Bush tax cuts: Can the U.S. afford them?
With the Bush tax cuts set to expire Dec. 31, Congress has begun debate over whether they should be extended.
We’re in “deep voodoo,” said Paul Krugman in The New York Times. With the Bush tax cuts set to expire Dec. 31, Congress has begun debate over whether the cuts should be extended. President Obama vowed to keep them for families making less than $250,000. Republicans want them extended for everyone, including the wealthiest—even though they claim to be deeply concerned about the federal budget deficit. You “never have to offset the cost of tax cuts,’’ GOP Sen. Jon Kyl explained. Republican Senate leader Mitch McConnell concurred, saying that the Bush tax cuts “increased revenue” by stimulating the economy. Can Republicans still be clinging to this myth? asked Ezra Klein in WashingtonPost.com. The nonpartisan Congressional Budget Office estimates that Bush’s tax cuts cost the treasury hundreds of billions, helping to transform Clinton’s budget surplus into a yawning deficit. The chairman of Bush’s Council of Economic Advisors, economist Greg Mankiw, has said that only “charlatans and cranks” believe tax cuts pay for themselves. Sadly, it seems, the GOP is being run by people who are “economically illiterate.’’
Unfortunately, leaders of the other major party are economically reckless, said Brian Riedl in The Wall Street Journal. Obama can’t blame his “trillion-dollar budget deficits” on the Bush tax cuts of 2001 and 2003. The deficits run up over the past decade were mainly caused by the cost of two wars, a major recession, and a massive increase in discretionary spending under both Bush and Obama, including Bush’s Medicare prescription program and Obama’s $787 billion stimulus. So while the Bush tax cuts make a “convenient scapegoat,” the root of the deficit problem is “the dramatic upward arc of federal spending.”
But if we’re serious about deficit reduction, said Megan McArdle in TheAtlantic.com, “those tax cuts have to go.” A weak labor market and slow economy might argue for another year or two of tax relief to moderate-income families. But we shouldn’t allow a tax cut that we clearly can’t afford to become “immortal.” Keeping the tax cuts for the 130 million households making less than $250,000 would cost about $255 billion a year, said Ryan Donmoyer in Bloomberg BusinessWeek. But to get the 60 votes necessary to overcome a filibuster, Democrats will need at least one Republican’s support. Given the election-year stakes, Democrats just might “blink and allow a one-year extension of the entire package.”