Obama's tax compromise: More rotten tomatoes for American workers

Obama's deal with GOP will do little to create what's needed most – jobs

December 08, 2010|By Dan Rodricks

The people who work for Custom Pak in Westover, on Maryland's Eastern Shore, pack tomatoes for a living. Their employer is a Florida company, LFC Agricultural Services Inc., one of the largest grower-packer-shippers of tomatoes in the country with operations in Florida, North Carolina, California and Arizona. Custom Pak prepares fresh tomatoes, including heirloom tomatoes and tomatoes on the vine, for supermarkets, wholesalers and food-service companies.

With about 100 employees, the Custom Pak plant in Westover is one of the largest employers in rural Somerset County. Work involving the growing, packing and shipping of food to market, while seasonal in some respects, is usually steady, with layoffs unlikely even during a recession.

But not so, apparently, in the Great Recession.

This just in, and just in time for the holiday season: Custom Pak informed Maryland labor officials this week that it will shut down its tomato packing plant in Westover in February, erasing another 100 jobs. That might not seem like a huge loss, but Somerset County's unemployment rate, at about 10 percent, already runs far above the state average and slightly above the national average.

The U.S. Labor Department reported Friday that unemployment across the nation hit 9.8 percent, and that only 39,000 new jobs were created in the last month or so. Companies are sitting on billions in cash from record profits, unwilling to hire while millions are without jobs. About 9 million Americans who are counted as working only have part-time jobs. And then there are the "discouraged" workers.

"Among those outside the labor force — that is, persons neither working nor looking for work — the number of discouraged workers in November was 1.3 million, up from 861,000 a year earlier," Keith Hall, the commissioner of the Bureau of Labor Statistics, told Congress last week.

So, yes, it's a good thing that President Barack Obama was able to get a deal to ensure an extension of unemployment benefits.

But it's a totally rotten tomato that the price of that was an extension of the Bush-era tax cuts to American households already advantaged from a prolonged period of enormous income disparity. The president could have and should made the case that the indefensible extension of tax cuts to the highest-income Americans will do nothing to foster job creation, which should be the No. 1 priority of the White House and Congress.

When George W. Bush was in the Oval Office, that was the argument: Tax cuts to high-income earners will bring the economy bounding back and produce more jobs. Didn't happen. Mr. Bush's legacy is unimpressive, particularly when compared with that of his predecessor. In the Clinton era, when the wealthy paid more in taxes, payroll expansion was nearly eight times greater.

As Mr. Bush was leaving office in January 2006, The Wall Street Journal looked at job creation during each administration back to that of Harry S Truman and declared George W. Bush's the worst on record. "The Bush administration created about three million jobs (net) over its eight years, a fraction of the 23 million jobs created under President Bill Clinton's administration and only slightly better than President George H.W. Bush did in his four years in office," the Journal said.

Most periods of major payroll expansion in the United States since World War II took place when Democrats were in the White House. Barack Obama is a Democrat, and while he can stand in front of the classroom and elegantly explain how many things his administration has done in this respect, the deal he worked out with the Republicans is not one of them.

The president ate the rotten tomato too quickly and too willingly.

Did he really believe that Republicans would let all Bush-era tax cuts expire, including those for the middle class? Republicans have been blocking the extension of unemployment benefits, but, given the rate of unemployment — and grim forecasts that recovery will take years — how much longer could they have kept that up?

The Democratic president never made the case — in the right hands, easy to make — that the Republicans are more interested in making the wealthy wealthier than they are in helping American workers who've been sent to the unemployment lines. He never got close to pointing out the GOP hypocrisy of continuing tax breaks that will do nothing to create jobs while adding hundreds of billions to the federal deficit. This isn't change we can believe in; this isn't even change.

Dan Rodricks' column appears Tuesdays, Thursdays and Sundays. He is the host of Midday on WYPR, 88.1 FM. His e-mail is dan.rodricks@baltsun.com.

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