Bush tax cuts fight solves nothing
President Obama and Mitt Romney spent Tuesday arguing over whether the Bush tax cuts should be extended for virtually everybody, or everybody. In so doing they made a pretty good case for why neither major party cares much about the government's trillion dollar budget deficits — or about anything, for that matter, if it gets in the way of winning the election.
OTHER VIEWS: 'A massive tax increase'
Truth is, the Bush tax cuts were unaffordable when they were enacted, and they are even more so today. But you won't hear that on the campaign trail.
During a radio show appearance, Romney argued for extending all of the tax cuts, including those that affect the top income brackets. Never mind that tax revenue, as a percentage of the economy, has fallen to levels not seen since the Truman administration. Making the Bush tax cuts permanent would raise deficits by $2.8 trillion over 10 years, according to the Congressional Budget Office.
Obama's argument is not much better. After agreeing in 2010 to a two-year extension of all the tax cuts, the president is back to making the case he made during the 2008 campaign. He wants to retain the cuts for families making less than $250,000 per year.
At an appearance Tuesday in Iowa, Obama argued that allowing the tax cuts above that income level to expire would raise almost $1 trillion over the next decade. But that is only as compared with Romney's approach. Obama's plan would add nearly $2 trillion in deficits when compared with doing nothing and allowing all the tax cuts to expire.
At the risk of stating the obvious, these are big numbers: $2.8 trillion is three-and-a-half times the size of Obama's 2009 stimulus measure and would cover nearly half of the national defense budget for the decade. Obama's $2 trillion would cover about a third of the defense budget.
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But what's a few trillion among friends when there are election narratives to develop?
The Republican one involves branding itself as the no-tax-increases-ever party while heaping blame on Obama for deficits. Never mind that the deficits are largely the result of the Bush tax cuts, the wars in Iraq and Afghanistan, and the Great Recession. Before those events, there was a budget surplus.
Obama's narrative is all about class resentment. He wants to paint a picture of wealthy individuals — including a certain former Massachusetts governor with a $100 million trust fund for his children — not paying their fair share. Never mind that there aren't enough rich people to balance the budget if everyone else's taxes stay low and major entitlement programs remain on their unsustainable trajectories.
That both sides are still bickering about whether to extend the Bush tax cuts from 2001 and 2003, and for whom, shows how stuck they are in the partisan trenches they dug years ago.
One way out of the hole is to phase out the Bush tax cuts for everyone, returning tax rates to where they were during the prosperous Clinton years.
An even better way is to rewrite the hopelessly complex tax code.
When the president's deficit-reduction commission, the Simpson-Bowles panel, devised a plan to eliminate at least $4 trillion of red ink over 10 years, it did not frame its case in terms of the Bush tax cuts. Simpson-Bowles proposed raising revenue (while actually lowering rates) by eliminating or reducing loopholes. It combined these modest revenue hikes with entitlement reforms and cuts in discretionary spending to produce an attractive and sensible plan.
That is the direction both parties should be taking, with a balanced yet bold deficit deal. Every dollar of tax increases should be matched with $3 in spending cuts. The parties were close to such a "grand bargain" last summer. Obama and a bipartisan cast of senators were ready to sign on. But House Republicans pulled the plug, charging that Obama had tried to change the terms of the agreement after a deal had been struck.
Those talks should resume, with an eye toward reducing short-term economic uncertainty and long-term deficits. Fighting over the Bush legacy, or everything that is purportedly wrong with the Obama administration, or how a wealthy elite is allegedly causing the nation's problems, solves nothing. It only drives deficits higher and people's opinions of government to new depths.
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