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OPPOSING VIEW: Keep tax rates where they are
But that, in effect, is what threatens to emerge from the lame-duck session of Congress that starts today. At the top of the agenda: what to do with the 2001 and 2003 Bush tax cuts, which are scheduled to expire Dec. 31.
Obama wants to extend the cuts permanently for families making less than $250,000. That would amount to some $3.2 trillion in additional red ink over the next decade, according to the Congressional Budget Office. Not to be outdone, the Republicans want to include families making more than $250,000 as well, bringing the cost to $3.9 trillion.
By comparison, Obama's 2009 stimulus was about $800 billion, relative chump change in today's mortgage-the-future sweepstakes.
Yes, despite all their campaign rhetoric about reducing deficits, politicians of both parties are racing to pile up future IOUs to stoke the economy of the present. It doesn't seem to matter whether they fashion themselves as unapologetic liberals or as fiscal conservatives. Both sides seem determined to continue pandering as usual.
As the bipartisan co-chairmen of Obama's deficit reduction commission noted last week, the federal government will never control its debt until its leaders come clean on two basic facts: Entitlement programs such as Medicare and Social Security must be reined in, and tax revenue can't stay where it is now, at levels last seen in the Truman administration.
The tax rates in place from the Reagan through Clinton administrations were sufficient to create one of the best periods in the nation's economic history. After President George W. Bush and Congress slashed those rates without making offsetting spending cuts, surpluses turned to deficits and income inequality widened.
Given the nation's dire fiscal outlook, none of the Bush tax cuts should be extended indefinitely. But given the state of the economy and political realities, some temporary extension might be unavoidable. One reasonable option would be to allow the cuts to expire next year for wealthy taxpayers and more gradually for everyone else.
Beyond that, tax rates should become part of the larger deficit reduction negotiations. The bold plan by the Obama commission's co-chairmen — to cut the deficit by some $4 trillion over 10 years by curbing spending while slightly raising (and greatly simplifying) taxes — offers one road map.
Over the weekend, top Democrats and Republicans seemed to be backing away from their initial negotiating positions that any extensions of the Bush tax cuts have to be forever. That's at least a glimmer of hope that the political ground is beginning to shift.
Now is the time to be looking at ways to reduce long-term deficits. Approving another $3 trillion or $4 trillion in unaffordable tax cuts would be the wrong way to start.
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