Good News: No Tax Increase! (For Now)

Amazingly, the Republicans held the line. Well, kind of:

President Obama and congressional Republicans apparently have reached a deal. The word is that the Bush tax cuts will be extended for everyone for two years. This includes all income, dividends, and capital gains taxes. In exchange, unemployment benefits will be extended to those who qualify for them for up to 13 months. There will also be a reduction of the payroll tax in 2011.

Some think this is good:

This strikes me as a very good deal for Republicans. Extending unemployment benefits - a humanitarian move that isn't entirely without merit - is a small price to pay for avoiding tax increases. Moreover, in a sense Obama has saved Republicans from themselves. Republican members would be vulnerable to a potentially powerful attack if they approved continued tax relief for millionaires, while refusing continued relief to folks who are looking for work but can't find it because the economy isn't producing many jobs.

The main benefit for President Obama and the Dems (to the extent they buy in) is that they avoid being held responsible (to a significant extent) for a large tax increase on the middle class. In addition, if the deal is approved quickly, Democrats may get the opportunity to attempt to enact legislation they like. All Senate Republicans were committted to blocking the Democratic agenda until the tax issue was resolved. But some Republican Senators have expressed their possible willingness to vote for liberal leglislation such as ending Don't Ask, Don't Tell, once taxes are sorted out.

In essence, then, the Republican leadership, through skillful maneuvering, laid the groundwork for what is something pretty close to capitulation by the president.

Some don't:

In remarks from the Old Executive Office Building, President Obama announced a tentative “framework” for a bipartisan deal on the Bush tax rates, seemingly determined to make a case for the necessity of the deal to his left flank, even as he transmitting just how distasteful he himself finds it.

“I have no doubt everyone will find something in this compromise that they don’t like. In fact, there are things in this compromise that I don’t like,” Obama said, referring specifically to the extension of current tax rates for top earners, and to an estate tax that is more generous “than I think is wise or warranted.”

Obama all but ceded that the deal amounts to a broken campaign promise, saying that “ever since I started running for this office, I’ve said we should only extend the tax cuts for the middle class” and that he “completely disagree[s]” with Republicans on the issue of top-earners. But he said that he won’t allow the tax “stalemate” to go into next year, turning taxpayers into “collateral damage” in a political fight.

Some say it's generally pretty good, and though it could have been better, it's at least a major temporary victory. Of course, some also wonder whether or not the GOP had to compromise at all.

Personally, as an ideologue, I land in that last group. We were the ones who won in historic fashion just one month ago. We were the ones constantly talking about bringing down (and keeping down) tax rates. We are the ones on the side of the American people on every important issue right now. We should not be compromising on anything at the moment. It's a mistake to subsidize unemployment, and everyone knows it. If people get paid not to work, what are the chances they'll get up every day and go out to look for work? Exactly. The last I knew, these unemployment benefits this new form of welfare stood at 99 weeks. Um...really? I know jobs are tight right now, but do we really need to pay using taxpayer dollars to pay people not to work for two years?! No.

And yet...this is a messy world, and politics is never as clean as you'd like it to be. Thus, I'll happily take the absence of the biggest tax increase in American history. For now. If the economy is the biggest issue, and one of the biggest hurdles to everything else working well in America, then let's absolutely embrace the victory there while we've got it. The key will be modify the welfare state into something reasonable and to lock in these tax rates the next chance we get, making them permanent; this is the critical follow-up step that must be taken. And, in my humble opinion, two years from now (just in time for the 2012 election) seems like a fantastic time to bring up who wants to raise taxes and who doesn't.

Speaking of the economy, here's a very intriguing article about how to balance the budget in a decade without any major spending cuts or tax increases. The short version: pass budgets that have a smaller rate of growth (not cuts, just smaller growth) than the year before, aiming for a budget that is 19% of GDP. Hit the article for the details, but it's shocking how simple and easily accomplished this would be.

Of course, that means there's not a snowball's chance Congress will do it. But, it's nice to dream, isn't it? And maybe, you know, point out this plan to our elected representatives as an idea they might want to examine...?

Some parting questions for the Democrats:
- If lower tax rates are acceptable for the short term, what makes them unacceptable for the long term?
- If lower tax rates for the middle class are a benefit to the economy, then why are lower tax rates for the upper class the opposite?

Seriously, think about these things. By signing onto this deal for a short-term extension of Bush's tax rates, Democrats are saying precisely these nonsensical things. Why?

Here's a hint:

Because your money is actually their money, not yours, you know...