Congress: Budget

Boehner: ‘No Tax Increases Ever on the Table’

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July 11, 2011, 10:40 a.m.

A CNN/Time/Opin­ion Re­search Corp. poll; con­duc­ted 10/1-5; sur­veyed 1,508 adults; mar­gin of er­ror +/- 2.5%. Sub­sample of 1,300 RVs; mar­gin of er­ror +/- 2.7%. Fur­ther sub­sample of 789 LVs; mar­gin of er­ror +/- 3.5% (re­lease, 10/6).

Obama As POTUS

- LVs LVs LVs - All RVs LVs Dem GOP Ind Men Wom Ap­prove 45% 44% 39% 80% 8% 33% 35% 42% Dis­ap­prove 48 51 57 16 91 60 63 51

(For more from this poll, please see today’s NV SEN and NV GOV stor­ies.)

Can we start call­ing the Bush tax cuts the Obama tax cuts now?

Ser­i­ously, Pres­id­ent Obama now owns nearly all of the Bush-era tax cuts and is us­ing the bulk of those af­fect­ing mar­gin­al rates as a cudgel against Re­pub­lic­ans. He did so on Monday at the White House, call­ing on House and Sen­ate Re­pub­lic­ans to ex­tend for one more year most of the George W. Bush-era tax cuts.

“If Con­gress doesn’t do this, mil­lions of Amer­ic­an fam­il­ies … could see their taxes go up by $2,200 start­ing on Jan. 1 of next year,” Obama said. “And that would be a big blow to work­ing fam­il­ies, and it would be a drag on the en­tire eco­nomy.”

This is a polit­ic­al ar­gu­ment. It is not an eco­nom­ic ar­gu­ment (more on that presently). Obama wants to drive a wedge between Re­pub­lic­ans and swing voters on the ques­tion of pri­or­it­ies and val­ues. He’s cornered the mar­ket so ef­fect­ively, even big-time cable net­works are con­fused. CNN on Tues­day morn­ing had a graph­ic de­scrib­ing Obama’s push to ex­tend most of Bush’s tax cuts as “Obama’s Pro­posed Tax Cuts.” Huh?

In. An. Elec­tion. Year.

Re­mem­ber, Obama had no trouble what­so­ever agree­ing to ex­tend all of the Bush tax cuts in late 2010 for two full years. That was part of an elab­or­ate lame-duck com­prom­ise where many oth­er pri­or­it­ies col­lided (not the least of which was Obama’s push for an ex­ten­sion of job­less be­ne­fits and a brand new, one-year 2 per­cent­age-point cut in the So­cial Se­cur­ity payroll tax). Even so, Obama erased nearly four years of rhet­or­ic op­pos­ing ex­ten­sion of Bush’s tax cuts for the wealthy. One of Obama’s best-re­membered cam­paign prom­ises van­ished in a puff. The ra­tionale was, again, eco­nom­ic. “I’m not will­ing to let our eco­nomy slip back­wards,” Obama said on Dec. 6, 2010, by way of ex­plain­ing his policy cave. “It’s the right thing to do for jobs. It’s the right thing to do for the middle class. It is the right thing to do for busi­ness. And it’s the right thing to do for our eco­nomy.” At the time, the un­em­ploy­ment rate was 9.8 per­cent. The eco­nomy cre­ated 39,000 jobs in Novem­ber 2010, down from 172,000 jobs cre­ated the month be­fore.

I don’t re­sur­rect this his­tory to pil­lory Obama or re­kindle Demo­crat­ic (in this case, lib­er­al Demo­crat­ic) griev­ances over his big tax-policy sur­render. The point is we have to start ask­ing ourselves, as a coun­try, what our tax policy is ac­tu­ally cre­at­ing in terms of jobs, growth, and wealth. What have the Bush tax cuts wrought? What has their ex­ten­sion for two years achieved? What about Obama’s tax cuts, cred­its, and sub­sidies, meant to beef up con­sumer spend­ing and soften the in­fla­tion­ary blows of, among oth­er things, col­lege tu­ition and work­er re­train­ing?

When Bush signed the first round of tax cuts in June 2001, he com­pared the move to sweep­ing tax cuts ushered in by John F. Kennedy and Ron­ald Re­agan. There isn’t room here for a full-blown de­bate about the eco­nom­ic mer­its of the Kennedy, Re­agan, and Bush cuts, each of which slashed mar­gin­al tax rates. But there is something to pon­der in terms of di­min­ished eco­nom­ic re­turns. The U.S. eco­nomy (gross do­mest­ic product) grew at an av­er­age an­nu­al rate of 4.65 per­cent from 1961 to 1964 (Kennedy’s years) and 5.05 per­cent from 1965 to 1968 (Lyn­don John­son’s years). The av­er­age rate of GDP growth in the Re­agan years (1981-1988) was 3.4 per­cent. In the Bush years (2001-2008), it was 2.09 per­cent. From the be­gin­ning of 2010 to now, GDP growth has av­er­aged 2.2 per­cent.

The Bush years cre­ated low-level eco­nom­ic growth and nearly stag­nant wages. The phase-in of mar­gin­al tax-rate cuts passed in 2001 were ac­cel­er­ated in 2003. On top of that, Bush cut taxes on di­vidends and cap­it­al gains. These moves, to­geth­er, were sup­posed to spur growth in the wake of the 9/11-in­duced re­ces­sion. They vastly un­der­per­formed.

And yet, Obama ex­ten­ded all of these tax cuts in 2010, with the hope they would, as noted above, gen­er­ate eco­nom­ic growth, boost­ing wages and hir­ing. The res­ults have been just as mea­ger as be­fore. But Obama ad­ded his own tax cuts. He star­ted with the Mak­ing Work Pay pro­vi­sion in the stim­u­lus law, a $116 bil­lion one-time tax cred­it worth $400 to in­di­vidu­als and $800 to mar­ried couples. Then in 2010, he ad­ded the 2 per­cent payroll-tax cut (now ex­ten­ded for a second year with no end in sight and an an­nu­al cost of roughly $115 bil­lion). Obama, like Bush, has con­tin­ued “patch­ing” the al­tern­at­ive min­im­um tax, pro­tect­ing the middle class from a huge an­nu­al tax in­crease.

But like the Bush tax cuts on mar­gin­al rates, di­vidends, and cap­it­al gains, Obama’s ef­forts have vastly un­der­per­formed in terms of job cre­ation and wage growth. Amer­ica’s eco­nomy is still in a daze, stum­bling along while the job­less search aim­lessly for an eco­nom­ic lad­der to pull them­selves out of the re­ces­sion­ary mire.

Des­pite Obama’s rhet­or­ic, we are not about to have a fresh de­bate about tax policy. Cur­rent policy isn’t work­ing. The eco­nom­ic fu­ture of this na­tion, 12 years of ac­tu­al ex­per­i­ence shows, is not go­ing to be won or even mildly im­proved by the cur­rent com­bin­a­tion of tax policy. Fresh think­ing and polit­ic­al risks are re­quired, or the eco­nomy and tax de­bate will re­main as ir­rel­ev­ant as they are now.

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