Death, Taxes, and Republican Thuggishness

The last two years have taught us that Republican intransigence is just as inevitable as death or taxes. The dilema over the extension of the temporary tax cuts that Bush rammed through the Senate in 2001 tells a nice 10 year story on the subject. Republicans are claiming that raising taxes now would have a disastrous effect on the economy and extension of the tax cuts would magically make the budget deficit better. To anybody with a memory of 2001 or the campaign of 2000, that's precisely the opposite reason initially given for the tax cuts. Per CBS News:

When Bill Clinton took office in 1993 he faced a $300 billion deficit. He cut government spending by $247 billion and raised taxes on top earners. That move, and later tax cuts, resulted in a budget surplus in 1998.

The tax cuts were supposed to give the surplus back to the American people. The government wasn't using it to provide services or pay down the debt, so they shouldn't be taking it out of the pockets of American workers. This in and of itself is an interesting myth, but one which was amply noted at the time. Bush quickly turned a government surplus into a crushing deficit, making it necessary to take money out of social security to pay for current operations. The social security crisis you keep hearing about was manufactured by Bush's OMB when they shoveled $3 trillion out the door, disproportionately into the pockets of the wealthy.

There were not 60 votes in the Senate to squander the national surplus on new yachts and planes for Bush's friends in the oil business, however, so Republicans used the budget process of 'reconciliation' to pass the tax cuts without the threat of a filibuster. Reconciliation bills must expire in 10 years, so the tax cuts were scheduled to expire on December 31st, 2010. Now Democrats want to extend the small tax cuts for everybody on the first $250,000 that a family makes, but Republicans voted against the tax cuts in the House last week and killed the bill in the Senate.

Republicans demanded that an extra tax cut on all income over $250,000 be included or every worker sees their wages lowered. An across-the-board tax would take money out of the pockets of families struggling to pay down their mortgage or looking to go holiday shopping, severely weakening the American economy. As long as Democrats care about economic consequences, this position gives the Republicans an upper hand in negotiations. Of course, Republicans are also holding the New START nuclear treaty, unemployment insurance, DADT repeal, and any other piece of government business hostage unless they get their extra tax cut for the wealthy dealt with.

President Obama, for his part, insists on pretending that Republicans care about anything other than lining the pockets of their wealthy donors, believing, There must be some sensible, common ground." In fact, there is sensible common ground. A CBS News poll finds that 49% of Americans would prefer to keep the tax cut on incomes under $250,000 per family and let the extra tax cut for the wealthy expire. An additional 14% would prefer to let all the tax cuts expire. Only 34% support the Republican position. The "sensible, common ground" solution is the Democratic solution.

The White House does have one card up its sleeve- the Obama tax cuts that were included in the 2009 stimulus bill are set to expire this year as well, and if Republicans want to blow a $700 billion hole in the deficit by demanding the extra tax cut for their lobbyist friends, they can still get plastered for letting the Obama tax cuts for the middle class and homebuyers die. But my guess is that Republicans will get exactly what they want, and Democrats will come out having achieved one or two small victories that will keep the economy limping along.

Update: Maybe the financial cost of letting all tax cuts expire won't be so bad, especially compared with the costs of extending them for the wealthy. Go read Krugman (GRK).