Tax Cuts and Bubbles

Nine years ago, I made one of those paper count-down chains they taught us to make in elementary school in the weeks leading up to winter break. Every week, I've been cutting off another link and am almost done, because this is the season when the Bush tax cuts are set to expire. For me, that will be a symbolic moment of exorcism: in a significant way we will be a little more free from that dark ghost of economics past.



Or will we? I heard on the radio today that the Democrats and Republicans are fighting over the issue in a way I didn't expect. The Republicans want all the tax cuts, including the ones on the richest 2% of Americans, extended (after all, if you're making $8 million a year, your time is too valuable to look for all the tax loopholes designed for the rich. It's much easier to get your taxes off up front without having to come up with a charity donation or local investment to write off). The Democrats don't want those tax cuts extended--but they do want to keep the rest of the Bush tax cuts, the ones that protect "middle class Americans" who earn $200,000 per year.

Did you hear that? $200,000 a year is middle class! Good thing we've got a party to fight for the vulnerable people in that income bracket!

Politically, I guess it makes sense to call very-but-not-quite-obscenely-rich people "middle class," but I'm beginning to wonder if that sort of thinking, on both sides of the aisle, is what got us into this economic mess in the first place. As I recall, the current economic crisis began when people took out massive sub-prime mortgages and second mortgages on houses they couldn't afford in the first place and then (surprise!) couldn't make their payments. Why, I wondered, would so many people do that?

Simple. Let's say you want a normal, middle-class American standard of living, and Congress tells you that means you should spend up to $200,000 a year. You'd better take a loan out fast, because where I come from, ain't many people who actually earn that.

Maybe we got in this crisis in the first place because Bush tax cuts drove up our collective idea of what appropriate spending was. The rich got richer and the "middle class" spent more to try to keep up, whether they had it or not.


Q: If you can pay cash for 16 of these every year, still have
$40,000 for living expenses, and be considered middle class,
what's the minimum number you have to buy to prove that
you're not dirt poor? A: I don't know, but loans never hurt.

I'm about ready to start my own Tea Party, except that in mine, we'll sink luxury goods to the bottom of Boston Harbor until people decide they're not worth going into debt and wrecking the economy for and maybe we should spend our money on things like schools, hospitals, research, and cleaner factories instead.