The battle over the extension of the Bush tax cuts rages on. We hear about it in the Congress, from the White House, on the news and even at the water cooler. Everyone is taking sides. If these cuts do not continue, the United States will experience one of the highest tax increases in US history and the continued attack on job creation. Furthermore, we will likely move to the top spot of highest taxed countries in the industrialized world. In a world where capital can easily take flight, this spells dire consequences for an economy that is the worst we have seen in three decades.
Political pundits and economists breakdown the prospects for the tax cuts into three likely scenarios:
The first scenario paints a picture in which the complete package is extended to all income groups for at least two years. This is obviously what investors, small business owners, and others with a vested interest in a robust economy desire. This will allow business owners to make some economic decisions, particularly job creators who have sat on the sidelines in order to see what government will do next. I believe this is the least likely scenario in the current political environment if, for no other reason, such will show tax cuts on wealth creation actually works. There are many in Congress who do not want Americans to come to that obvious conclusion.
A second, and more likely scenario has a multi-year extension of tax cuts for those who make $200,000 or less a year. In other words, a cut for those who contribute little, if anything, to job growth. I personally think that this is the most popular scenario in the current political environment. These type of cuts will have zero or even an adverse effect on an already weak economy. They will not work at creating jobs and the politicians will tell voters such, while failing to mention that the cuts were not extended to the ones who actually create jobs. It is bad economics, but excellent political pandering for those who are in the class conflict business.
A third scenario is one that includes a very short term extension of cuts for all groups. I think this, too, is a strong possibility and how long these cuts last could be predicated entirely on election results. If the House falls to a GOP majority, I could easily see a lame duck Congress rescind any extensions they passed before the election to persuade voters. These “sore losers” could come back with a vengeance between November and January with a list of bad bills, including one that turns its backs on the tax cuts for job creators.
With that, I think it is imperative to draw a line in the sand and stop the lame duck Congress from passing legislation. That battle will largely be fought in the US Senate through the use of the filibuster and conservative activists reminding the ten Republicans up for reelection in 2012 how important it is to hold the line on a government out of control.
Ironically, John Boehner, the leader of the Republican party in the US House and the probable next Speaker of the House, has already conceded that, in his opinion, “it would be better” to extend the tax cuts to those under $200,000 than to not have cuts for anybody. Better? In what way? The only advantage I see is in the arena of garnering votes, not jobs. This is political pandering at its worst and why the Republican Party has received as much scrutiny from Tea Party and other conservative activists as the Democrats.
Republican strategists are underestimating the intelligence of voters when provided a “teaching moment.” Boehner and other Republicans should just honestly say that we are in a fiscal crisis and if we are going to cut taxes, it should be to produce jobs and not votes. With that, the GOP should support cuts for all or for none. That kind of stand would resonate with voters who are tired of policy making as another form of political campaigning.
About the author: Kevin Price was an aide to U.S. Senator Gordon Humphrey (R-NH) and later went on to work in policy areas with some of the nation’s leading think tanks including the National Center for Public Policy Research and was part of the Heritage Foundation’s Annual Guide to Public Policy Experts. He is also a prolific writer, posting several times a week at his critically acclaimed blog and having authored The Debt Crisis and You and the public policy best seller, Empowerment to the People.