What the GOP doesn't get about Infrastructure and Taxes

In his last few speeches, President Obama has stressed the fact that many of his current proposals have, in the past, been supported – and even actively promoted – by both Democrats and Republicans. Today’s Republicans, though they may call on the name of Ronald Reagan as if his name was a magical incantation – would be horrified to know that Reagan, by his words and actions, would have agreed with President Obama more than he would have disagreed with him on these issues.

The upgrading and improvement of infrastructure – roads, bridges, ports, intermodal transfer facilities, and rail – was a cornerstone of the 1980 and 1984 Republican campaign platforms. After the economic ‘malaise’ of the 1970s, Buffalo Republican Quarterback-turned-Congressman Jack Kemp articulated a ‘new’ economic policy – one that emphasized government facilitation of business transactions (hence, “Supply” Side Policy," since it was aimed at the suppliers of goods and services rather than the consumers of said services). The theory was that by improving the nation’s infrastructure, businesses would be able to move goods and services in a more efficient, cost-effective manner, thus raising both profit margins and confidence in an economy that was sluggish at best. All one had to do was look at the effect of the Interstate Highway System, authorized under Republican Dwight D. Eisenhower, to see the effect on businesses which could now ship goods from Boston to New York in 4 hours rather than two days along the old U.S. Route 1. Fortunately for the Republicans, they garnered the support of many Democrats, who supported the idea not for its effect on business, but because, following traditional Keynesian spending theory, it would put shovels in labor’s hands and put them to work. Intermodal Transit facilities, HOV lanes and E-ZPass all became part of our vocabulary.

By the end of Reagan’s 8 years in office, grants to states for highway and infrastructure construction were 28% higher than when Reagan took office. Jack Kemp and Bronx Democrat Robert Garcia co-introduced federal legislation establishing protocols for Enterprise Zones to revive blighted neighborhoods, making millions of infrastructure project dollars available to states for projects, including parking facilities, rail facilities, and highway interchanges. Even when Reagan wanted to pull back on infrastructure spending, Republicans in the House and Senate turned against him and, with Democratic support, overrode their own President’s veto of the Surface Transportation and Uniform Relocation Assistance Act of 1987 (STURAA). This bipartisan policy continued through George H.W. Bush and Clinton, becoming a fixture of the American economic engine…and a piece of economic machinery supported by both political parties.

But somehow, today’s bunch of Republican extremists see this legacy only as “overspending." At a time when both natural disasters and deferred maintenance have destroyed or closed important transportation infrastructure, it is time for them to stop playing politics.

On Tax Policy, Obama has suggested a flattening of the overall tax brackets (part of the 1980, 1984, and 1988 Republican Party Platforms), as well as taxing investment income at the same rate as everyone else’s income. Currently, if you earn $100,000 from working at your job, you pay tax on the full $100,000. However, if you make $100,000 by buying and selling stocks, you only get taxed on 28% of your earnings – or $28,000. In one way, the Republicans are right – Tax policy *has* been used as class warfare: those who labor get taxed, those who sit back and place buy and sell orders with their online broker (and who produce *nothing* for the society) get taxed at far lower levels.

We have subsidized gambling by the wealthy on the backs of the laborer.

The biggest fallacy in the GOPs mock horror at Obama’s proposed tax changes is their assertion that these investments are good for business, and that taxing investment is bad for job creation. But there is nothing to show that those making money off of stock trading are creating jobs. Rather, they are hoarding the funds or simply continuing to trade ever-increasing amounts of wealth to amass more personal wealth.

In reality, most of what qualifies as 'investment’ and ‘capital' is neither. The vast majority of capital gains do NOT come from investing in a business, or from gains of capital provided to a company for expansion. MOST capital gains come simply from stockholders buying and holding stock from other stockholders. Such a purchase provides ZERO additional dollars to a business. It is simply another form of absentee landlord rent-seeking. Such “investors” generally do not participate in the corporations decision-making, governance, hiring, or expansion decisions. They use their wealth to purchase stock in a quick online transaction, follow it for a while (checking the price somewhere during the commercials on Dancing With The Stars), and ignore everything except how their ‘investment’ – which was purchased from another such ‘investor,’ not from the company – is doing. When the time is right, they access their account and hit the sell button…and make instant cash.

They produce nothing. They hire no one. They create nothing. They provide no expansion possibilities for businesses.

But they amass personal wealth. And yet, we treat them with kid gloves by taxing them less, at 28% the rate what we would tax someone who spends all day working and creating valuable goods and services in the economy.

Tax treatment that values gambling over the creation of goods and services, and that values 'wealth making wealth' rather than actual labor, is indeed class warfare, Mr. Boehner. It’s the class warfare that is destroying the middle class and rewarding a cadre of wall street elites that have you in their hip pocket.