AlterPolitics

The new tax cut bill, signed into law Friday by President Barack Obama, will surely come back to haunt him in his 2012 reelection campaign.  His quick capitulation to the Republicans, and aggressive advocacy for this fiscally irresponsible bill helps to further erode his credibility to one-time supporters.

First came his health care ‘reform’ bill — a backroom giveaway to BigPharma and the health insurance industry.  Then came his watered-down financial reform plan, his escalation in Afghanistan, his refusal to close Guantanamo Bay, his green-lighting the assassinations of American citizens abroad without trial, his complicity in shielding Bush war crimes, etc. etc.

Extending George W. Bush’s destructive ‘supply side’ tax policies only solidifies this President’s reputation as one who has no core principles to speak of.

Candidate Obama promised his supporters repeatedly that he would end, once and for all, the deep tax cuts for the wealthiest 2% of Americans.  To extend these tax cuts at a time when we are engaged in two wars, and with deficits skyrocketing, poses a serious threat to our country’s fiscal health.

Moody’s recently threatened to downgrade the United State’s AAA credit rating if this tax bill was signed into law.  The effects of a credit downgrade during a deep recession could be quite significant:

For the United States, a loss of the top Aaa rating, reduce the appeal of U.S. Treasuries, which currently rank as among the world’s safest investments.

“From a credit perspective, the negative effects on government finance are likely to outweigh the positive effects of higher economic growth,” Moody’s analyst Steven Hess said in a report sent late on Sunday.

After Obama announced his plan, Treasury prices fell sharply in volatile trade last week and yields have hit a six-month high, in part due to concerns over the effect the package will have on government debt levels.

If the bill becomes law, it will “adversely affect the federal government budget deficit and debt level,” Moody’s said.

Moody’s believes this tax bill will add an additional $700 to $900 billion in new national debt.  A downgrade in the US credit rating could push interest rates upwards, thereby prolonging this deepest of all recessions.

The President never even attempted to make a compelling case to the American people for Keynesian economic principles — the ones he ran on; the ones he was elected on — but instead cowardly embraced the failed trickle down policies that helped to create much of our country’s problems: including runaway debt, and redistribution of wealth from the middle class to the highest earners over the last 30 years.  His Democratic party still controls the Presidency and both Houses of Congress, and yet he is too timid to use the bully pulpit to promote any progressive policies.

The irony is, he will personally wear the new debt this bill creates around his neck like a noose.  And the blame for it will be leveled by the very Republicans to whom he capitulated.  After all, they were blaming him for Bush’s debt just ONE MONTH after he was sworn in as President.

The Republicans will shamelessly pick up where they left off a month ago: screaming that Obama has created runway deficits, and pointing out the urgency for government spending cuts.

Having caved in on extending Bush’s tax cuts for the richest 2%, he will be forced to offset the new debt by cutting important programs like Social Security, Medicare, and Medicaid.  In addition, new government spending cuts will ‘trickle down’ to impact state budgets, in the form of more layoffs for school teachers and police officers.

Instead of writing the epitaph on Bush’s failed ‘trickle down’ economic policies, Obama has instead resurrected them from the grave.

So we as a country — governed by a Democratic President — will continue to endure a deepening divide between the rich and the poor, and will continue to watch our national debt escalate in a way that won’t create a single job, but will only threaten our country’s most cherished social programs.

Karl Rove is jumping for joy over this turn of events.  After the signing of the bill, he jubilantly Tweeted:

Judging by remarks from Geithner, Hoyer & others celebrating Bush tax cut extension; we’re all supply-siders now!

Perhaps Obama should tap Rove to run his 2012 Presidential Campaign.  They appear to be on the same page on just about every issue.