of this strategy, the president now states firmly that he will not accept any extension of the Bush-era tax cuts for the very rich. His plan thus repudiates the notion that economic prosperity depends on ultra-low tax rates on great wealth. He’s right. We tried that; all it got us were vast numbers of big houses — many now for sale. Good for him.

I’d like more: a clear focus on energy and climate change, a jobs program, tax and debt relief for workers, prosecutions of banking fraud, a commitment against cuts in Social Security or Medicare, liberation from the shackles of deficit/debt hysteria.

But this is a start. Democrats should rally with the president to enact this program, right away.

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