The Tax Cuts Debate: What’s the Deal?
You’ve probably heard by now that Congress is debating whether or not to extend Bush’s tax cuts–including tax cuts for people making over $250,000. If you’re a Democrat, this is a no-brainer, as one of the major principles of Obama’s campaign was to go back to the tax rates of the rich under President Clinton. For Republicans, it’s also a no-brainer because extending the tax cuts is keeping in place a Republican proposal. So, as always, the two sides are completely at odds.
Here’s what’s likely going to happen. The Democrats will most likely compromise on extending the tax cuts in exchange for extending unemployment benefits. Here’s the news from the Christian Science Monitor:
President Obama and Congressional Republicans are close to a big economic compromise: Obama would agree to extend Bush-era tax cuts at all income levels, while GOP leaders would relent and allow passage of extended benefits for the long-term unemployed.
“They are making progress,” said White House spokesman Bill Burton on negotiations surrounding the deal on Monday on negotiations surrounding the deal.Such a deal would mark a profound turnabout for Obama, who campaigned hard on the idea that extending tax cuts for the wealthy would be wrong.
I have to weigh in on this one and take sides: this doesn’t make a lot of sense. Though in passing “tax cuts” sounds like a nice idea and “tax and spend liberal” sounds like a bad one, when you’re talking about only taxing the well-off (i.e.; those that can afford it), this idea has merit. The flip side of the argument is that you need to let everyone have as much money as possible so they’ll pump that money back into the economy. But the wealthiest 1% pumping money back into the government to help pay off federal debt is just as useful. The compromise which will extend unemployment coverage is costly, and without the additional tax revenue, it will just add to an increasing debt.
The whole problem that led to our current financial problems was a lack of long-term planning. Sure, bad credit mortgages made a lot of people a lot of money in the short term–but then cut to 2006. This issue has a similar flavor–though there’s an argument that extending the tax cuts will help out the economy short term, the long-term deficit and our freedom to spend money where it’s necessary will be hampered.
Also, given that our economy has tanked while the Bush tax cuts were on the books doesn’t exactly inspire confidence that extending the exact same economic plan will suddenly have a positive impact. Here’s the lowdown on economic growth during the Bush years according to the New York Times:
Those tax cuts passed in 2001 amid big promises about what they would do for the economy. What followed? The decade with the slowest average annual growth since World War II. Amazingly, that statement is true even if you forget about the Great Recession and simply look at 2001-7.
The main argument for extending the cuts is it increases job creation – but facts bear out that this isn’t true. Saying this is “Obama’s economy” is pretty short-sighted. The economy didn’t just started in 2008. This is Obama’s economy, Bush’s economy, Clinton’s economy, etc., etc. In short, it just seems weird that there is even a discussion about this , but such is politics.
OK, soapbox over. Just one blogger’s opinion. What about you–do you support the current compromise on extending the Bush tax cuts that’s more than likely to occur?