The midterm election is over and the results are exactly as expected. The Republican party has overtaken the House of Representatives and has strengthened its minority in the Senate. Much of this has been due to the effect of Tea Party activism on the conservative side of the political spectrum. Voters turned out for these candidates out of excitement over the Tea Party promise to rein in government spending and reduce the national debt. These newly elected representatives will face their first test almost immediately, and it will come with the expiration of the Bush-era tax cuts at the end of the year.
Not surprisingly, Republicans are pushing for a full extension of the entirety of the Bush tax cuts. There seems to be an elephant in the room that nobody is talking about though: this position is almost entirely antithetical to the principles of fiscal responsibility and deficit reduction that these same Republicans claim to represent.
The Bush tax cuts, which encompass two separate pieces of legislation signed into law in 2001 and 2003, have turned out to be one of the most fiscally irresponsible actions ever taken by the U.S. government. While it must be acknowledged that the cuts did reduce taxes for almost everyone, the greatest and most costly reductions were reserved for the rich. By vastly reducing taxes for the wealthiest Americans, the cuts have robbed us of well over a trillion dollars already. To put this into perspective, the money lost by the Bush tax cuts could have paid for health insurance for every American, which would have made Obama’s health care bill a deficit non-issue. The lost money could have also completely paid for the Iraq War.
The theory behind the tax cuts was the same idea behind the “Reaganomics” of the 1980s. The notion was that if you reduced taxes on the richest Americans – people who absolutely do not need their taxes reduced and are doing just fine – there would be a “trickle down” effect that would lead to job growth and a stronger middle class. This is a principle that has proven time and time again to be completely false. Worse yet is that this “trickle down” principle is always pushed by administrations that couple it with drastic deregulation of the private sector.
It is baffling how soon American voters forget what got us into the current economic recession in the first place. When Bill Clinton handed George W. Bush the keys to the Oval Office, the U.S. was in the middle of a budget surplus. We now face the largest budget deficit in American history, most of which was gift-wrapped and placed on the desk of the Oval Office before President Obama walked in the door. Our intricate system of checks and balances makes it the extremely rare case when one or two specific policies can be blamed for a major problem – but this is one of those cases. Put simply, had the Bush tax cuts never been signed into law, we would not be anywhere close to the financial pickle in which we currently find ourselves.
That’s the past. We now have a government that has less than two months to make a decision about whether or not to extend the cuts for the future. If we thought the effects of the tax cuts thus far have been bad, we have seen nothing yet. Independent estimates predict that a full extension of the cuts would add an additional $4 trillion to our budget deficit over the next 10 years. This will ensure that the U.S. continues to become a weaker player in the global economy. Of course, it will also limit our ability to take care of our own problems at home.
As has become typical, President Obama is looking at a number of potential compromises, including a one-year extension to buy Congress time to look at the details. He is also considering support for a partial extension of the cuts for Americans making under $250,000 per year. Obama has to decide whether to honor his principles or respond to a voter base that is going to the polls in two years to decide whether or not to give him a second term as president.
Meanwhile, the Republicans seek a full extension of all of the cuts, including those for the richest Americans. This is absolutely baffling in light of the principles these Republicans claim to represent. The GOP won the midterm elections by running on a platform of deficit reduction. If their goal is to actually reduce the deficit, then extending the Bush tax cuts makes absolutely no sense whatsoever. In fact, extending the cuts would massively increase the deficit. In short, it would be just about the most fiscally irresponsible thing that could be done given the circumstances.
Time will tell what these politicians will do in their first big test of this lame-duck session of Congress. Should they move to fully extend the cuts, it will be clear that they do not stand for deficit reduction. Rather, it will be obvious that they seek to appease rich voters and corporate lobbyists while ignoring both basic economic principles and the facts on the ground.
Charles Hicks is a fourth-year religious studies major. He can be reached at cbhicks@uci.edu.
