It's All About the Benjamins

There's been a lot of talk lately about the government's penchant for "printing money." But as it turns, out the government can't even print money correctly.
By Eric Rosenbaum ,

WASHINGTON D.C. (

TheStreet

) -- A plague on both your houses, or at least a plague on both aisles of the House of Representatives. As for that house on Pennsylvania Avenue, plenty of plague in the old petri dish to go around. Heck, why not throw in a plague for the distinguished gentlemen and women of the Senate?

Can you sense we're feeling a little grumpy about the tax cut package?

It's not a former Obama lover's sudden post-coital remorse. We're not looking to throw things at Glenn Beck's image on the television, either. We're not outraged at the Democrats or the Republicans, specifically. In fact, we're just gonna lump 'em all together for this short-sighted, deficit-dizzy approach to legislation.

To paraphrase the comic genius Jeff Foxsworthy,

You know you're in...

legislative la-la land when the only major political figures not speaking out of both sides of their mouths about the tax cut legislation are the only socialist on Capitol Hill (Bernie Sanders); a Republican who is retiring and could care less about the next election (George Voinovich); and a Republican speaking for the Tea Party movement (Jim Demint), who would probably call for the Congressional rotunda to be sold as scrap marble if it would help chip away at the deficit.

We've got no problem with extending unemployment benefits, or doing whatever it takes to create sorely need jobs for out-of-work Americans. What gets our legislative goat, though, is the double talk of this "economic stimulus" package. It's suddenly so critical to the fate of the U.S. economy that tax cuts for the richest Americans -- tax cuts that almost everyone agrees will do nothing to stimulate the economy, tax cuts that

Warren Buffett

pleaded with the government not to pass so he and his fellow billionaires would have to pay more of their fair share -- have to be the price America pays for not falling off the economic deep-end.

Mind you, the last quarter was the highest on record in the history of the U.S. for corporate profits. The Dow Jones Industrial Average and S&P 500 Index are up 10% this year. The Federal Reserve chairman Ben Bernanke has been saying for some time that high unemployment will continue to be a serious issue at least until 2012, and only decline to 8% by then.

Yet suddenly, amid a rebounding market and a job outlook that has been sober for some time already, tax cuts for the affluent which President Obama swore as an election promise to do away with are a vital political concession to keep America and its economy moving forward.

We're not buying it, and we're not mincing words either. The Republicans will get their all-time favorite pet project. President Obama will get the chance to avoid the fate of Jimmy Carter (though Swift Tax Cut Legislative Veterans for Truth will find some way to call Obama a flip-flopper on the Bush tax cuts by the next election). The Democrats who are dead-set against the tax cut passage will quietly go along once they exact whichever of their pet projects are feasible to pass as legislative extenders. It's all

realpolitik

and it's all going to add to the massive deficit.

It's easy to put the numbers on how much this tax cut package is going to cost. It's less easy to do the math on how much it will benefit the economy. It may be all gussied up like a Macy's holiday window or Rockefeller Center Christmas tree, with job creation and economic stimulus serving as ornaments attracting the sentimental wonder of the public. In the end, though, were talking about one Redwood-sized action of fiscal irresponsibility.

Just consider this: the estimated cost of extending the tax cuts for the most affluent Americans is $75 billion, according to Treasury Department figures. There's another estimated $88 billion -- according to the Tax Policy Center -- that will result from changes in the estate tax code.

The total cost of benefits for the unemployed: $56 billion. That's right, we're spending $163 billion to take money out of the economy in the form of tax cuts for the affluent- and there's not much debate about whether the affluent pocket their tax cuts in tax shelters as opposed to spending it -- and on protecting the estates of the wealthy once we've protected more of their wealth from taxes, than we are running up a bill for the desperate and unemployed.

And while $75 billion for the richest of the richest is just the price America has to pay, a mere $3 billion in a Treasury cash grant program to support the renewable energy industry is on Capitol Hill with hat in hand begging for inclusion in the legislation.

With this kind of accounting, why not just throw in the $120 billion in lower social security tax costs. That system's going broke one way or another anyway, right? Better to save the American taxpayer $1,000 in social security taxes a year so they can go out and buy that new 1080p LED flat screen TV. At least the semiconductor industry and Wal-Mart will benefit.

We're not oblivious to the fact that the lion's share of the tax cuts' ultimate cost -- $383 billion - is for families making less than $250,000.

However, as Simon Johnson, the former chief economist of the International Monetary Fund, wrote in a

New York Times

op-e piece on Thursday, the argument that cutting American taxes from current levels will stimulate growth so much that the cut will pay for itself and end up reducing or at least controlling the fiscal deficit is about as rock solid as the worst fuzzy math of Reaganomics.

And what did the former IMF chief choose for comparison purposes when predicting where America could end up as a result of this ill-conceived legislation? As examples of the path we're headed down he alluded to the brilliant deficit managers from Greece and Portugal. Get the picture?

The next bailout isn't gonna be the banks, or the unemployed, or the affluent and their precious high-net-worth private banking accounts. It's gonna be the whole sinking, poorly managed corporate enterprise known as the United States of America Inc.

ticker: SAM Here's a bit of advice: we wouldn't invest your tax cut windfall in that investment opportunity.

--Written by Eric Rosenbaum in New York

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