By, Nancy Tengler
The extension of the Bush tax rates (what the media is now calling Obama’s tax cuts) is a victory for Conservatives that should not be squandered. The Obama tax cuts are neither Obama’s–they are Bush’s–nor are they tax cuts–they are an extension of the current rates that were set to expire on 12/31/10. But the claim of the Democrats that these extensions had to be made because raising taxes on Americans in this economy would be disastrous is a true victory for Conservatives. It is also sound fiscal policy and should be capitalized on.
An editorial in today’s Wall Street Journal points out: “As Milton Friedman taught us with his “permanent income hypothesis,” consumers base their consumption on their longer-term income expectations, not merely on current income.” Temporary tax rates return money to its rightful owner, the earner, but without the certainty of knowing what future tax rates are increased consumption will be muted by the lack of clarity. The Republican majority in the House has a golden opportunity to revisit the tax question while they have the Democrats on their heels and push for further, permanent cuts in 2011.
After passage of the bill Senator Dick Durbin (D) claimed: “The president has a big victory here. It’s big because it means there won’t be a tax increase at the first of the year, which could have hurt our economy.”
Suddenly, though not un-coincidentally (recall the landslide November elections), the Democrats have found lower tax religion. If, as the Senator says higher taxes “hurt” our economy, why has it taken two years for the Democrats to support this extension of the Bush tax rates in an economy they call the worst since the Great Depression? Additionally, why didn’t they propose lower and permanent rates to further stimulate demand?
President Obama, too, is a an enthusiastic member of the lower tax club. Only a week ago he was complaining that the House Republicans were holding unemployment benefits hostage to the tax rate extensions, then upon signing the bill declared: “This is real money that’s going to make a real difference in people’s lives. That’s how we’re going to spark demand, spur hiring, and strengthen our economy in the new year” (Reuters)
Ronald Reagan move over and meet the new supply-sider in the White House. His claim that “lower taxes spark demand, spur hiring and strengthen our economy” should be rung from every mountain top from now until 2012. He is right, of course, but has strayed so far from the soak the rich tax policies he has espoused as recently as last week. But the ever changing, ever evolving, Chameleon-in-Chief is claiming the tax cut mantle of Kennedy and Reagan and Bush II for now.
We will have to hope the Republicans are savvy enough to remind him–and the rest of the nation–when he changes his tune again leading up to 2012.