"Simply Stealing"? Simply Silly

The closer we get to an election, the more absurd the political dialogue becomes. Last Sunday, a Spartanburg Herald-Journal editorial denounced the president's proposal to extend the current tax rates only for those making under $250,000 a year as "Simply stealing." That's right. Raising taxes is theft.

As silly as that statement is, it is illustrative. This debate regarding the extension of the Bush tax cuts is exposing some basic fault lines in American politics, the same lines that have dominated since at least the tax revolt of the late 1970s that culminated in the Reagan tax cuts of the early 1980s.

The basic question is this: should the current rates, which are set to expire at the end of the year, be extended as they are for all income groups (the Republican position), or should they be extended only for couples making under $250,000 a year (the president's position).

Before engaging the merits of the two positions, a little history for context. The reason they are set to expire is that the Republican Congress that passed the current tax rates back in 2001 had to limit the time they would be in effect in order to keep down the long-term loss of revenue. In other words, if nothing were to be done by this Congress, and tax rates were to revert to the levels of the 1990s, it would be due to the way Republicans wrote the bill back in 2001. And they wrote it that way so that they could pass it using reconciliation (yes, the same technique used to amend the health care bill, which today's Republicans denounced as an anti-democratic abuse of power).

But no one seriously proposes doing that. Republicans propose, as they have ever since they passed the initial bill in 2001, that the current rates should be made "permanent." In the 2008 campaign John McCain took that position, while Barack Obama argued that they should be extended for those making under $250,000 and allowed to expire for those making more. One could argue that the election results should have settled that question, but Republicans have done little in the last 18 months to show that they respect the results of the last election.

The various arguments advanced by Republicans today reveal the inconsistency of that party's economic vision. In 2001, they argued that the tax cuts were necessary because the federal government was running a surplus. Today, they argue that the extension of the tax cuts is necessary, even for the very wealthiest Americans, despite the fact that the federal government is running a huge deficit. So it seems that regardless of economic circumstances, taxes should always be cut.

They denounced the president's stimulus bill in 2009 because it was based on Keynesian economics: the idea that in a slow economy, the federal government should cut taxes and increase spending to increase economic activity. Republicans rejected that theory, and claim it has failed. Now they say no one's taxes should go up during a recession--which is itself a Keynesian concept.

They say we need tax cuts now, because the stimulus failed, while neglecting that fully one-third of the stimulus bill was tax cuts (and which Republicans almost unanimously voted against).

They argue that the president's proposal would hurt small businesses and prevent them from creating jobs, while the New York Times reports that fewer than 3% of small businesses would be affected by it:

"Even among the 750,000 businesses that would be subjected to the higher rates in 2011, many are sole proprietors — a classification so amorphous it can include everyone from corporate executives who earn income on rental property to entertainers, hedge fund managers and investment bankers. Because 80 percent of America’s 32 million businesses are sole proprietorships, 90 percent of the tax cut would be derived from businesses without employees."

In other words, it would have virtually no negative impact on jobs, while adding $700 billion in revenue to federal coffers.

None of the arguments against the president's proposal put forward by conservatives hold water. So what is the real reason? Fortunately, some people have trouble hiding their true agenda. In a stunning display of political obtuseness, Senate Minority leader Mitch McConnell stated last week said that those who make over $250,000 a year are “the people who’ve been hit hardest by this recession.”

This will come as news to the millions and millions of unemployed and under-employed Americans struggling every day to make ends meet. What should not be news to anyone is the dogged determination of Republicans to resist tax increases for the wealthiest Americans, regardless of the consequences. The wealthy have suffered the most, they believe, and cannot be asked to sacrifice any more. That's the honest explanation, but don't expect to see it in this season's campaign ads.

The "Stimulus Did Nothing" Canard Update

The Wall Street Journal has gotten a hold of letters some leading GOP members of Congress wrote to get the money for their districts, where they clearly state that they believe it will create jobs. So much for "wasteful spending." So much for the idea that opposition to the stimulus had anything to do with political principle. They don't even believe their own rhetoric.

The "Stimulus Did Nothing" Canard

If there is one thing Republicans agree on these days, it is that the stimulus bill "did nothing." The newest Republican phenom, Scott Brown, asked to have his swearing in hastened so that he could oppose any further economic stimulus. “The last stimulus bill did not create one new job,” Brown confidently said.

This claim is absurd on the face of it.

Oh, it is easy for people like Sean Hannity to hammer away at the fact that the Obama administration claimed that the stimulus would keep the unemployment rate from reaching 8%, and last month it was 10%. Therefore, they claim, it did nothing--unemployment is higher, so no jobs were created.

On the surface, you can see the appeal of the claim. But it won't withstand even a moment's thought. Jobs being saved, or created, is not inconsistent with the unemployment rate going up. It's the equivalent of saying that the rescue efforts in Haiti have saved no lives because the death count keeps going up.

Yes, they were wrong about what the unemployment rate would be. But if that is the standard Republicans want to use, then they have some explaining to do.

Let's take the Reagan tax cuts enacted in August 1981. At that time, the unemployment rate was 7.4%. Despite the tax cut, the unemployment rate continued to rise, reaching a height of 10.8% in December 1982. It did not decline to below the August 1981 level until the fall of 1984, over three years after the passage of the bill. Would today's GOP say that this means the Reagan tax cuts did nothing, that they "did not create one new job”?

Or look at George W. Bush. In January 2001, Dick Armey predicted that passing "a pro-growth tax cut ... could help avert a recession." Despite getting the tax cut passed in June 2001, which Bush predicted would stimulate the economy, the unemployment rate rose from 4.2% in January 2001 and peaked at 6.3% in June 2003. Yet we were told repeatedly that the tax cuts worked, even though the unemployment rate continued to rise for two years after the cuts were enacted. When even ONE Republican says that this fact means the Bush tax cuts did "nothing," I'll start taking this line of attack on Obama seriously.

The unemployment rate would be higher without the stimulus. To pretend that it did "nothing" is absurd substantively because it is demonstrably false, but if the objective is to deny Obama any credit for partisan purposes, well then there is a certain twisted logic to the claim--one perfectly consistent with the scorched earth political strategy of the GOP.

One last blatant contradiction. If the stimulus package did nothing, then it would seem tax cuts are totally ineffective and produce nothing, since about $200 billion of it was tax cuts. I won't hold my breath waiting for Republicans to admit that.