[R-G] Fwd: Why Obama Is Proposing Whopping Corporate Tax Cuts, and Why He's Wrong

[Suzanne de Kuyper]

On reading this it is good to remember that U.S. Presidents have
little real power, as Obama learned early on from Bill and Hilary
Clinton and fro his party.   He has acted as the Choiceless Man after
comng into power as the Clueless Man.   Set up like a million others.
The cuts will go through.   If not today then tomorrow. Wrong or Right
have nothing to do with anything.   Suzanne

---------- Forwarded message ----------
From: Sid Shniad <shniad at gmail.com>
Date: Wed, Sep 8, 2010 at 6:59 AM
Subject: Why Obama Is Proposing Whopping Corporate Tax Cuts, and Why He's Wrong
To:


http://www.commondreams.org/view/2010/09/07-8

September 7, 2010

Why Obama Is Proposing Whopping Corporate Tax Cuts, and Why He’s Wrong

by Robert Reich

President Obama reportedly will propose two big corporate tax cuts this week.

One would expand and make permanent the research and experimentation
tax credit, at a cost of about $100 billion over the next ten years.
The other would allow companies to write off 100 percent of their new
investments in plant and equipment between now and the end of 2011 at
a cost next year of substantially more than $100 billion (but a
ten-year cost of about $30 billion since those write-offs wouldn't be
taken over the longer-term).

The economy needs two whopping corporate tax cuts right now as much as
someone with a serious heart condition needs Botox.

The reason businesses aren't investing in new plant and equipment has
nothing to do with the cost of capital. It's because they don't need
the additional capacity. There isn't enough demand for their goods and
services to justify it. Consumers aren't buying because they're trying
to come out from under a huge debt load, including mortgage debt; they
have to start saving because their nest eggs are worth substantially
less; and they've lost or are worried about losing jobs and pay.

In any event, small businesses don't have enough profits against which
to use these tax credits and deductions, and large corporations are
sitting on over a trillion dollars of profits and don't need them.

Republicans and corporate lobbyists have been demanding tax cuts on
corporate investments for one reason: Big corporations are investing
in automated equipment, robotics, numerically-controlled machine
tools, and software. These investments are designed to boost profits
by permanently replacing workers and cutting payrolls. The tax breaks
Obama is proposing would make such investments all the more
profitable.

In sum, Obama's proposed corporate tax cuts (1) won't generate more
jobs because they don't put any cash in worker's pockets (as would,
for example, exempting the first $20,000 of income from the payroll
tax and making up the difference by applying the payroll tax to
incomes over $250,000); (2) will subsidize companies to cut even more
jobs; and (3) will cost $130 billion - money that could better be
spent helping states and locales avoid laying off thousands of
teachers, fire fighters, and police.

So why is Obama proposing them? To put Republicans in a bind. If they
refuse to go along he can justifiably say they have no agenda other
than obstruction. After all, the only thing they've been arguing for
is lower taxes. On the other hand, if Republicans agree to support
these corporate tax cuts, Obama can claim a legislative victory that
will help Democrats neutralize their opponents in the upcoming
elections.

The proposals also make it harder for Republicans to argue the Bush
income tax cuts should be extended for the richest 3 percent of
taxpayers because small businesses need it. Obama's corporate tax cuts
would appear to do the trick.

The White House probably figures even if Republicans agree to the
proposed tax cuts, nothing will come of it. Congress will be in
session for only about two weeks between now and the midterm elections
so it's doubtful these proposals would be enacted in any event.

But this cynical exercise could backfire if Republicans call Obama's
bluff and demand the corporate tax cuts be put on a fast track and get
signed into legislation before the midterms.

More troubling, Obama's whopping proposed corporate tax cuts help
legitimize the supply-side dogma that the economy's biggest obstacle
to growth is the cost of capital, rather than the plight of ordinary
working people.

Robert Reich is Professor of Public Policy at the University of
California at Berkeley. He has served in three national
administrations, most recently as secretary of labor under President
Bill Clinton. He has written twelve books, including The Work of
Nations, Locked in the Cabinet, and his most recent book,
Supercapitalism. His "Marketplace" commentaries can be found on
publicradio.com and iTunes.