http://thecenterholds.com/2012/11/20/time-for-the-sun-to-set-on-the-bush-tax-cuts/
Ever since the election ended, most of the buzz around Washington — and the rest of the country — has been focused on the impending “fiscal cliff”. This overly-dramatic phrase refers to a set of spending reductions and tax increases that are due to take effect at the start of 2013. Both Republicans and Democrats are concerned about the impact these may have on a fragile, slowly-recovering economy, even though many of them are responsible for these events being about to occur, and their timing as well. And, of course, the two sides differ on what should be done to avoid the “crisis”.
I guess I have to start by observing that members of Congress, and the president, have spent years claiming that debts and deficits are a big problem, while running up huge debts and deficits, and now that we finally face the possibility of the deficit being significantly reduced, nobody wants to do it. No big surprise there.
Similarly, much of the “fiscal cliff” results from automatic spending cuts due to the Budget Control Act of 2011, cuts that are only going to take place because the people oh-so-worried about the “cliff” couldn’t or wouldn’t negotiate anything that works better.
But what bothers me the most about this entire affair is that it is being used to rationalize further extending the so-called “Bush Tax Cuts”, reductions in tax rates and other changes that were instituted in 2001 and 2003. These were implemented using the budget reconciliation process, which allows the normal possibility of a filibuster to be bypassed.
The intention of reconciliation was to allow for speedy passage of federal budget bills — and specifically, to ensure that the budget stayed balanced — but it didn’t take long before some senators realized they could use it to try to push through bills that actually increased the budget deficit. To counter this, in 1985 the Byrd Rule was implemented (after former senator Robert Byrd), which among other provisions, prevents reconciliation from being used on any bill that increases the budget deficit beyond the “reconciliation period”, which is generally considered to be ten years. To avoid being thwarted by this rule, the Republican-controlled senate put a sunset provision on the Bush tax cuts so they would expire after ten years. This is why the tax cuts are temporary, rather than permanent. (These games were necessary because Democrats would likely have filibustered the tax cuts otherwise.)
At the time, the expiration of these tax cuts was actually used by Republicans to deflect criticism from Democrats that the cuts were a bad idea that would balloon the budget deficit. The claim was made that they were only temporary and would expire, so the complaints were overwrought.
Of course, we all know what really happens to “temporary” changes like tax cuts with sunset provisions — once people get used to them, they consider the “temporary” situation the status quo. It is analogous to companies that give a Christmas bonus to all of their employees year after year. At first, the people receiving these bonuses are grateful, but over time, they start to rely on these extra checks, and even expect them. If the bonuses stop coming, they don’t view this as losing something they never had a right to. On the contrary, they resentfully see it as a loss of an entitlement, even considering it a “pay cut”.
Naturally, this is happening with the Bush tax cuts as well, exacerbated by the addition of politics to the mix. Many people no longer view the expiration of the Bush tax cuts as something that should happen because of a designed-in sunset provision. Rather, they look at the Bush tax cuts as the “new normal”, consider any attempt to not extend them as improper or even unpatriotic. On talk radio, I have even heard pundits refer to the expiration of these cuts as a “tax increase” — a phrase that puts the sunset provision squarely on its ear in the same manner as people losing Christmas bonuses talking about “pay cuts”.
In 2010, President Obama agreed to allow the extension of the Bush tax cuts for all income brackets by two years. At the time, many on the left viewed this as a capitulation, but political analysts saw the shrewdness of the move: by making the expiration now occur shortly after the 2012 elections, the president ensured that he’d be in the driver’s seat regardless of the outcome. Had he lost, he’d have been a lame duck with no reason to extend the cuts further; and now that he’s won, he can use the pending expiration of the cuts as a bargaining chip. But while I can see the reasoning behind including the tax cuts in the larger negotiation over the “fiscal cliff” with Congress, I think an argument can be made that these tax cuts should be allowed to expire regardless.
From a political strategy standpoint, I think it makes sense for President Obama to use the GOP’s efforts to invert the concept of a sunset provision against them, in his effort to extend the lower rates only for the lower and middle classes. Right now, he’s being accused of wanting to “raise taxes on the rich”. If he simply allows the Bush-era cuts to expire, some folks will gripe about this as a “tax increase”, but that can be negated fairly quickly by proposing a new tax cut bill for those earning under whatever figure the politicians agree upon. Republicans wanting to block this will put themselves in the uncomfortable position of arguing against a middle-class tax cut.
But from a simple ethical point of view, I’d like to see the Bush tax cuts gone simply because of how they were put into place. Budget reconciliation was not supposed to be used to ram through massive partisan tax cuts that increase the budget deficit. The Byrd Rule is already pretty gutless if it allowed these two tax cut bills to go through, but the point of that rule is that bills that increase the deficit at least expire, and that’s exactly what should happen here.
Finally, I think it is important that tax rates go up both to help reduce the budget deficit, and to drive home the point that tax increases are not an instant death knell to the economy. In addition to calling the expiration of the Bush tax cuts a “tax increase”, members of Grover Norquist’s anti-tax cult seem to have conveniently forgotten that the economy did pretty well under the tax rates that existed during the Clinton presidency. Allowing a return to those rates may help break the religious fever surrounding taxes that is currently dominating the Republican Party.
Ever since the election ended, most of the buzz around Washington — and the rest of the country — has been focused on the impending “fiscal cliff”. This overly-dramatic phrase refers to a set of spending reductions and tax increases that are due to take effect at the start of 2013. Both Republicans and Democrats are concerned about the impact these may have on a fragile, slowly-recovering economy, even though many of them are responsible for these events being about to occur, and their timing as well. And, of course, the two sides differ on what should be done to avoid the “crisis”.
I guess I have to start by observing that members of Congress, and the president, have spent years claiming that debts and deficits are a big problem, while running up huge debts and deficits, and now that we finally face the possibility of the deficit being significantly reduced, nobody wants to do it. No big surprise there.
Similarly, much of the “fiscal cliff” results from automatic spending cuts due to the Budget Control Act of 2011, cuts that are only going to take place because the people oh-so-worried about the “cliff” couldn’t or wouldn’t negotiate anything that works better.
But what bothers me the most about this entire affair is that it is being used to rationalize further extending the so-called “Bush Tax Cuts”, reductions in tax rates and other changes that were instituted in 2001 and 2003. These were implemented using the budget reconciliation process, which allows the normal possibility of a filibuster to be bypassed.
The intention of reconciliation was to allow for speedy passage of federal budget bills — and specifically, to ensure that the budget stayed balanced — but it didn’t take long before some senators realized they could use it to try to push through bills that actually increased the budget deficit. To counter this, in 1985 the Byrd Rule was implemented (after former senator Robert Byrd), which among other provisions, prevents reconciliation from being used on any bill that increases the budget deficit beyond the “reconciliation period”, which is generally considered to be ten years. To avoid being thwarted by this rule, the Republican-controlled senate put a sunset provision on the Bush tax cuts so they would expire after ten years. This is why the tax cuts are temporary, rather than permanent. (These games were necessary because Democrats would likely have filibustered the tax cuts otherwise.)
At the time, the expiration of these tax cuts was actually used by Republicans to deflect criticism from Democrats that the cuts were a bad idea that would balloon the budget deficit. The claim was made that they were only temporary and would expire, so the complaints were overwrought.
Of course, we all know what really happens to “temporary” changes like tax cuts with sunset provisions — once people get used to them, they consider the “temporary” situation the status quo. It is analogous to companies that give a Christmas bonus to all of their employees year after year. At first, the people receiving these bonuses are grateful, but over time, they start to rely on these extra checks, and even expect them. If the bonuses stop coming, they don’t view this as losing something they never had a right to. On the contrary, they resentfully see it as a loss of an entitlement, even considering it a “pay cut”.
Naturally, this is happening with the Bush tax cuts as well, exacerbated by the addition of politics to the mix. Many people no longer view the expiration of the Bush tax cuts as something that should happen because of a designed-in sunset provision. Rather, they look at the Bush tax cuts as the “new normal”, consider any attempt to not extend them as improper or even unpatriotic. On talk radio, I have even heard pundits refer to the expiration of these cuts as a “tax increase” — a phrase that puts the sunset provision squarely on its ear in the same manner as people losing Christmas bonuses talking about “pay cuts”.
In 2010, President Obama agreed to allow the extension of the Bush tax cuts for all income brackets by two years. At the time, many on the left viewed this as a capitulation, but political analysts saw the shrewdness of the move: by making the expiration now occur shortly after the 2012 elections, the president ensured that he’d be in the driver’s seat regardless of the outcome. Had he lost, he’d have been a lame duck with no reason to extend the cuts further; and now that he’s won, he can use the pending expiration of the cuts as a bargaining chip. But while I can see the reasoning behind including the tax cuts in the larger negotiation over the “fiscal cliff” with Congress, I think an argument can be made that these tax cuts should be allowed to expire regardless.
From a political strategy standpoint, I think it makes sense for President Obama to use the GOP’s efforts to invert the concept of a sunset provision against them, in his effort to extend the lower rates only for the lower and middle classes. Right now, he’s being accused of wanting to “raise taxes on the rich”. If he simply allows the Bush-era cuts to expire, some folks will gripe about this as a “tax increase”, but that can be negated fairly quickly by proposing a new tax cut bill for those earning under whatever figure the politicians agree upon. Republicans wanting to block this will put themselves in the uncomfortable position of arguing against a middle-class tax cut.
But from a simple ethical point of view, I’d like to see the Bush tax cuts gone simply because of how they were put into place. Budget reconciliation was not supposed to be used to ram through massive partisan tax cuts that increase the budget deficit. The Byrd Rule is already pretty gutless if it allowed these two tax cut bills to go through, but the point of that rule is that bills that increase the deficit at least expire, and that’s exactly what should happen here.
Finally, I think it is important that tax rates go up both to help reduce the budget deficit, and to drive home the point that tax increases are not an instant death knell to the economy. In addition to calling the expiration of the Bush tax cuts a “tax increase”, members of Grover Norquist’s anti-tax cult seem to have conveniently forgotten that the economy did pretty well under the tax rates that existed during the Clinton presidency. Allowing a return to those rates may help break the religious fever surrounding taxes that is currently dominating the Republican Party.
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