WaPo - Fareed Zakaria - "To deal with the deficit, let the tax cuts expire"

[TomCADem]

In today's polarized political climate, Republicans accuse anyone left of Jim DeMint as being a socialist while anyone right of Dennis Kucinich is derided as a right wing corporatist. However, Fareed might be one of the more insightful, independent thinkers, who does not fall within the strict left or right camps of punditry.

http://www.washingtonpost.com/wp-dyn/content/article/2010/08/01/AR2010080103287.html?hpid=opinionsbox1

For the past few months, we have heard powerful, passionate arguments about the need to cut America's massive budget deficit. Republican senators have claimed that we are in danger of permanently crippling the economy. Conservative economists and pundits warn of a Greece-like crisis in which America will be able to borrow only at exorbitant interest rates. So when an opportunity presents itself to cut those deficits by about a quarter -- more than $300 billion! -- permanently and relatively easily, you would think that these people would be leading the way. Far from it.

The "Bush tax cuts," passed in 2001 and 2003, remain the single largest cause of America's structural deficit -- that is, the deficit not caused by the collapse in tax revenue when the economy goes into recession. The Bush administration inherited budget surpluses from the Clinton administration. What turned these into deficits, even before the recession? There were three fundamental new costs: the tax cuts, the Medicare prescription-drug bill and post-9/11 security spending (including the wars in Iraq and Afghanistan). Of these the tax cuts were by far the largest, adding up to $2.3 trillion over 10 years. According to the Congressional Budget Office, nearly half the cost of all legislation enacted from 2001 to 2007 can be attributed to the tax cuts.

Those cuts are set to expire this year. Republicans say they want to keep them all, even for those making more than $250,000 a year (less than 3 percent of Americans), because higher taxes will hurt the recovery. But for months Republicans have also been arguing that the chief threat to the economy is our gargantuan debt and deficit. That's what's scaring consumers, creditors and businesses. Yet given a chance to address those fears by getting serious about deficit reduction, they run away. By contrast, British Prime Minister David Cameron, a genuine fiscal conservative, concluded that to deal with his country's deficit, which in structural terms is not so different from America's, he would have to raise taxes as well as cut spending.

* * *
The simple facts are these: All of the Bush tax cuts were unaffordable. They were an irresponsible act of hubris enacted during an economic boom. Conservatives thought they would force us to shrink the government. But with Republicans controlling the White House and both houses of Congress, did reduced taxes cause reduced spending? No. They led to ever-increasing borrowing and a ballooning deficit.

[Lasher]

1. Good for Zakaria

Sometimes the obvious needs to be stated.

If Republicans win back Congress, their first order of business will be to extend all the Bush tax cuts for another 10 years, via reconciliation. I wonder if Obama would veto such a measure.

[TomCADem]

2. Should President Obama Veto? Maybe The People Want To Be The Next Greece?

The Republican plan is heavily promoted, but the Republicans aren't publicly identifying what they want to cut in spending-wise, and the Republicans aren't shy about pushing for tax cuts. Then, as the deficit grows, blame public employee salaries and pensions, and use that as a Trojan horse to cut government spending, and say that the people demanded it. And you know what?

If we vote Republican, or sit on the sidelines during the election, then we have essentially demanded it, particularly with the Bush years fresh in our mind. Yet, there is a certain contingent that has been promising for two years now, some before Obama even took the oath of office, that they were going to take off their Obama bumper sticker. The advocates of apathy have remained consistent in their narrative that there is no difference between the two parties. Well, we could very well discover that difference once again.

[Lasher]

3. Yes, Obama should veto.

Otherwise they would become the Obama tax cuts.

[Bandit]

5. However he can not "line item" veto

If renewing the tax cuts are all included he may have to just allow it or veto ALL tax cuts and that is not what he ran on. He ran on middle class cuts and increased taxes for those earning over $250 million. It may prove to be a real problem.

[Lasher]

6. I don't see a problem, he just needs to announce up front that he will veto any such legislation.

And he needs to stick to it.

[Orsino]

4. ...and fucking tax the rich progressively.

Zakaria is aiming for that Sensible Middle Ground. Perhaps he really imagines that letting the Bush tax cuts expire would be enough...but I doubt it.