Separate from the partisan ideological debate over what should be done in response to the pending scheduled expiration of Bush’s tax cuts, there’s a real argument to be had about how expensive these cuts would be if they were extended. Paul Krugman, in a column where he goes somewhat from critic to coach of the President, writes this about the short-term costs of a blanket extension of these tax cuts.
But while raising taxes when unemployment is high is a bad thing, there are worse things. And a cold, hard look at the consequences of giving in to the G.O.P. now suggests that saying no, and letting the Bush tax cuts expire on schedule, is the lesser of two evils.
Bear in mind that Republicans want to make those tax cuts permanent. They might agree to a two- or three-year extension — but only because they believe that this would set up the conditions for a permanent extension later. And they may well be right: if tax-cut blackmail works now, why shouldn’t it work again later?
America, however, cannot afford to make those cuts permanent. We’re talking about almost $4 trillion in lost revenue just over the next decade; over the next 75 years, the revenue loss would be more than three times the entire projected Social Security shortfall. So giving in to Republican demands would mean risking a major fiscal crisis — a crisis that could be resolved only by making savage cuts in federal spending.
And we’re not talking about government programs nobody cares about: the only way to cut spending enough to pay for the Bush tax cuts in the long run would be to dismantle large parts of Social Security and Medicare.
Keeping the tax cut expiration debate squarely in the realm of the political is a mistake. There’s no way to win this argument without talking about the actual economic impact these cuts will have down the road. At a time where there is a mania about deficit reduction, what the Republicans are pushing for truly represents a break with fiscal reality. As Krugman points out, the only way to pay for what the Republicans want is to thoroughly crush the social safety network…to pay for tax cuts for millionaires.
What’s most frustrating about how this debate has played out, again as Krugman notes, is that the GOP is blackmailing the President and Democrats in Congress. No more, no less. The response should come on multiple levels: as I said above, laying out the case for the fiscal irresponsibility of extending tax cuts to millionaires, a partisan assault framing for 2012 (which is where it has mostly been done so far), and a moral argument about pushing for handouts to Paris Hilton at a time when millions are about to lose their unemployment benefits.
Unfortunately, it’s late in the game. Though there is still nearly a full month before the cuts expire on schedule, there doesn’t seem to be a desire to have the fight that needs to be had. Maybe there really is too much at stake to deal in the details now, but I’m just hard pressed to believe that neither economics nor ideology have anything to play in the resolution of this legislative fight.