The fact remains that extending the Bush-era tax cuts will cost the U.S. Treasury about $3.7 trillion in revenue over the next decade. Extending just the popular middle- and lower-income tax cuts will cost $3 trillion. It is hard to imagine that extending all of the tax cuts at a cost of $3.7 trillion is fiscally irresponsible, but extending $3 trillion worth of tax cuts is somehow fiscally sensible.
Last month, the co-chairs of the president’s Fiscal Commission released a draft of recommendations to curtail the deficit. Their proposal includes spending cuts so draconian that they are likely to be summarily rejected by Congress. Their plan reduces the deficit by $3.8 trillion – almost exactly the cost of extending all the Bush-era tax cuts.
Fiscal responsibility in the federal budget requires making tough choices. If you cut one person’s taxes, then you must pay for those tax cuts by either increasing someone else’s taxes or by cutting spending. The proposal of the co-chairs of the President’s Fiscal Commission demonstrates the fiscal reality of extending the Bush-era tax cuts by listing the kinds of cuts that would be needed to pay for the extension.
Unfortunately, the Republican Party never attempts to tackle the tough choices. For the six years that the Republican Party held both Congress and the White House, they failed time and time again to make these tough choices. They enacted $1.3 trillion in tax cuts in 2001 and another $350 billion in 2003 without offsets. They created a trillion dollar prescription drug entitlement program without paying for it. We also shouldn’t forget that they financed two wars overseas with borrowed money.
Democrats can and have made these tough choices – most recently with the enactment of Health Care Reform, which provides the largest benefit to the middle class since the enactment of Social Security and at the same time is paid for; in fact the CBO projects that it will reduce the deficit by nearly $1.2 trillion over the next two decades. Democrats passed the 1993 Clinton Budget that led to a record number of jobs created, almost quadrupled the Dow Jones Industrial Average and was on schedule to pay off the entire debt held by the public by 2008. That budget passed without a single Republican vote in either the House or the Senate. Ironically, it is those Clinton-era tax rates that people seem so scared to return to.
We need to make tough, unpopular choices – obviously letting tax cuts expire is unpopular. But when we ever get serious about the deficit, we will find that the realistic alternatives are even more unpopular.
And while we have to be sensitive to the fact that we are still in an economic recovery, the additional revenue from a return to the Clinton-era tax rates could be directed immediately towards job creation through investments in direct job programs, such as highway and public transit construction jobs, summer jobs programs, and the AmeriCorps program. Such targeted, temporary job creation spending will not only accelerate the recovery, but the influxes in spending in these areas can be ended a lot easier than reductions in individual income tax rates.
If we don’t have the political will to end the Bush-era tax cuts now by enacting a two-year extension of all the rates, we certainly won’t have the political will to do it during a presidential election. Accordingly, the reasonable choice Congress should make now is to allow the Bush-era tax cuts to expire as scheduled at the end of this year and try to restore fiscal sanity to our nation’s capital.
Robert C. “Bobby” Scott is a democrat who represents the 3rd Congressional District of Virginia and is a member of the House Budget Committee.