Bipartisan Hypocrisy on the Bush Tax Cuts

Some of former President George W. Bush’s most significant economic policies were his tax cuts. At the end of 2010, those tax cuts are set to expire; all tax rates will bounce back to Clinton-era levels. In this change lie the seeds for a political fight as heated and fervid as that which occurred over health care.

There are some areas of agreement, however. Both Republicans and Democrats agree that the tax cuts will be extended for the working and middle classes – those individuals making less than $200,000 and those families making less than $250,000. This is what President Barack Obama meant during his campaign when he promised not to raise taxes for those making for more $250,000.

It is on those Americans making above that number where the debate starts. Democrats want Mr. Bush’s tax cuts ended for the rich; Republicans want them extended. In making these arguments, both parties are guilty of a remarkable amount of hypocrisy.

Let’s start with the Republicans. Today, the Republican Party is passionately dedicated to reducing the deficit. Indeed, a central tenet of the Tea Party is to cut the enormous deficits produced in the past ten years. Much Republican opposition to the health care plan, and Mr. Obama’s presidency itself, bases itself upon rising national debt.

There is no better way to reduce the deficit, in the near term, than to allow the Bush tax cuts to end. This would literally save trillions of dollars in the future; a true deficit hawk would criticize Democratic plans to extend Mr. Bush’s tax cuts for the middle and working classes.

Republicans, however, have taken the opposite tact; they want the tax cuts extended to everybody. Deficit cutting apparently is less important than cutting taxes – a revealing hint about what truly drives the right wing.

Democrats are also guilty of massive hypocrisy. The economic policies of Mr. Obama are based, to a large extent, on the theories of one John Maynard Keynes. Mr. Keynes introduced the revolutionary theory of deficit spending during economic downturns. According to Mr. Keynes, a government should spend more than it takes in during a recession, to offset declines in private sector spending. Deficits are not important, in this view.

Personally, I have expressed doubts about the validity of this theory. Nevertheless, the prescription of Mr. Keynes constitutes economic orthodoxy. Much of the administration’s actions – from the economic stimulus to its spending efforts today – take from Mr. Keynes playbook.

Ending Mr. Bush’s tax cuts – even on only the rich – would go very much against his prescription. It would literally constitute a tax raise during the middle of a harsh economic recession. This is what President Herbert Hoover did during the Great Depression, and it is what Keynesians continuously crusade against. Some liberals argue that raising taxes on only the rich does less harm; my knowledge of economics is not quite strong enough to contest the details, but this sounds an awful lot like fanciful conservative claims that cutting taxes will lower the deficit (something which time and again has been proven not to be true).

Democrats justify their action as – believe it or not – designed to lower the deficit. In reality, ending tax cuts for the rich is part of their crusade, as a liberal would put it, to creating a more equal and fair society. Conservatives like to call this redistributing the wealth.

This is all fine and dandy – indeed, it is an agenda this individual would very much support – but now is not the time to implement it. A recession, especially of this magnitude, is a terrible time to raise taxes (even only those on the rich). Especially given the terrible July jobs report, in which 131,000 jobs were lost, these chances should not be taken. Mr. Bush’s tax cuts ought to be temporarily extended for everybody – rich, poor – until the recession is over and the jobs are back. That is the time to end the tax cuts on the rich.

Advertisements
This entry was posted in Economy and tagged , , , , , , . Bookmark the permalink.

4 Responses to Bipartisan Hypocrisy on the Bush Tax Cuts

  1. Andy says:

    The truly Keynesian approach would be to end the tax cuts on the rich and, rather than reducing the deficit, spend the result on something more stimulative. FWIW, the tax cuts for the rich are barely stimulative at all.

    Also, modern Keynesian economics doesn’t say that deficits don’t matter.

    • inoljt says:

      Thanks for reading and commentating on this; I appreciate the discussion. As for your points – I do think you’re right that it would be better to “end the tax cuts on the rich and…spend the result on something more stimulative” such as aid to states in deficits. Unfortunately, I don’t see how politically feasible that would be, when Democrats struggle to get 60 votes just to extend popular unemployment insurance.

      I do think that the rich are undertaxed in the United States, especially in light of increasing inequality; I just don’t think now is the right time to tax them.

      • peakers82 says:

        I think it’s important to note that what we do on income tax rates will likely not have a drastic affect on the economy. They reason that the government stimulus should work is that it directly injects money into the economy (through employing and paying people) just like what we did in the 30’s and 40’s. The problem is we have to rely on human behavior. When George W. Bush’s administration sent tax rebate checks to everyone it was a great idea, but it relied on people spending those checks. We have an economy based on consumer confidence. If we want the economy to rebound we have to convince people to spend money. The increase in demand leads to business expansion and job growth and so on. When the American people feel the recession is over it might just be.

      • inoljt says:

        That is definitely the truth: that business and consumer confidence needs to be restored. Which is a lot easier said than done.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s