The political theater playing out in Washington D.C. currently is amusing as well as instructive. I speak, of course, of the tax deal hammered out between President Obama and, supposedly, the Senate Republicans, which Nancy Pelosi and House Democrats are loudly attempting to repudiate.
The major part of it is the extension of the Bush income tax rates to all, including individuals or couples making more than $200,000 or $250,000, respectively. Otherwise, come January 1, those rates will expire and be replaced with higher ones across the board. Included in the package are an extension of jobless benefits for another 13 months, a cut in the payroll taxes that fund Social Security, and a larger exemption on estate taxes along with miscellaneous other tax credit extensions.
Pelosi and the more left-wing Democrats are beside themselves over the missed opportunity to raise taxes on the over $200/250,000 bracket, who they refer to, unaccountably, as millionaires and billionaires. Obama, tallying the votes, figured he couldn’t get a deal for the increase and made what he thought was the best one possible, with Republicans set to take over the House next January. Nevertheless, the Pelosi crew is denouncing him as a cowardly weenie who gave away the store without a fight, which they now intend to put up themselves.
It is difficult to gauge either their intentions or motivations. Why would the Republicans reopen negotiations on a done deal which they negotiated in good faith with the president? It’s not their fault if Obama didn’t go up to the Hill and hold hands with Pelosi and her friends, they will say, and if the tax rates go up for everybody, it will be the fault of the Democrats who reneged on the deal, possibly bringing on the dreaded double dip in this recession. (It is not widely understood that it will not be possible to readjust many large payroll programs, reset in January to withhold for the higher rates, until the second quarter of 2011, April.)
Besides, given the chance to reorder it in January when Republicans run the House, the package could well come out much leaner for the left. There will be more time for questions, such as: 1.) What earthly reason is there for a moratorium on the payroll tax which funds Social Security, a program already on the verge of bankruptcy? Its contributions and payouts are set and will not be affected by an improving economy; 2.) At what point does extension after extension of unemployment benefits become a disincentive to work? – at the least should they not be paid for out of unused stimulus funds lying around? And why should this money be sacrosanct, having proven itself utterly useless in stimulating either jobs or the economy?
At that time Republicans should also restate the basic and sound arguments for not raising anyone’s taxes. First of all, there is no reason – none – to think that the federal government will do a better job of spending the money of those who were creative and energetic enough to earn it in the first place. Obama/Reid/Pelosi just tossed out nearly a trillion dollars to keep unemployment below 8% and it now hovers close to 10%. Their economic theory is laughably crank and/or a cover for motives they won’t admit to.
And more fundamentally, making income taxes even more progressive than they already are simply enables and promotes a bigger government that Americans do not want, and empowers and enables a parasitical political class that causes more problems than it can ever solve.