On Tax Cuts, The Filibuster and Our Narrow Thinking, Encouraging News on the Deficit Panel

The lame-duck Senate today is voting for cloture on two Democratic proposals, one to extend the Bush era tax cuts for all individuals with income under $200K and all married couples under $250K and another to do the same for all earners under $1 million. The votes seem assured to fail as all 42 Republicans (because the election in Illinois was a special election, Mark Kirk is already seated for the lame duck session) vowing to hold out for a bill that extends all Bush era tax cuts.

Here is the honest truth that neither party is telling you...we simply cannot afford to extend ANY of the tax cuts to earners at ANY level. The cost of extending to those under $200/$250K is approximately $4 trillion over the next 10 years. The cost of extending to those above that level is an incremental $700 billion.

I like a tax cut as much as the next person. But we can't afford any of them. Not with red ink spilling as far as the eye can see. It's time for all of us citizens to grow up and realize that you can't have huge government spending on two wars, Social Security and Medicare as it exists today AND have low taxes for everyone.

But neither party will tell you that. On 85% of the cost of the extension measure, the parties are in violent agreement. On the other 15% (the tax cuts for high earners), I suspect that the GOP will ultimately get its way, at least for 2011. What a shame that we continue to borrow from China because we aren't grown up enough to pay our bills.

By the way....isn't it ironic that the Bush Tax Cuts were passed under reconciliation so as to prevent a Democratic filibuster but that the Democratic changes in the rules of reconciliation now prohibit them from using this tactic to get their version of the extension? Democrats tightened reconciliation rules when they came to power to limit reconciliation to appropriations bills and deficit-reducing bills. Since the base case is that all the tax cuts expire on Jan 1, this clearly does not meet either of those criteria. The net effect of not being able to pass a deficit-increasing bill under reconciliation is likely to be that an even more deficit-increasing bill is ultimately passed.

Where is Ross Perot when you need him? Or even John McCain from a few years ago, a man who opposed the Bush Tax Cuts on the basis of their impact on the deficit.

Some Reason to Be Encouraged
While the bi-partisan deficit reduction panel didn't reach the 75% bar it set for itself (14 out of 18 members voting for the proposal), it did ultimately get 11 out of 18 members to back a very tough set of spending cuts and tax increases that would reshape the course of our nations budget.

I've written previously about why I support many of the key provisions of their plan, including raising the Social Security retirement age, eliminating or severely curtailing the home mortgage interest deduction and making meaningful cuts in defense spending. At the time, I lamented that it would probably quickly fall by the wayside as spineless Republicans and Democrats, who have seemed unwilling to ask even the most basic sacrifices of the population to balance our budget, would all find something to hate in the bill.

Maybe I was too hasty in my judgement.

On the deficit panel, liberal Senator Richard Durbin voted for the plan. So did conservative Senator Mike Crapo. So did conservative former Senator Alan Simpson. So did moderate Democrat Erskine Bowles.

Since the release of the report, 13 additional Senators, 12 Democrats and Independent Joe Lieberman have all urged support for the proposal.

I'm encouraged, but obviously we are a long way from passage. I strongly urge President Obama to work with the new GOP leadership in the House and Democratic leadership in the Senate to build support for key elements of this proposal early in the new year.

The best thing that we could do for the nation's long-term prosperity is to deal with the structural issue of the deficit. This is an issue that will require sacrifice and needs Presidential leadership. Let's hope the President can show some.