Friday, December 3, 2010

Why We Must Allow The Bush Tax Cuts to Expire

It was a time when higher taxes did not sink the economy. Instead, after Clinton passed a tax increase in 1993, the economy enjoyed an epic era of economic prosperity with over eight years without a recession in sight highlighted by an unemployment rate that fell below 4 percent - a level no one thought possible only a few years earlier. - Jules Kaplan/The Hill

Despite the propaganda from both the Dems and the wing-nuts the economy will not suddenly come crashing down if the Bush tax cuts are allowed to expire. The reason most people on both sides want to keep some form of the tax cuts is because they have a vested interest in their continuation. Many of the television pundits and reporters who have been covering this story have not called for letting all of the tax cuts to expire even though letting them expire is what is best for the country as a whole. The reason is because we have all become special interest groups who are choosing our own interests at the expense of the country. Does anyone remember “Country First”?

There are two reasons why I believe we should let all of the Bush tax cuts expire. The first reason is because as long as all of the tax cuts are connected then all of the tax cuts can be held hostage. As long as the middle-class tax cuts are directly connected to the higher rate tax cuts then the wing-nuts can continue to hold the entire tax cut process hostage into perpetuity. If all of the tax cuts were allowed to expire then the Congress would have a clean slate to create targeted tax cuts if that is the direction they want to go in. Every objective economist has stated that tax cuts are the least effective method for stimulating the economy and yet we are still having this debate. Because of decades of tax cut propaganda by the wealthy it has almost become political suicide to even discuss the removal of tax cuts regardless of their effectiveness. Every time anyone (ever) proposes allowing these or any tax-cuts to expire they will immediately be accused by the wing-nuts of raising taxes, is this a great strategy or what?

The wing-nuts under George W. created the perfect trap for all future Congresses despite their political makeup. By combining the tax cuts, no Congress will be able to separate them without catching the full wrath of the wing-nuts and their minions as demonstrated by the recent debate. Remember when the tax cuts were enacted it was because we had a surplus and the wing-nuts argued that same old tired argument from the 80’s; that the “people” knew better how to spend their money than the “government bureaucrats”. So tax-cuts were good during good times was their argument. Here is where the circular argument begins and why there can be no negotiation with these clowns. Now that the economy is bad they argue that tax-cuts are needed to stimulate the economy. So the previous 10 years of tax-cuts did not stimulate the economy, but now magically they are going to start stimulating the economy. My question to these wing-nuts is simply this, “When is it a bad time to give tax-cuts?”

By allowing all of the tax cuts to expire you diffuse the hostage crisis we currently find ourselves in by removing the incentive or reward for maintaining the crisis. To allow these tax cuts to expire of course would require political leadership and the courage of one’s convictions to be able to withstand the echo chamber and the false meme that is being propagated by the wealthy. The President should tell the wing-nuts that as a matter of principle he does not negotiate with hostage takers and to prove it he is willing to allow all of the tax cuts to expire. I have yet to see that sort of strength and leadership from this White House so I am not holding my breath.

The second reason for not extending all of the Bush tax cuts is because of all the folks who have benefited from the economy the last few decades the wealthiest have seen the largest increase in wealth since the gilded age. So while the majority of Americans have seen their wealth shrink and personal income stagnate the top earners have continued to see theirs expand. One of the fundamental values extolled by the wing-nuts is fairness except of course when it comes to paying one’s fair share. The federal revenues derived from personal income taxes and payroll taxes are at 15% of GDP, the lowest it has been in a decade. If all of the Bush tax cuts were allowed to expire the revenue would grow to 21% of GDP by 2020 or at the percentage of GDP they were during the 90’s.

The common argument among the wealthy is that because only 47% of Americans actually pay federal income tax they are already shouldering the bulk of the tax burden but that argument belies why we have income taxes in the first place. You may want to re-litigate the whole income tax argument or you may disagree with the concept on philosophical grounds but that does not afford one the luxury of ignoring the law of the land. We must decide (I thought we had already) if we are a serfdom society or we are the nation created by those founding fathers that the wing-nuts are always so quick to quote, except of course when it doesn’t fit into their narrow definitions of “conservative constitutionalism”. What the hell does that even mean?

If we are serious about fixing the mounting problems that are threatening our country then the first step towards demonstrating that resolve would be to allow these tax cuts to expire and begin to increase revenues. History has shown time and again that the doomsday scenario of raising taxes and wrecking the economy has never materialized and in fact the opposite has occurred when we have left the wealthy and the corporate interests to their own devices they have wrecked the economy. I hate to break the news but the free ride is over America. The decade of waging two wars, increasing entitlements through giveaways to drug companies and oil companies while at the same time cutting taxes is over. The time has come to face the music even though the sun is shining through and we are hung over and revolted by the partner laying next to us it’s over. It is now the morning after in America.

Bush said despite that current prosperity, “It’s time for a change” in Washington. “Some say [the economy] is doing pretty well - well it may be,” he said. But “People need more money in their pocket, as far as I’m concerned.” – George W. Bush

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