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Tax Cut Deal Provides Money Pot to Tiny Group of Millionaires

Kevin Drum swatted down the complaint from defenders of the tax cut deal that Democrats got more money in real dollars for their causes than Republicans got for theirs. The difference, of course, is the number of people involved.

So that’s $125 billion for Republicans and $216 billion for Democrats (not counting the business investment stuff). Yay Democrats!

Or not. As Ezra says later, quoting a senior administration official, “Republicans were extremely eager to get benefits for the top tenth of a percent of Americans.” And when you’re dealing with such a tiny number of people, a small pot of money goes way, way further than a bigger pot divided up among the vast majority.

Over the past 30 years the wages of most Americans have grown more slowly than the rate of overall economic growth. The difference isn’t much: maybe half a percentage point or so. It’s easy not to notice, or to handwave away if you do decide to notice it. But over 30 years, that adds up to a lot of money if it all gets funneled to the top 1%. This is fundamental to understanding what’s happened to the American economy in recent decades: a little bit of money from a large number of people becomes a very large amount of money when it gets channeled into the bank accounts of a tiny number of wealthy rentiers.

So is $216 billion vs. $125 billion a victory for the common man? Of course not. It means most of us get a few hundred dollars while the rich get hundreds of thousands or even millions each. The rich are willing to make that deal every day. Wouldn’t you?

Indeed, Think Progress’ report on this shows that 156 million people would split $214 billion dollars under the Democratic parts of the deal, while 4.8 million would split $133 billion under the Republican parts.

This is another point that has to be taken into account. It’s very easy to say “stimulus now!” (although I still maintain it’ll get canceled out), but if you believe that one of the biggest problems with the economy over the short and long term is the yawning inequality that cripples society, then all this deal does is stratify that even more.

UPDATE: Harold Meyerson:

The best we can say of the deal is that it largely perpetuates, and only occasionally worsens, the status quo – in particular, the three-decade status quo in which the rich get richer at ordinary Americans’ expense. Obama vowed during his news conference Tuesday to take on that status quo over the next two years, but his inability thus far to frame that debate – even though most Americans share his opposition to extending tax cuts for the rich – is maddening.

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David Dayen

David Dayen