Raise My Taxes, Mr. President!
Zakaria, Fareed, Newsweek
Byline: Fareed Zakaria
We can't afford the Bush cuts anymore.
For the last few months, we have heard powerful, passionate arguments about the need to cut America's massive budget deficit. Republican senators have claimed that we are in danger of permanently crippling the economy. Conservative economists and pundits warn of a Greece-like crisis, when America can borrow only at exorbitant interest rates. So when an opportunity presents itself to cut those deficits by about a third--more than $300 billion!--permanently and relatively easily, you would think that these very people would be in the lead. Far from it.
The Bush tax cuts remain the single largest cause of America's structural deficit--that is, the deficit not caused by the collapse in tax revenues when the economy goes into recession. The Bush administration inherited budget surpluses from the Clinton administration. What turned these into deficits, even before the recession? There were three fundamental new costs--the tax cuts, the prescription-drug bill, and post-9/11 security spending (including the Iraq and Afghanistan wars). Of these the tax cuts were by far the largest, adding up to $2.3 trillion over 10 years. According to the Congressional Budget Office, nearly half the cost of all legislation enacted from 2001 to 2007 can be attributed to the tax cuts.
Those cuts are set to expire this year. The Republicans say they want to keep them all, even for those making more than $250,000 a year (less than 3 percent of Americans). They say that higher taxes will hurt the recovery. But for months now they have been arguing that the chief threat to the economy is our gargantuan debt and deficit. That's what's scaring consumers, creditors, and businesses. Given a chance to address those fears by getting serious about deficit reduction, though, they run away. Look by contrast at British Prime Minister David Cameron, a genuine fiscal conservative. To deal with his country's deficit, which in structural terms is not so different from America's, he concluded that he would have to raise taxes as well as cut spending.
The Democrats, for their part, are also running scared, proposing to keep all the tax cuts except those affecting the very rich. But they were opposed to these tax cuts in 2001 and 2003. If they were a bad idea when budget deficits were small, why are tax cuts a good idea when deficits are in the $1.3 trillion range? …