Jenny EriksonFar left Democratic leadership has moved closer to the middle this week. On Thursday night, Senate Majority Leader Harry Reid (D-NV) dropped the $1.1 trillion dollar omnibus bill, claiming he didn’t have the votes to pass it. Instead, an extension will be granted to keep government payments at their current levels until February, when a new budget can be passed.
Earlier today President Obama signed into law an extension of the Bush tax cuts for all income brackets for the next two years. Previously, Obama had said he opposed keeping taxes low for high-income earners. He agreed to this deal with the Republicans in exchange for an extension on unemployment insurance for the long-time unemployed.
While some Democrats sulked in the corner, President Obama praised bipartisan spirit:
"The final product proves when we can put aside the partisanship and the political games, when we can put aside what's good for some of us in favor of what's good for all of us, we can get a lot done.”
He also said:
"This is real money that's going to make a real difference in people's lives … That's how we're going to spark demand, spur hiring, and strengthen our economy in the new year."
Basically, the most Liberal president in history just admitted that keeping taxes low for everyone is good for, well, everyone. He also admitted that he understands cause and effect. By allowing business owners to keep more of their money, you’re making sure they have enough capital to reinvest into the economy.
It’s the circle of economics: Let people keep most of their money, and they will try to earn more, so they can buy really cool stuff like iPads and take vacation trips to Maui. To make more money, they will have to work very hard and move up the financial food chain. As they move up, they create jobs behind them for all the other people on their way up, or for people that are satisfied with their rung and have decided to stop climbing. Not everyone cares about having an iPad, after all.
When you start taking money away from all these people on the ladder and give it to other people (who sometimes use it to take their own vacation), they think to themselves, “Hey, wait a minute! Why am I working so hard for these anonymous people’s benefit? Screw that.” Productivity slows, less goods or services are sold, less income is made, fewer taxes are paid, and unemployment skyrockets.
By signing this law, President Obama kept a wrench from being thrown into our economy for the next two years. Next step? Making the tax rates permanent.
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