President Obama delivered his first State of the Union speech tonight, assuring us that we could jump-start job creation through tax cuts for businesses and gain needed relief for families through tax cuts for middle-class households.
What Obama offers is, as usual, a mixed bag--too much of the same old tax cuts favored by the right for decades , which have not been proven to do much to create new jobs, but some good programs that merit passage.
I've got strong doubts that an accelerated depreciation provision amounting to a 10% tax cut for businesses and costing $38 billion can be considered an effective jobs bill, even when it is generously offered to small businesses. Similarly, more preferences for capital gains (exempting them from taxes when the money is invested in small businesses) goes the wrong way--without much assurance of real job creation.
The proposal for a tax credit for new workers is more promising--although I'd prefer to see stimulus and not tax cuts, this credit is at least directly related to new employment, unlike the other provisions that simply reduce the tax costs for existing businesses without any guarantee of new jobs.
Adjusting the way the federal government supports loans for college students is a long-needed reform. The current program represents a subsidy for banks that has grown through the years to provide fees to banks even though universities do most of the same administration work that they did under the direct loan programs. Banks have finangled the subsidy (as they have credit card fees, the TARP-related guarantees) into more money for themselves and less for students. It's time to eliminate the giveaway and provide the money to students instead of to the banks. Obama is pushing the right policy here.
Ending tax breaks for Big Oil, ending the carried interest preferential taxation of compensation for investment fund managers, and not extending the lower rates for the super-rich are all good ideas. Obama finally made the needed argument that the solutions offered from the right--to extend tax cuts for the wealthiest Americans, deregulate, and maintain the status quo on health care--are just what we've been doing that led us to crisis and huge deficits. We shouldn't repeat the failed experiment.
Similarly, Obama made his proposal for taxing financial institutions to pay for the costs of the federal guarantee that has been necessary to move them out of crisis through use of the TARP funding. That's a reasonable plan, based on the degree of leverage other than ordinary deposits.