President Obama has suddenly discovered the virtues of deficit reduction: Having spent all the money, he now thinks it would be downright irresponsible of taxpayers not to pick up some of his tab. His defenders would have us believe that every form of fiscal austerity would sink us deeper into the quicksand — except for tax increases on the most productive individuals and profitable small businesses in the country. The rich don’t spend the money, they argue, so why let them keep it if they’re just going to put it in the bank? Apparently, putting your money into banks is Timothy Geithner’s job, not yours.
This kind of incoherence deserves to be met with a forceful response from Republicans, and House minority leader John Boehner has provided one: a proposal to freeze all tax rates where they are for two years and reduce non-defense discretionary spending to 2008 levels to offset the forgone revenue. From a policy standpoint, we would have preferred making the Bush tax cuts “normal law” (another way of saying “make them permanent”) and a more comprehensive package of spending cuts, but Boehner’s package is simple, achievable, and superior to the administration’s alternative on both politics and substance.
First, on the politics: Republicans should be happy to let this be the defining debate of the fall, notwithstanding those polls that suggest that the public favors extending the middle-class tax cuts and rescinding the rest. The polls don’t really test the argument that raising taxes in a weak economy is a bad idea. Polls that put the question in that context, such as the latest from Ipsos-Reuters, indicate that about half of the country is behind the idea of extending the tax cuts for all Americans.
Have that fight, and let Democrats defend higher taxes — but not all of them will: With the Democrats already suffering from pre-election disarray and panic, many of them will peel off. Several Senate Democrats have already indicated that they do not support raising anyone’s rates in the current economy, and representatives such as Gerry Connolly, a Northern Virginia Democrat, have tried to point out that class-war politics doesn’t play in affluent, purple, suburban districts such as his.
The central Republican economic message right now is that Obama-created uncertainty is holding the economy back. That unease is inspired in no small part by uncertainty about taxes. The Democrats could have passed something to deal with looming middle-class tax increases more than a year ago but preferred to spend their time socializing medicine and trying to ration energy. Having expended so much political capital in those efforts, they now lack a coherent vision when it comes to taxes. Republicans should remind voters at every turn that holding down middle-class taxes has been low on the Democrats’ agenda, to the extent that it has been there at all.
Second, on the substance: Boehner’s tax proposal is imperfect in that it would build in another expiration date, making it more difficult for businesses to make long-term plans. But it would at least reassure them that the big debate over tax policy has been postponed to a time when liberals who wish to raise their taxes will most likely have less power in Washington than they do now, and when election-year politics will again work against the Democrats’ attempts to raise rates. That kind of uncertainty is preferable to certain tax hikes.
As far as spending is concerned, we would rather see deeper cuts and more specific proposals for them. But Boehner’s cut-and-cap approach would still yield substantial savings and serve as a useful counterweight against the president’s claims that Republicans want to cut taxes without offsetting the impact of cuts on the deficit. Even more than most liberals, Obama has the annoying habit of talking about tax cuts in terms of how much they “cost” the government, as though it were the government’s money to begin with. He has gone so far as to say that Republicans “would have us borrow” the money to “give” taxpayers their money back. Very well then: Boehner’s freeze would obviate the need to borrow a dime.
Obama knows he is losing this fight, which is why he has refused to commit to vetoing an extension of all the Bush tax cuts should such a bill land on his desk; Boehner’s proposals have offered moderate Democrats a way to oppose the president, thus paving the way for precisely that outcome. A temporary extension of the Bush tax cuts is not the best policy, and we still have a long way to go toward addressing the real sources of our deficit woes. But given the actual viable options on the table, our best bet is to extend the tax cuts while awaiting a sounder government that can reform our tax code and entitlements more broadly.