BUSINESS
Does Anyone Still Remember Why We Have The Bush Tax Cuts?
Jul. 12 2011 - 4:56 pm | 4,236 views | 2 recommendations | 58 comments
In today’s Washington Post, Ezra Klein reminds us of the circumstances that brought the Bush tax
cuts into being – and why they no longer make any sense.
cuts into being – and why they no longer make any sense.The Bush tax cuts were not supposed to last forever. Alan Greenspan, whose oracular endorsement was perhaps the single most decisive event in their passage, made it very clear that they were a temporary solution to a temporary surplus. “Recent data significantly raise the probability that sufficient resources will be available to undertake both debt reduction and surplus-lowering policy initiatives,” Greenspan said in 2001.
While things may not have worked out the way it was envisioned back in 2001, one can certainly appreciate a philosophy suggesting that a government that is racking up large, annual surpluses might be indicative of a population that is being taxed too highly.
Of course, there were no shortage of voices at the time arguing that the surplus should be committed to the public benefit – like investing to repair our collapsing infrastructure and improving on the basics so as to keep America competitive in the 21st century. Indeed, had the Senate not invoked the procedural device of reconciliation, the tax cut would have gone down to a filibuster as the final vote was 58-33.
I can recall my own reaction to the tax changes those many years ago.
While I wondered if we should not be more focused on putting money aside for that inevitable rainy day, I could certainly understand a policy that would allow more dollars to stay in the pockets of Americans if the government did not actually need the cash. I also didn’t mind that my own pockets would be a little heavier thanks to the legislation.
Further, if the estimates of the day were correct, the revenue that would come into the national coffers following the tax break would still be adequate to meet the nation’s needs.
As things turned out, the surplus that gave life to the initial Bush tax cuts had all but disappeared by the end of 2001 as the economy slowed unexpectedly.
Where the CBO had once predicted a $125 billion budget surplus for 2001, just thirteen months later that same CBO estimate had turned into a $9 billion deficit.
It happens.
By all rights, a responsible President would have made the necessary adjustments once the surplus turned into a deficit. Of course, the politics of such a move would have been extremely unpleasant for the administration and one could hardly blame them for not wanting to take back the gift they had just recently bestowed on the public.
Then came 9-11, Iraq and Afghanistan.
I remember watching the television screen as the bombs began to fall on Baghdad, thinking that one of those bombs had my tax cut tattooed on its side. Surely, unless this war turned out to be as brief and inexpensive as the invasion of Granada many years before, our tax cut would explode into dust just as the target that bomb had set its sights upon was pulverized into ashes.
Nothing eats up a federal budget like a war, let alone two wars.
Imagine my surprise when President Bush not only failed to make the expected speech wherein he would suspend the 2001 cuts as they were no longer in the best interest of a nation during a time of war, but actually elected, less than thirty days after the commencement of “shock and awe”, to move ahead with his plans to provide further cuts via The Jobs and Growth Tax Relief Reconciliation Act of 2003 – the law which reduced taxes on dividends and cut the capital gains tax rate.
If you thought the 2001 cuts were tough to get through the Congress, consider that, even with the use of reconciliation once again to avoid a filibuster, President Bush only managed to get passage in the Senate by a vote of 51-50 with Vice-President Cheney casting the deciding vote to break the tie.
While the 2003 cuts were intended to be permanent – or permanent until another Congress came along to change them – the 2001 Bush cuts werenot so intended. And that is no small point.
Indeed, the law came complete with a sunset provision that would bring the tax cut to an end in 2010 if Congress decided to return to the rates of the Clinton era should circumstances so require.
The expectation of the 2001 Congress was that government, with the benefit of knowing how things turned out over the ten years following initial passage, would make wise decisions as to whether or not the cuts were still judicious in light of the current circumstances.
What the 2001 Congress could not foresee was that, in just ten short years, their intentions would be perverted to the point where Members would stand fast against meeting the intent of the very law they voted to pass – even in the face of a serious, nation-threatening budget crisis.
I have no doubt that the Congresses that passed both the 2001 and 2003 tax cuts would have viewed our current situation as one demanding serious cuts in federal programs, including entitlements, just as our current Congress is also demanding.
But I also have little doubt that the 2001 GOP would not have imagined that their leadership in the year 2011 would be so irresponsible as to lead their party- and the nation- into a scenario whereby they would so much as consider allowing the United States to default on debts created by that very Congress -and the many that preceded and would follow them.
Late in 2010, as the tax cuts were ready to expire, President Obama sought to persuade the legislative branch that the very concerns that gave rise to the sunset provision in the law had more than come to pass.
We all know how that turned out. In an effort to protect the unemployment insurance that stood as the sole support for the families of millions of unemployed Americans who were the victims of the Great Recession, the President was forced to cave in to the GOP and allow the Bush cuts to continue despite the escalating crisis of our national debt.
Was that really the intent of the 2001 Congress?
I don’t think so.
The history of the 2001 tax bill is known all too well to the current crop of Republican leaders as they were there when it came into being and, to a man, voted for the legislation that included the sunset provision.
These men know what the Congress intended– and they couldn’t care less.
With all their talk about responsible government, the GOP refusal to acknowledge that the circumstances that gave rise to the Bush tax cuts could not be further from where we now find ourselves, is the clearest indicator of the perversion of government that is the GOP led Congress.
If you support lower taxes, fine. If you believe that oil companies should continue to receive hundreds of millions in government subsidies despite their extraordinary profits, that is your given right as an American.
And if you think that the GOP’s refusal to deal honestly with the debt solution by remembering why the Bush tax cuts exist and showing some willingness to make the adjustments contemplated in 2001 – even if just for the most wealthy among us – is the right way to go, then vote as you will.
But do yourself a favor.
Stop pretending that this behavior is, in some bizarre way, the actions of those who seek to benefit and protect the national interest. Even the 2001 Congress (with a GOP majority in the House) realized that the tax cuts might turn out to be counterproductive in the future- and they had the good sense to plan for this despite doing so during a time when we not only had surpluses but believed that we would continue to be in the money for many years to come.
Things change – and responsible leaders change with the times.
Thus, if you believe that the Bush tax cuts were the right thing to do, then you should also acknowledge that there was a plan that came with it and that plan should be honored.
Does anyone really believe that this is what is happening?
People like Eric Cantor and Grover Norquist know the intent of the law that created the Bush tax cuts. Eric Cantor voted for it.
Yet they ignore it – leaving Mr. Cantor to play hardball with a bat he was never intended to have- not even by Eric Cantor himself.
How is that not just plain wrong?
contact Rick at thepolicypage@gmail.com
Twitter @rickungar
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