Obama Wins; Supply-siders may lose big.
Bill Pascoe's insight on the longterm political calculus of staying the tax increase is very smart – that it’s not only a win-win for Obama in 2012, but has huge potential risk to our ability to make the argument for tax cuts down the road.
The lack of permanence is going to have more effect on decisions about job creation than the rate itself, so while this is getting pitched as necessary to create jobs, if jobs aren’t created then tax cuts will be claimed are a failed approach.
Between that, unemployment extensions, and the death tax increase, Republicans are giving up a lot just to maintain the status quo.
Except that they campaigned on cutting taxes and government, not just status quo, and certainly not status quo plus increasing other taxes and spending. Basically this will be viewed as a stimulus package of spending through other means, and I have to think that is going to make much of those who just voted in Republicans unhappy.
Now, which presidential candidate wants to get out front and distinguish him or herself on this one?
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Re: Obama Wins; Supply-siders may lose big.
Heather: In addition to what you say here, I don't know why we always accede to the left's terminology. Their idea of stimulus is demand-side and never stimulates anything -- appreciably. Even they admit the jobs the stimulus created (or saved) -- another insultingly stupid formulation -- were temporary. Nothing in this package will stimulate anything. The payroll tax is demand-side, not marginal rate reductions that incentivize production, savings and investment. The highest rate (and other rates) staying the same can't stimulate by definition because they are retaining the status quo, as you say. Their expiration could exacerbate problems, but their retention will not stimulate. And the extension of unemployment benefits, contrary to liberal, Keynesian, demand-side dogma, also will not stimulate, imho.
May '10
Re: Obama Wins; Supply-siders may lose big.
Economically it is true that the potential direct effect is not significant. But I disagree with Pascoe by about 60-40 (I think his case may be 40% likely), and further assert that there really is no choice at this point. We could either do nothing whatever, be the enemies of the working (middle) class, and swallow up a bunch of investment capital formation for the next two years, or we could accept the deal and move ahead.
I don't see a meaningful down side for 2012 by accepting the deal. The Dems will scream about Tax Cuts For The Rich no matter what we do (or don't)- it's Pavlovian pre-programmed like "racist", "you want to destroy Mother Earth", and "Don't privatize Social Security".
There is no way that any permanent extension of tax rates would fly even after January. We need to use our energy in the new Congress to deal with spending cuts, not re-fight TCFTR on an extended basis. In fact, tax reform is a better expenditure of political capital.
Re: Obama Wins; Supply-siders may lose big.
I think what you say, Duane, makes good sense. There will be no way, without Democrat support, to get an extension of the Bush rates for the highest income group, which includes many productive small businesses -- not that the highest rate extension needs special justification. I just think Republicans might have negotiated their position more adeptly because Obama needed them too. Having said all this, I'm reading more and more about the possibility that this "tax deal" is in jeopardy, and even if it goes through, it won't be before it is substantially loaded up with more and more pork. Disgusting.
May '10
Re: Obama Wins; Supply-siders may lose big.
These points you all are making are good, but too esoteric for all but the most poltically engaged, who are few in number.
For most, the message of Obama's cave is this: After three years of blaming Bush's economic policy for our woes, Obama now advocates extending the cornerstone of that policy--on grounds that we can not yet "endure" his own policy.
"Obama concedes Bush was right." True or not, that's the message. Everything else over parses the matter. (for most of America, I mean; not for Ricochet)
Edited on Dec 10, 2010 at 7:57amSep '10
Re: Obama Wins; Supply-siders may lose big.
I see nothing short of a lack of intestinal fortitude that would keep the Republicans from accepting this admittedly flawed deal now, to avoid the economic upheaval we are facing come January 1, and then coming back in the new session and pushing for full extension, payment for unemployment extensions (or cutting where necessary to match), etc. Our economic future is job one for these guys and not much else needs to be considered for the next 2 years.
Re: Obama Wins; Supply-siders may lose big.
David, I apologize - I should have used scare quotes around "stimulus", because it never is.
I do think we lost a rhetorical opportunity - as long as we call it extending the Bush tax cuts we lose; when we call it refusing to raise taxes, we win. The problem for me is that we've made the argument (which Obama now echoes), that lower tax rates = more jobs.
But really what creates jobs (lower taxes helping but not being sufficient) is economic certainty in an environment that encourages risk taking and the deployment of capital. Which we don't have. I worry that if the temporariness of the tax cuts, combined with other regulatory uncertainties and costs etc don't yield job growth, the left gets to assert that they tried it under Bush, they tried it again (oh those hostage takers!) and see, they told us so...
Re: Obama Wins; Supply-siders may lose big.
Heather Higgins: David, I apologize - I should have used scare quotes around "stimulus", because it never is.
I do think we lost a rhetorical opportunity - as long as we call it extending the Bush tax cuts we lose; when we call it refusing to raise taxes, we win. The problem for me is that we've made the argument (which Obama now echoes), that lower tax rates = more jobs.
But really what creates jobs (lower taxes helping but not being sufficient) is economic certainty in an environment that encourages risk taking and the deployment of capital. Which we don't have. I worry that if the temporariness of the tax cuts, combined with other regulatory uncertainties and costs etc don't yield job growth, the left gets to assert that they tried it under Bush, they tried it again (oh those hostage takers!) and see, they told us so... · Dec 10 at 10:09am
Yes, Heather, and one of DeMint's main reasons for his opposition is the very uncertainty in the temporary measures that you mention. Of course now, as we speak, the bill is getting crammed with more and more pork. Unbelievable.
Oct '10
Re: Obama Wins; Supply-siders may lose big.
Lame duck? Sure looks like this refudiated Congress is flying along as if November never happened.
As the pork increases, Republican leaders need to step up and say "NO DEAL."
Let's get away from tax increases for the rich who earned their incomes, and focus on ethanol subsidies and wind farm tax breaks that go to the rich private equity speculators that contribute to Democrats. These are transfer payments directly to rich Democrats.