A taxing strategy

Our view: Financial giants get trillions in aid, but ordinary Americans will be footing the bill

November 30, 2008

Through a long campaign, President-elect Barack Obama made a mantra of his pledge to raise taxes on the wealthy and cut them for the struggling middle class. But now it seems likely that the rich won't be paying more, at least for a year or two, because any tax hike would be bad for the country's morale in the current economic struggle. That's what Mr. Obama's aides have suggested.

That may be a campaign promise not kept, but ducking the tax issue is a convenient bit of recession theory that fits seamlessly with what appears to be the Bush administration's economic game plan. Hundreds of billions have been spent to rescue large financial institutions generally described as "too big to fail." But only a promise of trickle-down help has been offered to members of the middle class, apparently designated too small to survive.

The Federal Reserve and Treasury Department have spent $1.4 trillion on loans and investments to keep an array of investment bankers, insurance companies and mortgage lending giants afloat. Trillions more have been pledged to guarantee that these institutions will keep their promises to investors. All of this is aimed at revitalizing a financial system that had stopped lending money to most consumers. But ordinary Americans are having a hard time spotting the benefits.

Last week, the Treasury and Federal Reserve announced they would spending another $600 billion to help purchasers of houses, cars and other consumer products. But, reading past the headlines, it becomes clear that the money won't be going directly to consumers who might actually buy something with it but rather to companies that make a business financing their purchases. And, again, these billions won't be used to slow a rising tide of foreclosures on subprime home mortgages.

Meanwhile, Mr. Obama warned that we all will eventually have to tighten our belts to repay the money borrowed to fund the rescue effort. The rich may be asked to pay higher taxes, but don't count on it.

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