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Working In These Times

Thursday, Jul 29, 2010, 7:07 am

Will Democrats Lose Message War Over GOP Tax Cuts for Rich?

BY Art Levine

During the recent battles in Congress over extending unemployment benefits or promoting job-creation bills, the Republican Party has taken the lead in raising alarms over the impact such measures could have in worsening the deficit—while leading Democrats and pundits have echoed some of those concerns. 

But when it comes to allowing Bush-era tax cuts for the wealthiest two percent of Americans to expire, the GOP has shown that it doesn't really care about deficits or the $678 billion in lost revenues resulting from keeping those cuts in place.

Indeed, while claiming that the (discredited) miracle of supply-side economics would somehow boost the economy through tax cuts, GOP leaders have been reluctant to admit the tax cuts would actually balloon the deficit, although sometimes, they "slip up," as Think Progress reported this week. It caught Rep. Devin Nunes (R-Calif.) accidentally admitting the truth: "Well, I think that they increase the debt. If you let them expire at the end of the year we're going to have a huge, the largest tax increase in American history."

Democrats, though, are resorting to logic and fact-based appeals to argue against the GOP noise machine. Right-wing propagandists and GOP leaders are arguing that we can't "raise "taxes in a recession, while Democrats aren't taking an aggressive frontal assault on the GOP's favoritism towards the rich.

What Democrats and their progressive allies are failing to do effectively is calling out the GOP's false claims that the administration wants to let all the tax cuts expire, not just for the wealthy. Just like the mantra over "death panels" and the swift-boating of John Kerry, Democrats seem to be assuming that since it's a bald-faced lie, the public won't be be fooled.

As a Daily Kos writer pointed out, even the centrist Politifact watchdog reporters have debunked the GOP's Big Lie that everyone's taxes will rise if the Bush tax cuts expire in the way the White House wants. The administration has clearly stated that it aims to preserve tax cuts for families earning under $250,000 but that difference has been conflated by the GOP, a few centrist Democrats and, of course, by many in the right-wing pandering mainstream media. As Daily Kos highlighted:

In the world Rep. Mike Pence wants all Americans to fear, President Obama and the Democrats are about to raise everyone's taxes starting on January 1, 2011:

"The American people deserve to know that, should Democrats get their way, every income tax bracket will increase on January 1, 2011. Every single one. You know, you don't raise taxes on every American taxpayer during the worst recession in 25 years. As we've done on their failed stimulus policy, as we did on their national energy tax, as we did on their government takeover of health care, House Republicans will stand in the gap to protect taxpayers from the largest tax increase in American history."

Nice soundbite, but it's a complete and total lie. Even Politifact, which generally avoids ascribing motives, said Pence's false claim "verges on a scare tactic":

"While the legislative drafting is still in process, the Democratic majority in Congress has made clear that it plans to extend tax cuts for all but the top couple percentage points of the income distribution. So it's highly misleading for him to say that Democrats actually want to see all the bill's cuts expire. Indeed, Pence's comment verges on a scare tactic. While Pence would have been entirely accurate to say, "If the Democrats fail to extend the expiring tax cuts, all tax brackets will increase," he didn't. What he did say merits a ruling of False. "

Yet the soundbites about how we're facing  the biggest tax increase ever if the evil Democrats get their way continue unchallenged in any effective way by the Democratic leadership, despite able critiques by Media Matters and other progressive media critics.

As Media Matters pointed out earlier this month July: "Fox Business has aired at least 11 segments in the past three days falsely claiming that the impending expiration of the Bush tax cuts at the end of the year will lead to the "Largest Tax Hike Ever." Most of these segments failed to acknowledge that President Obama's proposed budget calls for retaining the tax cuts for the vast majority of Americans."

Yet as The Hill reported, Christina Romer has been deputized to critique the Republicans on politely worded factual grounds:

Christina Romer, a top economic adviser to President Obama who serves as the chairwoman of the Council of Economic Advisers, made the administration's case for letting tax cuts set to expire at the end of the year run out for high earners, while extending them for middle-class families.

"Recently, some have argued that extending the high-income cuts is necessary for the economy," Romer wrote in an official blog post. "This is simply wrong."

Extending tax cuts for high earners would do little to strengthen the economy and add jobs, Romer said, while maintaining the cuts for lower earners would provide an immediate stimulus.

"If lawmakers are truly concerned about job creation, as they should be given the painfully high rate of unemployment, many approaches would be more cost effective than extending the Bush tax cuts for high-income earners," she said.

Democrats have been put on the defensive on spending and tax issues by their acceptance of the danger of deficits over the menace of long-term unemployment, as shown by Obama's appointment of a deficit commission. But Democrats somehow believed that they'd be able to go after Republicans for bailing out the rich and hypocrisy on the deficit, but already centrist Democrats are defecting by asking for all the Bush tax cuts to be extended, including those for the wealthy.

As even a moderate Washington Post editorial pointed out:

Certainly, given the yawning debt, there is no reason to extend the tax cuts for the wealthiest Americans. But here is the worrisome development of recent days: Several ordinarily deficit-hawkish Democratic senators, including Budget Committee Chairman Kent Conrad of North Dakota -- have suggested that the current economic slowdown justifies temporarily renewing all the tax cuts, even for upper-bracket earners. Expressing similar concerns were Evan Bayh (D-Ind.), Ben Nelson (D-Neb.) and Joseph I. Lieberman (I-Conn.).

"As a general rule, you don't want to be cutting spending or raising taxes in the midst of a downturn," Mr. Conrad said. "We know that very soon we've got to pivot and focus on the deficit. But it probably is too soon to cut spending or raise taxes." As a general rule, what Mr. Conrad said is correct. In its particular application -- raising taxes on the highest-income earners, households making more than $250,000 annually -- he is dead wrong.

Analyzing the best bang-for-the-buck policies to stimulate the economy, the Congressional Budget Office found that the least effective was extending tax cuts for the top brackets. The reason is obvious. "The higher-income households . . . would probably save a larger fraction of their increase in after-tax income," the CBO said.

But you won't hear that from either Republicans or their Demoratic allies. Instead, sheer hypocrisy and disinformation over taxes and the deficit is allowed to flourish in Washington, and it's not at all clear that the Obama administration is willing to fight back hard on this front. If it doesn't, the fiscal bleeding that will result could ultimately wreck the economy even more.

Even a pro-business Financial Times columnist, Martin Wolf, has pointed out the potentially scary outcomes if the GOP wins this message war, irresponsible inaction continues and its leaders' hypocrisy triumphs. His column may appear a bit dry, but he's arguing that the completely heedless approach to taxation and deficits favored by Republicans aims in part to destroy the American government's ability to spend money. This latest GOP crusade over tax cuts goes a long way to fulfilling Republican operative Grover Norquist's most cherished dream: "I don't want to abolish government. I simply want to reduce it to the size where I can drag it into the bathroom and drown it in the bathtub."

As Wolf observes:

Indeed, nothing may be done even if a genuine fiscal crisis were to emerge. According to my friend, Bruce Bartlett, a highly informed, if jaundiced, observer, some "conservatives" (in truth, extreme radicals) think a federal default would be an effective way to bring public spending they detest under control [emphasis added]. It should be noted, in passing, that a federal default would surely create the biggest financial crisis in world economic history....

So, when Republicans assail the deficits under President Obama, are they to be taken seriously? Yes and no. Yes, they are politically interested in blaming Mr Obama for deficits, since all is viewed fair in love and partisan politics. And yes, they are, indeed, rhetorically opposed to deficits created by extra spending (although that did not prevent them from enacting the unfunded prescription drug benefit, under President Bush). But no, it is not deficits themselves that worry Republicans, but rather how they are caused: deficits caused by tax cuts are fine; but spending increases brought in by Democrats are diabolical, unless on the military...

What conclusions should outsiders draw about the likely future of US fiscal policy?

If Republicans win the mid-terms in November, as seems likely, they are surely going to come up with huge tax cut proposals (probably well beyond extending the already unaffordable Bush-era tax cuts). The Republican proposals would not, alas, be short term, but dangerously long term, in their impact...

In sum, a great deal of trouble lies ahead, for the US and the world.

So is this battle over tax cuts another messaging war Democrats—or the country—can afford to lose?

Art Levine, a contributing editor of The Washington Monthly, has written for Mother Jones, The American Prospect, The New Republic, The Atlantic, Slate.com, Salon.com and numerous other publications.

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