Why on earth should the Republicans swallow a tax increase now? Having just walked away from the budget and debt limit negotiations, the GOP leadership simply ratified what they have been saying all along. They basically told Vice President Biden and the Democratic congressional leadership that they really mean it this time.
There are, of course, traditional supply-side arguments against raising taxes for which readers can find ample justification from the ranks of Larry Kudlow, Arthur Laffer and the books of the late, great Jack Kemp.
Moreover, Grover Norquist of Americans for Tax Reform is right to keep the focus on spending, rather than the deficit per se, since you can balance the budget as easily through tax increases as with spending cuts, the former being bad, the latter good.
While I admit to being perplexed over the very complex theological debate, ongoing, between Mr. Norquist and the GOP House caucus on one side, and Senator Tom Coburn (R-OK), Martin Feldstein, and the Wall Street Journal on the other, as to the proper handling of “tax expenditures” or tax breaks, especially absurd ones such as ethanol credits, I see really no need to go there given the numerous targets of opportunity for reductions in both mandatory as well as discretionary spending at least at this early juncture.
In view of the recessionary hangover the nation is still experiencing, long-term cuts in entitlement spending probably make more sense than relying exclusively on cuts in discretionary spending, again, for now at least. Alas, there is little political will for such an approach.
But the most compelling reason not to cave on the matter of increasing taxes, or even tax expenditures, at least for the nonce, is that our Commander-in-Chief has forthrightly and repeatedly indicated his intention, if re-elected, to let the Bush tax cuts — all of them — expire.
Back in February, when he released his budget for 2011, President Obama said, “We extend middle-class tax cuts in this budget,” but “we will not continue costly tax cuts for oil companies, investment fund managers, and those making over $250,000. We just can’t afford it.”
Of course you can’t when you are spending as if there is no tomorrow and refuse to do anything about entitlements. Just tax the very people who provide the very things the country needs at this critical period in its economic history: energy, investment capital and small businesses, the engines of job creation. Right.
“I don’t see anything in the Democratic Party that says they’re not comfortable raising the top rates to the level they were in the Clinton administration,” stated the President. Well, that’s certainly true. Having agreed to a temporary extension of the Bush cuts, he and his party have drawn a line in the sand regarding any further extensions. In other words, he is just saying, “No.”
Returning to the current negotiations over the debt ceiling, this thought comes to mind: Aren’t the Republicans entitled to take the President at his word that he will allow taxes to rise drastically with the expiration of the Bush tax cuts? If so, shouldn’t that be factored into the negotiations, a chit for the Democrats, prospectively, so to speak? Assuming the President is a) re-elected and b) has something like enough votes in Congress to sustain his veto of further tax-cut extensions, why not keep the focus exclusively on spending cuts? After all, the Obama administration is obviously counting on this happening.
The truth is that the Democrats — the White House and the congressional wing — are hedging their bets. They understand that the President may or may not be re-elected. Still, there is no reason the Republicans should not articulate this very real possibility, for purposes of their negotiating position during these consequential negotiations. Taxes are going up. The President said so.
So there is no need to cave on this point now. In fact, the GOP should be reminding the public of this eventuality as it drives that hard bargain.