Bernie Sanders Has Right Heart Wrong Medicine for Unemployed

Posted by Michael A. Kamperman on December 12, 2010

Bernie Sanders is so right, yet so wrong, on how to help the unemployed.  There can be no doubt Senator Sander’s heart is too big, not too small.  His filibuster was brilliant and had me applauding.  However, raising taxes on the rich to support social services is pre-depression thinking and unfortunately Senator Sanders, like most of our Washington leaders, is fighting the last war, which is now the wrong war.  We have an almost $1.5 trillion annual deficit because of a lack of demand resulting in massive unemployment.  Taxing the rich another $70 billion or so isn’t going to materially change the federal government’s finances, and it isn’t going to help the unemployed.  The unemployed need jobs, period, end of story.  Everything that helps to create jobs needs to be on the table.  The only saving grace from the last couple of weeks is we have confirmed that few in Washington are really serious about deficit reduction.  They just want to use the debt and the deficit as a tool to beat back the oppositions proposals and advance their own.  Sorry Senator Sanders and Rush Limbaugh, but a gridlocked stalemate is not in the country’s best interests.

President Obama should have driven a  much harder bargain with Republicans by dangling the carrot of a permanent extension of the Bush tax cuts combined with an elimination of the estate tax.  Imagine what he could have gotten if he gave Republicans their Christmas wish list.  For starters, he could have gotten an agreement to maintain extended unemployment benefits until the official unemployment rate is below 7% for an average of 90 days.  You want permanent tax cuts, I need unemployment insurance as long as necessary rather than for just one year.  He also could have negotiated a 6.2% payroll tax cut until the unemployment rate is below 7% for an average of 90 days, rather than just the 2% he negotiated.  He could also have negotiated a substantial infrastructure bill focused on roads, bridges, and sewer and water lines.  He could have added a federalization of Medicaid benefits, though that idea has yet to perculate in Washington.  He also could have included a major fix of the housing market.  Yes he traded off the world’s biggest bargaining chip for $24 worth of trinkets.  The President went minimally in the right direction for the right reasons.  Senator Sanders is suggesting he head in the wrong direction, for the right reasons.  Now is not the time to hold fast to your side of the debates of the past, now is the time to cut big deals and get the country moving again.

The deal the President cut is far better than gridlock, but it will not move the needle on unemployment as he and his advisors believe.  For starters there is nothing in the deal to solve the housing debacle.  Despite the rhetoric no one is getting a cut in their income tax rates in 2011, they will be getting the same rates as they paid in 2010, 2009, 2008, 2007, 2006, 2005, 2004, and 2003.  Plus, people were already receiving extended unemployment benefits in 2009 and 2010.  How can extending existing 2009 and 2010 tax and unemployment policy in 2011 produce a meaningful change in the almost 10% official unemployment rate?  The answer is it can’t.  And after the summer the aid to the states from the original stimulus bill will be gone.  In Texas, they are now talking about a $28 billion two year budget shortfall and plan to lay off elementary school teachers ala most other states.  Much more is needed, but at least the lightbulb has finally been turned on in the Whitehouse.