Sunday, September 12, 2010

Help Making Money

Come next Tuesday, Michael D. Brown may well unseat incumbent Council member Phil Mendelson (D-At Large) because many voters think he's actually Council member Michael A. Brown (I-At-Large). But to fight the impression that he's simply riding the confusion over a name to office, Brown has put up some campaign signs around town and raised over $23,000 in campaign funds. Well, $15,000 of that was a personal loan from himself to the campaign, but hey, at least he's going through the motions.

Yesterday, Brown sent out an email to friends and supporters claiming he was close to making history, but he really needed their help to seal the deal. The email, in full:

Dear Friends;

We are in the final stages of what has been an amazing campaign. I started 10 weeks ago with no money and a few friends like you, and last week a city wide Washington Post Poll showed that I am ahead of the incumbent by 12 points among likely voters. If I win, I will make history. My opponent has spent over $200,000.00 outspending me 20 to 1. He has run TV commercials against me paid for by a political action committee funded with money from a DC businessman and has mailed and handed out tens of thousands of flyers against me. He is supported in this effort by the leading candidate for Mayor and several members of the City Council. All I have is you. Next Tuesday, September 14 is election day. My opponent will surely have people at every polling place handing out his literature and campaigning for him. I need your help now more than ever. If you can spend even a hour or two at a polling place for me, please let me know. I am working so hard and I have come so far. The friends and family that have stood up for me against great odds have made all this possible. It is incredible to me that we have accomplished so much. I know it is a lot to ask, but we are so close and we have so little resources I need your help in this final hour. If you can come to a polling place please respond to this e-mail as soon as possible. We will provide you with materials and assign you a convenient location by your home or office, Thanks for getting me this far. No matter what happens, I have been humbled by your love and support.

"Make history"? "Working so hard"? "We have accomplished so much"? Look, we know that Mendelson was hoping to cruise to victory on little more than his own name recognition, but at least there was no confusion as to which Phil Mendelson people would be voting for. And Clark Ray -- who we spoke to this week -- has actually run a campaign, spending the better part of a year raising over $150,000 and actually challenging Mendelson on the issues. Brown, well, not so much.

Sure, history will be made -- but it might be the type of history that you'd soon rather forget.

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.

This post originally appeared at

eric seiger

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