The level of back-and-forth over the extension of tax rate cuts enacted under Bush 43 has reached a fever pitch. From the right, we get “all or nothing!” or “no one should have a tax increase in this economy!” or, to borrow from a classic hip hop song by the one-hit-wonder group, The Double XX Posse, “not gon be able ta do it!” From the left, we get “no tax cuts for millionaires and billionaires!” or “tax cuts for the rich” and “no subsidizing the rich” or “they don’t need it.” But my favorite is that, in essence, we can’t afford the $700 billion cost (CBO projected).
For the life of me, I could not figure out how anyone would have the nerve to specifically talk about the $700 billion that extending the current rates for high-income earners may cost (remember, they are projections, so its only a guess), but not talk about how the cost of the rest of the cuts. After all, the same CBO that produced the $700 billion number also stated that the TOTAL cost of extending ALL current tax rates would be $3 trillion. So what gives?
Just more political shenanigans.
Let’s step back for a moment to 2007. From wikipedia:
The PAYGO system was reestablished as a standing rule of the House of Representatives (Clause 10 of Rule XXI) on January 4, 2007 by the 110th Congress:
It shall not be in order to consider any bill, joint resolution, amendment, or conference report if the provisions of such measure affecting direct spending and revenues have the net effect of increasing the deficit or reducing the surplus for either the period comprising the current fiscal year and the five fiscal years beginning with the fiscal year that ends in the following calendar year or the period comprising the current fiscal year and the ten fiscal years beginning with the fiscal year that ends in the following calendar year.
Less than one year later though, facing widespread demand to ease looming tax burdens caused by the Alternative Minimum Tax, Congress abandoned its pay-go pledge.
So, to set themselves apart from the previous congressional crew, the swept-into-power Democrats in the House re-enacted a rule that makes a lot of sense–if we are gonna spend it, we are going to pay for it. Tub notice the next next line: it lasted less than a year. PAYGO was shelved, allowing major pieces of legislation, like the Bush Stimulus package in 2008 and Obama’s Stimulus package in 2009, to be passed without the rules applying. Then, new statutory PAYGO rules were again passed in February of 2010.
In addition, Obama signed new budget rules. From Businessweek:
Under the budget rules, any tax cuts benefitting individuals earning more than $200,000, or couples earning more than $250,000, must be offset with new tax revenue or spending cuts elsewhere.
Apparently, the tax cut line-in-the-sand was drawn long ago. After bucking the PAYGO rules, now the rules must apply and for those high-income earners, tax cuts aren’t affordable.
Here’s what’s missing.
Lets be honest. If there is an argument to be made, its that NONE of the tax rate cuts are affordable. But let’s stick to the current discussion. The reason that Democrats are saying we can’t afford the $700 billion is not because we can’t afford it. That can’t be the case, since evidently, financing $2.3 trillion via debt is not a problem (and allowed under the rules!). The real problem is that offsetting spending cuts would have to be made. History has shown that Democrats are not big on cutting spending (unless its Defense related). Any mention of cutting programs, especially entitlement programs, is met with more resistance than a goalline stand in the national championship game. Any other arguments, like referring to lower tax rates as a “subsidy” (how can the government grant or gift a person their own money) or “welfare for the rich” (once again, its their money) just distracts from the true discussion.
Don’t worry, my Dem friends, I’ll tackle the Repubs too.