Republicans About to Lie in Tax Cut Bed of Their Own Devising
Over email, Bruce Bartlett observes:
According to press reports, in his budget Obama will allow many of the Bush tax cuts to expire next year. Republicans charge that this constitutes the largest tax increase in history. I think it is important to remember that the reason the Bush tax cuts are expiring is because that’s the way Republicans wrote the legislation. If anyone is responsible for increasing taxes, they are.
I believe that Republicans could have had permanent tax cuts which would have been better for the economy in the first place. But they would have had to negotiate with the Democrats. They preferred not to do so, believing that they could just extend their temporary tax cuts forever. I warned for years that this was a stupid strategy, but was ignored. Now the chickens have come home to roost.
Indeed. Recall that the purpose of writing the sunsets into law was to bring the “ten-year cost” of the cuts down. Basically, they wrote a tax cut bill that was too expensive to pass. Then instead of actually moderating the scale of their agenda, they made the cost appear smaller by arbitrarily phasing the cuts out under the theory that they could then turn around and accuse adversaries of implementing a huge tax increase if they refused to make the cuts permanent. What I guess they didn’t count on in this game of legislative chicken was that huge electoral gains for the Democrats in 2006 and 2008 have now made it easy to let the law operate as written and phase the cuts out. In an alternate reality, the Bush administration could have struck a deal with Democratic leaders for a smaller, less regressive, but permanent tax cut whose actual cost would have been in the neighborhood of the fake cost of the Bush tax cuts. That wouldn’t have made me smile, but it would have been better in line with supply-side theory (whose logic requires the tax cuts to be permanent) and better advanced long-term conservative policy goals. Unfortunately for them—but at the end of the day, also unfortunately for the country—many Republican political leaders have chosen to take advice primarily from stupid people. And a certain number of other smart people have been more interested in being team players than in telling said political leaders the truth.
32 Responses to “Republicans About to Lie in Tax Cut Bed of Their Own Devising”
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February 23rd, 2009 at 11:00 am
Oh, you go me!
I thought this was going to be a post about how every single Republican in the House, and 38 out of 41 in the Senate, voted against the largest middle class tax cut in American history.
And also to, 41 is a little itty bitty teeny tiny little number.
February 23rd, 2009 at 11:07 am
it’s not just that they take advice from stupid people; they, too, are enormously stupid.
February 23rd, 2009 at 11:12 am
Unfortunately for them—but at the end of the day, also unfortunately for the country—many Republican political leaders have chosen to take advice primarily from stupid people.
Ah, well, stupid people tell them what they want to hear.
And a certain number of other smart people have been more interested in being team players than in telling said political leaders the truth.
Look at it is as a selection problem: a certain number of people wish the government to go away, and they do not care how. If the actual facts are arguing against the policy, R’s then try to cope with the facts get chased out, which leaves nothing but true believers. That’s the problem with pure parliamentarianism in a two-party system.
max
['The upside to all this, is that there's no reason for D's to be bipartisan or moderate.']
February 23rd, 2009 at 11:16 am
Obama is simply following the Republicans’ idol, Ronald Reagan.
God, it’s great to have a good ol’ soak the rich liberal again like Reagan was.
February 23rd, 2009 at 11:29 am
Or another forumlation: tax cuts = government spending.
February 23rd, 2009 at 11:30 am
The whole idea of the “starve the beast” strategy is to make the Democrats look like the bad guy. Republicans pass tax cuts regardless of how feasible and fair they are and force the democrats to raise them. Responses like those made by Bartlett are entirely expected and ignored because when it comes to taxes Republicans are better able to take advantage of voters’ psychological weaknesses.
February 23rd, 2009 at 11:30 am
Exactly. That is a rare, precious cheerful thought one can hold onto in the sea of economic gloom.
February 23rd, 2009 at 11:33 am
Re El Cid at 5: “God, it’s great to have a good ol’ soak the rich liberal again like Reagan was.”
—————–
You/re wrong, you evil little fucker. Ronald Reagan was a Fiscal Conservative.
Don’t you remember how he balanced the budget? Just like he promised in his campaign?
February 23rd, 2009 at 11:34 am
There may have been some validity to the “starve the beast” theory back in the 1970s, but over time tax cuts stopped being a means by which spending could be cut but rather a substitute for spending cuts. Today most Republicans believe that the only thing they need to do to reduce the size of government is cut taxes. I exposed the fallacy of this view here:
http://www.independent.org/pdf/tir/tir_12_01_01_bartlett.pdf
February 23rd, 2009 at 11:38 am
Obama is simply following the Republicans’ idol, Tip O’Neil.
God, it’s great to have a good ol’ soak the rich liberal again like O’Neil was.
There, fixed.
February 23rd, 2009 at 11:51 am
Ya, well it’s going to take 20 years to clean up all of Bush’s little messes and I just don’t know if Dems will ever get around to repealing the Bush tax increases.
February 23rd, 2009 at 11:52 am
Bruce:
I would not say there was “validity” to it back in the 1970s, but rather, that it was an as-yet-untested testable hypothesis.
Test flunked.
Even hard tax caps (see: California) don’t stop spending; they increase borrowing.
February 23rd, 2009 at 11:53 am
For years I’ve advocated that the expiration of the tax cuts should be labelled the Republican tax increase of 2011. IIRC, EVERY Republican voted for the package except an odd maverick (think failed presidential candidate). They (the GOP) own this pending tax increase in the same way that Clinton owned the 1993 budget/tax increase and Obama will own the stimulus bill.
February 23rd, 2009 at 11:57 am
DTM,
By putting it the sunset the Republicans have achieved their “starve the beast” type goal. Tax cuts are sort of like entitlement spending and over time people become increasingly accustomed to them. Regardless of the legislative reasons for why these benefits disappear voters will see democrats as responsible for taking them away.
Of course the democratic response, of placing a rising tax burden on fewer and fewer voters, has been highly effective in neutralizing this strategy. Going forward I am not sure if either of these methods will be sustainable. As seen in Europe you can’t depend on the rich for everything and when the time comes to ask progressively poorer and poorer voters to pay up they may be more reluctant (all thank to norquist).
February 23rd, 2009 at 12:26 pm
Recall that the purpose of writing the sunsets into law was to bring the “ten-year cost” of the cuts down.
Yes and no – the Republicans rammed through the tax cutes as part of a “Budget Reconciliation” – meant to expedite passage of budget issues by limiting debate (filibuster) and amendments and needing only a simple majority in the Senate. According to the provisions of the so-called “Byrd Amendment”, anything passed via Budget Reconciliation can only be temporary – it can’t last longer than the current CBO projections at the time the bill was passed (in 2001, CBO projections went out 10 years – since then they’ve been shortened to 5). So to go via the Budget Reconciliation route, the tax cuts HAD to expire after 10 years. It passed in the Senate by 58-33 (compare that to the way Obama went about getting his stimulus bill passed – he *could* have gone the budget reconciliation route also and not needed the 60 votes or any Republican votes – but it all would have expired after 5 years).
Undoubtedly the Republicans planned on making the tax cuts permanent once they could be sure of getting 60 votes in the Sentate. They were actually planning on a vote on the issue as part of Bush’s re-election “mandate” and had scheduled to start as soon as the Senate came back from the Labor Day recess in 2005 (remember, according to Republicans, you don’t market new things until after Labor Day) – however Hurricane Katrina intervened, the debate and vote were postponed as being unseemly after the huge disaster, and it was never picked up again before the Democrats took over.
I always found it ironic that the Republicans tried to portray the Democrats as being failures in the last Congress because they were unable to get major legislation passed over Republican obstructionism – yet, it is arguably true that massive tax cuts are probably the most important issue for Republicans, and for the amount of time that they held Congress they were unable or unwilling to make them permanent – which to me is a far-greater failure than that of the Democrats in the 110th Congress – yet no one ever holds them accountable.
February 23rd, 2009 at 12:39 pm
Note that it’s not just the rates that sunset, the estate tax is also back to its pre-2001 rate and the gift tax exemption goes back to $1M. Pretty brilliant idea to pin the sunset on the GOP but I doubt it’ll work. Better idea to focus on the new cuts this year like Obama did during the campaign and accept that the sunset provisions will be spun as tax increases.
February 23rd, 2009 at 12:42 pm
I hope someone could answer this for me: what in the hell is a “permanent” tax cut? What Constitutional provision allows for legislation to be made “permanent,” meaning a future Congress would be unable to overturn it? Wouldn’t it take a Constitutional Amendment to make something “permanent,” and similarly, wouldn’t any “permanent” cut still be alterable by future Congresses?
February 23rd, 2009 at 12:44 pm
I alwayw wonder why Kerry didn’t say in 2004 that Bush signed the large tax increase in history, which is completely true.
February 23rd, 2009 at 12:52 pm
Piper:
You’re absolutely right, but “permanent tax cut” is, in this context, almost a term of art signifying the burden of political inertia. A “permanent” tax cut is one that continues until somebody gets the votes to raise taxes. The tax cuts at issue here disappear by the terms of the legislation itself at a stated time — unless you cobble together the votes to extend them, either “permanently” or for another fixed period.
February 23rd, 2009 at 12:52 pm
Piper, any tax cut can be overturned. But Bush’s tax cuts are “temporary” in that they have an expiration date: if they’re not renewed before then, they automatically disappear. Their temporariness is written into them.
February 23rd, 2009 at 1:27 pm
Thank you each for your response. One more question: has there ever actually been a “permanent” tax cut enacted?
I had never heard this term before the second round of Bush tax cuts was being debated.
February 23rd, 2009 at 1:53 pm
“has there ever actually been a “permanent” tax cut enacted?”
I’m fairly sure Reagan’s tax cuts were permanent. And presumably, at some point in the next 18 months Congress will make everything but the top bracket of Bush’s tax cuts permanent (since they’re all planning to sunset).
A good example of why the difference is important is the offshore drilling ban. For some reason I didn’t really catch, it had to be renewed every year, otherwise it expired. So all the “drill baby drill” drivel got up such an outrage that they just didn’t bother taking a vote on it (to correctly avoid a politically hot issue that could drag down a good election year, I imagine), so it expired through inaction. Which was of course the whole point.
February 23rd, 2009 at 2:06 pm
Piper – unless there are some portions of the tax cuts associated with the Obama Stimulus package that are specifically designated to expire at some point, they would be considered “permanent”.
February 23rd, 2009 at 2:27 pm
I don’t think this was a bad strategy for the Republicans. It’s bad policy, but pretty good politics. They gave out exorbitant tax cuts, and got credit for it, and now they get to criticize Obama for a tax increase. If the Republicans were still in power, they’d take credit for extending the Bush-era tax cuts.
It’s only stupid advice if you care about lowering taxes. If you care about your party staying in power for as long as possible, this is a pretty good strategy.
Of course, an even better strategy might be to govern responsibly. But for the Republicans currently in power, that ship has pretty much sailed.
February 23rd, 2009 at 3:42 pm
I think Obama successfully co-opted that criticism with the tax cuts in the stimulus that affect 95% of the people. The Bush tax cuts did very little for anybody but the very top tier. So when they expire, they won’t affect most of the people – but the Obama tax cuts will.
Advanatage: Obama. Smarter than the average Republican.
February 23rd, 2009 at 3:51 pm
There may have been some validity to the “starve the beast” theory back in the 1970s, but over time tax cuts stopped being a means by which spending could be cut but rather a substitute for spending cuts.
With all respect to Mr. Bartlett, the R’s have never–never–had a concrete plan for reducing the size of the federal government, at least not since openly calling for the repeal of the New Deal became unfashionable.