Why does the media not note that the $4 trillion in savings claimed by the Catfood commission is the same as the $4 trillion cost of extending the Bush tax cuts for the rich and corporate. The $700 billion number batted around is just the millionaire tax cut from the change to the highest marginal tax rate. The whole tax cut is $4 billion.

The average fellow would be much better off with Clinton tax rates and none of the cat food commission changes.

UPDATE – a comment asked that this be expanded: An excellent expanded version was written by J Kwak for HuffPo:

http://www.huffingtonpost.com/james-kwak/obama-bush-tax-cuts-compromise-_b_783356.html

James Kwak, Co-author of The Baseline Scenario and of 13 Bankers
Posted on November 14, 2010

“….The question is: Is it better to extend the tax cuts for everyone or for no one? The answer is to extend them for no one.

The Bush tax cuts have always overwhelmingly benefited the rich, not the middle class, and that is no less true today than when they were enacted. They were bad policy then and they are bad policy today. Extending the tax cuts would dramatically enrich the wealthy relative to everyone else. 65.5 percent of the total benefit would go to the top quintile by income, 26.8 percent to the top 1 percent, and 14.7 percent to the top 0.1 percent.*

….It is true that tax increases would have a modest first-order negative impact on economic growth. But that impact will be small (per dollar of net fiscal impact) for exactly the same reasons that tax cuts are a poor stimulus. The multiplier for tax cuts is far lower than the multipliers for virtually every other type of government spending, especially aid to state and local governments. In particular, the economic impact of tax increases is smaller when they go to the rich rather than the middle class, because the rich consume a smaller portion of their marginal income. In addition, letting the tax cuts expire would have positive second-order effects because it would improve the government’s fiscal balance, which is widely (though perhaps incorrectly) perceived as a source of risk to the economy.

… If the tax cuts are extended, the average benefit for tax units (roughly speaking, households) in the middle income quintile will be $880 per year.*** By contrast, tax units from the 80th to 99.9th percentile will gain $6,094 each, and the top 0.1 percent–those with over $2 million in annual income–will gain $339,473 each.

…$3.7 trillion is the figure that is generally cited as the projected ten-year impact of the Bush tax cuts. Letting the tax cuts expire will eliminate $3.7 trillion from the projected national debt with one stroke. Why does this help the middle class? Because Social Security and Medicare are currently under assault. The national debt is being used as a bogeyman to frighten politicians (and the people who elect them) into agreeing to significant reductions to Social Security and Medicare. Yet middle-class households need Social Security and Medicare far more than they need $880 of current-year income. Our country faces the very real threat of a retirement security crisis, since saving via 401(k) plans is shockingly low; in 2007, the average retirement account balance for a household where the head of household was between ages 55 and 64 was only $63,000 (Federal Reserve Survey of Consumer Finances, Table 6).

…The CBO (full document, Table 1-7) projects the cost of those tax cuts in 2020 at $368 billion, or 1.6 percent of GDP. The tax cuts mean the difference between a federal deficit of 3.0 percent of GDP (probably sustainable) or 4.6 percent of GDP (probably unsustainable). Removing that enormous wedge from the structural deficit would reduce the current pressure for “entitlement reform” and give the cost-saving provisions in your health care reform bill time to work.

…(say) “I refuse to force future generations to pay for our own failure to make hard choices. I refuse to allow an enormous hole in the national budget that will threaten the long-term health of Social Security and Medicare. Because this is the price that the Republicans are demanding that I pay in order to extend the middle class tax cuts, all of the tax cuts will expire on December 31–under the law passed by the Bush administration.” “

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