Middle-class families must come first

Perhaps the most important question Americans could ask of their representatives right now is this: For whom are you fighting?

President Obama is fighting for permanent tax relief for the middle class.  At the end of this year, if Congress fails to act, a family of four in the middle of the income scale will see their tax bill rise by $2,100. For families making $100,000, the tax increase would be about twice that much. That’s why the president has proposed to give permanent tax cuts for every family making less than $250,000, while letting rates on the wealthiest 2 percent of families return to where they were during the late 1990s. 

Republicans in Congress, on the other hand, are holding the middle-class tax cuts hostage so they can fight for the richest households in America. As House Republican Eric CantorEric Ivan CantorSpanberger's GOP challenger raises over .8 million in third quarter The Hill's Campaign Report: Florida hangs in the balance Eric Cantor teams up with former rival Dave Brat in supporting GOP candidate in former district MORE (Va.) put it the other day, when it comes to preserving tax breaks we can’t afford for millionaires and billionaires, “…we’re not backing down.”

Let’s take a closer look at those for whom Cantor and his allies are fighting so hard. Extending the tax cuts for the top 2 percent would blow a $700 billion hole in the deficit, and about 84 percent of that money — almost $600 billion during the next decade including interest costs — would go to about 300,000 households with incomes of $1 million and up. That’s less than one-half of 1 percent of America’s households — average income: $3.1 million — and Republicans want to give them an average tax break of more than $1 million each during the next 10 years.

The president, on the other hand, is fighting for the middle-class families who most acutely need tax relief. During the run-up to the financial crisis, while the wealthiest households were enjoying record income gains amplified by huge tax cuts, middle-class income growth was stagnant at best. So this $2,100 means a lot to families in the middle of the income scale: It’s their car insurance or utility bill for more than a year; it’s half a year of groceries; two-thirds of a year of gas for the car.

What possible rationale could Republicans have for holding these critical tax cuts hostage? 

You’ve probably heard defenders of these high-end cuts claim they’re protecting small businesses. But even they agree that 97 percent of small businesses would not see their taxes go up one cent.

The other 3 percent of businesses are often not small businesses at all, but rather individuals with very high incomes, including partners at major corporate law firms and hedge fund managers.

Indeed, the Republican definition of “small businesses” in this top range would include more than half of the 400 highest earners in the United States.

Perhaps in an ideal world, we could worry about whether partners in major law firms and investment banks are paying lower taxes. But right now, our policy must focus on helping the middle class, boosting job creation and reducing the long-term budget deficit. We simply can’t afford tax cuts for the people who need them the least.

Aside from basic fairness, there’s an economic logic to this position: The fact that these high-end tax cuts would go to the folks who need them the least is exactly why they’re so ineffective at job creation.  When non-partisan economists investigate the job-creating bang-for-the-buck of different government policies, tax cuts like the ones Republicans are fighting for score as the least effective. 

For example, when the Congressional Budget Office looked at nine different ways the government could boost growth, tax cuts for the highest-income households came in second-to-last.  CBO found a dollar spent on middle-income tax cuts is two-and-a-half times more effective in raising growth and jobs than the high-end cuts.

Middle-class families have to come first. There’s never a good time to hold their family budgets hostage to expensive tax breaks for the people who need them least. Now, when the middle class is still struggling to find its footing after the Great Recession, when we’ve got to squeeze every job out of every dollar government spends in programs or tax breaks, policy makers must fight for those who need help the most and stop there.

Republicans say they want to keep the middle-class tax cuts in place just as much as we do. We all agree on that. So if politics is the art of compromise, then now is the time to practice that art.

Extend the tax cuts for middle-class families today.

Bernstein is the chief economist to Vice President Joe BidenJoe BidenGiuliani goes off on Fox Business host after she compares him to Christopher Steele Trump looks to shore up support in Nebraska Jeff Daniels narrates new Biden campaign ad for Michigan MORE and the executive director of the White House Task Force on the Middle Class.