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Friday, September 17, 2010

Paul Krugman: The Tax-Cut Racket

Republicans are playing a dangerous game with the economy as they attempt to preserve tax cuts for "their wealthy friends":

The Tax-Cut Racket, by Paul Krugman, Commentary, NY Times: “Nice middle class you got here,” said Mitch McConnell, the Senate minority leader. “It would be a shame if something happened to it.”
O.K., he didn’t actually say that. But he might as well have, because that’s what the current confrontation over taxes amounts to. Mr. McConnell, who was self-righteously denouncing the budget deficit just the other day, now wants to blow that deficit up with big tax cuts for the rich. But he doesn’t have the votes. So he’s trying to get what he wants by pointing a gun at the heads of middle-class families, threatening to force a jump in their taxes unless he gets paid off with hugely expensive tax breaks for the wealthy. ... Politics ain’t beanbag, but there’s a difference between playing hardball and engaging in outright extortion...
How did we get to this point? The ... Bush administration bundled huge tax cuts for wealthy Americans with much smaller tax cuts for the middle class, then pretended that it was mainly offering tax breaks to ordinary families. Meanwhile, it circumvented Senate rules intended to prevent irresponsible fiscal actions ... by putting an expiration date of Dec. 31, 2010, on the whole bill. And the witching hour is now upon us. If Congress doesn’t act, the Bush tax cuts will turn into a pumpkin at the end of this year, with tax rates reverting to Clinton-era levels.
In response, President Obama is proposing legislation that would keep tax rates essentially unchanged for 98 percent of Americans but allow rates on the richest 2 percent to rise. But Republicans are threatening to block that legislation, effectively raising taxes on the middle class, unless they get tax breaks for their wealthy friends.
That’s an extraordinary step. Almost everyone agrees that raising taxes on the middle class in the middle of an economic slump is a bad idea... So the G.O.P. is, in effect, threatening to plunge the U.S. economy back into recession unless Democrats pay up.
What kind of political party would engage in that kind of brinksmanship? The ... same kind of party that shut down the federal government in 1995 in an attempt to force President Bill Clinton to accept steep cuts in Medicare, and is actively discussing doing the same to Mr. Obama. So,... the tax-cut fight is ... ultimately about a radicalized Republican Party, which accepts no limits on partisanship.
So should Democrats give in?
On the economics..., the G.O.P. plan would add hugely to the deficit — about $700 billion over the next decade — while doing little to help the economy. On any kind of cost-benefit analysis, this is ... not worth considering. ...
On the politics, the answer is also a clear no. Polls show that a majority of Americans are opposed to maintaining tax breaks for the rich. Beyond that, this is no time for Democrats to play it safe: if the midterm election were held today, they would lose badly. They need to highlight their differences with the G.O.P. — and it’s hard to think of a better place ... to take a stand than on ... big giveaways to Wall Street and corporate C.E.O.’s.
But what’s even more important is the principle of the thing. Threats to punish innocent bystanders unless your political rivals give you what you want have no legitimate place in democratic politics. Giving in to such threats would be an economic and political mistake, but more important, it would be morally wrong — and it would encourage more such threats in the future.
It’s time for Democrats to take a stand, and say no to G.O.P. blackmail.

    Posted by on Friday, September 17, 2010 at 01:05 AM in Economics, Politics | Permalink  Comments (85)


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