President Barack Obama originally proposed to raise revenue to cover the cost of his jobs plan introduced in September 2011 by ending the subsidies and tax credits for fossil fuel corporations and ending the Bush tax cuts on individuals earning over $200,000 and households earning over $250,000; however, because of opposition from Democratic senators representing states with large oil and gas operations, and opposition from some U.S. senators who didn’t want to increase the taxes for anyone in these dire economic times, he has dropped his tax proposals for a substitute imposing a surtax of five percent on those earning a million dollars or more annually.
For some reason, Obama doesn’t want the surtax to start on January 1, 2012; instead, he wants to delay the start to January 1, 2013. The question raised is: Does he fear he will lose votes among the very wealthy by having the surtax kick in before the November 2012 presidential election? Because he wants to delay the start of the surtax by one year, the sponsors have raised the surtax rate to 5.6 percent.
The consequences of this switch in taxation strategy are two-fold: 1) the expected leveling of the field for renewables by increasing the cost to oil and gas producers will not take place; and 2) it will become more difficult for Obama to call for the end of the Bush tax cuts because it will be argued that the wealthy have already taken a big hit with the surcharge.
Another consequence of this switch in strategy is that those earning between $200,000 or $250,000 and $1 million will continue to be taxed at the top level of 35 percent.
What is really needed is the addition of several more tax brackets to a top rate of at least 60 percent, as proposed in an earlier post on this blog.
It is becoming increasingly clear that one of the very unfortunate legacies of the Obama presidency will be a taxation structure that allows the top 20 percent of income learners to pay taxes at a rate far below their share of the annual income earned in the nation.
Government Creating Jobs
A major conservative talking point is that government can’t create jobs, a premise proven false by Franklin Delano Roosevelt in the 1930s with the creation of the Civilian Conservation Corps (CCC) and the Works Progress Administration (WPA). It is also proven false by the many government workers and the private contractors who perform tasks once performed in-house by the government.
A bolder President Obama would have embraced FDR’s CCC and WPA in order to provide millions of jobs for those now unemployed. A further benefit would be to update the nation’s infrastructure by having those workers replace aging sewer pipes, water lines, water treatment systems and retrofit public school buildings to make them more energy efficient — a report this past summer said that the average public school building was at least 40 years old.
In order to maximize the number of workers hired to fill these public works jobs, two workers would split a 12-hour day running from 7 a..m. to 7 p.m. Each would be paid $10 an hour, so that each would take home about $15,000 a year. A stipulation would be that only one member of a household could be hired in order to spread the jobs out as widely as possible.
The annual cost of this program would be $150 billion to hire 10 million workers. Given that the unemployment rate is expected to remain high for several years, this program should be funded for at least three years.
The high unemployment rate embodies a benefit in doing the types of public works jobs described above, as there are many of the unemployed who have the engineering and technical skills needed to perform the more difficult tasks.
The next blog will explore how military and militarily-related spending are bankrupting the nation.