What About the Big Tax Deal?

President Obama made a Clintonian lurch to the Republican side when he agreed to extend nearly all of the Bush tax cuts. But what to make of the deal?

In the sense that Obama has exhibited a willingness to abandon the left on tax matters, this is good news for his presidency and for the US as a whole. One might think that I’d be a huge fan of the agreement.

You’d be wrong. I strongly believe — and the data back me up on this — that out-of-control spending is the main problem facing our nation. I’d rather have seen Republicans in Congress have abandoned the tax cuts in favor of serious spending restraint. Instead, Obama has successfully used the tax cuts to keep spending.

The tax deal certainly makes future spending restraint more politically-difficult as Democrats and large swaths of the population will view the Republicans as hypocrites on closing the deficit (they are, but not because of the tax cuts, they are hypocrites because they have not been serious about slashing spending). The Democrats are the really sad case here, however. As columnist Jeff Jacoby notes, the left’s extreme reaction to extension of “tax cuts for the rich” clearly illustrates their reliance on the politics of envy and their basic misunderstanding of money and property rights.

If I were in Congress, I’d hold my nose and vote for the deal, but I’d be darn sure that Congress tightened the reigns on spending and did so immediately.

Update: interesting points made counter the agreement by Charles Krauthammer who I don’t always agree with.

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2 Replies to “What About the Big Tax Deal?”

  1. I mostly agree with you Paul. I could see how Obama’s handlers would use this from the beginning. Label the continuation of the current tax rates as a “tax cut”, and tie it together with the outrageous spending in the bill and blame the ballooning national debt and financial woes on the Republicans, while appearing to have compromised and moved towards the center. What baffoons are the Republicans in congress to fall for this! Here was the perfect opportunity to prove they were serious about cutting spending, as they have promised, and they blew it.
    Unlike you, I wouldn’t vote for it. The Republicans should have insisted on a straight up vote on extending the current rates with no extra spending attached, and let the Dems and Obama get blamed for the biggest tax hike in history.

    1. Fair enough Debbie. I think this is a really tough issue. Politically, I think Obama is partially lucky because I think the tax cuts will move the economy forward, but also stupid because extending the unemployment benefits for another year will cause the unemployment rate to remain elevated as we move into an election year, thus making him look bad. Economically, I’m concerned that foreign bond holders will drive interest rates dramatically higher, thus killing economic growth as Washington appears to be unwilling to get serious about spending. It is a very tough issue.

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