Good Reasons for Ending the Bush Tax Cuts

Today, I read an op-ed piece in the Los Angeles Times, “Why Populism Isn’t Popular” by William Voegeli. In it, Voegeli says, as I understand his words, that the main reason liberals want to discontinue the Bush-era tax cuts for wealthy individuals earning more than $200,000 per year, or families earning more than $250,000 per year, is to lessen income inequality among America’s classes. No mention is made of the impact, whatever it might be, of discontinuing the tax breaks upon the economy.

Will the Bush tax cuts for the richest 2% of the country be ended or extended? This question has been on my mind lately. To my non-economist’s eyes, it seems that they should be ended, at least for the time being. Why do I say that? Because ending those tax cuts appears to be the best way to stimulate the economy. You might recall that when the taxes for the wealthy were in place at the end of Bill Clinton’s tenure in the presidency, the economy was booming. With those taxes removed, George W. Bush’s presidency ended with the worst economic crisis since the Great Depression.

Of course, that isn’t a foolproof reason for ending those particular tax breaks, but at least, it provides some empirical evidence for how new tax rates might play out. If new revenues earned by the federal government were then to be plowed into refurbishing this country’s dilapidated infrastructure, this could put much-need money into the pockets of working Americans, who would be more apt than others to spend it on necessities. Those providing the necessities would then have money of their own to spend on the things that they need. Once this money is back in circulation, the economy can grow at a much faster clip. Would such a scenario actually work? I don’t know; as I said earlier, I’m not an economist. But this hypothetical situation certainly sounds more than plausible.

Opponents of ending the Bush tax cuts disagree. They say that not extending these tax breaks would inhibit “small businesses” (as they define the term) from creating jobs at a time when they’re desperately needed. And the reason that money from the Bush tax cuts isn’t stimulating the economy right now, conservatives say, is because potential job creators are too “uncertain” about any future increase in their taxes to invest their money. The assumption behind this is that every penny that the richest 2% save in taxes will be reinvested in creating jobs. But if this is true, why weren’t the Bush tax cuts stimulating the economy when it started to falter back in December 2007? Furthermore, a November 24 episode of Countdown with Keith Olbermann reported that the wealthiest Americans do indeed have plenty of money to throw around, but they just aren’t throwing it in the direction of job creation. Other reports say that they are spending it on static investments that don’t create jobs: expensive oil paintings, expensive jewelry, and the like. In other words, the “uncertainty” argument is a myth.

Anyway, this is why I am in favor of ending the Bush tax cuts for the wealthiest 2%: because of plausible positive effects ending them might have on stimulating the economy. There are also various reports, which I don’t have at my fingertips, that say extending tax cuts for the rich would be the worst way to get the economy moving again. I am not in favor of ending them, as Voegeli would have it, for pie-in-the-sky reasons of ending income disparity. And to attribute wanting to end these tax cuts for unrealistic reasons denigrates any realistic reasons we may have for doing so, while Voegeli simultaneously paints us tax-cut opponents as irrational and dogmatic.

Again, since I’m not an economist, I can’t say whether the reports I read are credible or not. And to make matters more confusing, for every report or estimation saying that tax cuts for the wealthy are the worst economic stimulus, you have some other report or estimation gainsaying what the first ones say. This allows Republican politicians to say that they’ve seen no “credible” economic evidence to argue against extending the Bush tax cuts for the wealthiest Americans.

Signs from Washington are pointing to President Obama giving up on his principle of ending the cuts. I’m tempted to use some Democratic Party buzzwords like Obama “caving” to Republican demands, but I won’t. I just hope that whatever economic policies that Obama and the Republicans can agree on will result in something that best gets the economy moving. But I’m not optimistic.

Remember the President’s appearance before the Republican representatives at their Baltimore retreat last January 29? He gave a powerful defense of his economic policies and rebutted conservative arguments to the contrary. Obama looked so good at this face-to-face give-and-take that Fox News cut away from live coverage of the event: the channel didn’t want reality to interfere with its predetermined narrative that Obama’s policies didn’t have any good arguments in their favor. How did the Republicans act in response to what the President said? They just went back to spouting the same old conservative dogma, unaffected by Obama’s rebuttals, and doing what they always do as though nothing had happened, as though they learned nothing. That doesn’t bode well for the future of this country’s financial health.