Why Liberals Shouldn't Despair About the Bush Tax Cut Deal
It's hard to talk about the Bush tax cuts without scrambling politics and policy. Politically, the Bush tax cuts have been an unmitigated disaster for Democrats, exposing the Senate and House caucuses as divided, desperate, disorganized. But as a matter of policy, this plan -- which combines short-term tax cuts with renewed support for low income families to sustain today's large government deficits while states and the labor market wobble -- is close to what center left economists want from government policy during a downturn.
But this plan has two cardinal virtues: It's temporary and it's stimulus.
So there are a stimulative effects of tax cuts. Who'd a thunk it.
Of course the Atlantic doesn't get it all
Temporary is key, because making any significant part of the Bush tax cuts permanent is a budget buster. Extended for a full decade, the Bush tax cuts would keep effective tax rates on all Americans at 50-year lows while government spending rose to historic highs. All told, it would deprive Treasury of $4 trillion in the next ten years and potentially destroy our credit with international investors. That's why the only reasonable solution for Democrats is to extend some part of the Bush tax cuts for a few years, fight like hell for reelection, and finally replace the Bush tax cuts with a new tax law that raises more money.
Sadly the only side of the income statement the Atlantic (and liberals) seem to look at when solving (government) budget problems is the income
side. The expense side is where much more focus is needed.
P.S. What we're discussing right now are not tax cuts
...we are merely discussing the extension of current tax rates
and not allowing them to increase in 2011 (or longer I hope.)