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Thursday, December 30, 2010

Today's New York Times Pretty Well Spells It Out!!

When you read this editorial, go to the Times website (www.nytimes.com) and read the comments. Smart people make the same comment over and over again, e.g., living in this country ain't free!! And the richy richest who continually whine over their taxes should feel free to move to Somalia and pay no taxes.

Deficit Hypocrisy

It was not long ago that Republicans succeeded in holding unemployment benefits hostage to a renewal of the high-end Bush-era income tax cuts and — as a little bonus — won deep estate tax cuts for America’s wealthiest heirs. Those cuts will add nearly $140 billion to the deficit in the near term, while doing far less to prod the economy than if the money had been spent more wisely.

That should have been evidence enough that the Republican Party’s one real priority is tax cuts — despite all the talk about deficit reduction and economic growth. But here’s some more:

On Dec. 22, just before they left town for the holidays, House Republican leaders released new budget rules that they intend to adopt when they assume the majority in January and will set the stage for even more budget-busting tax cuts.

First, some background: Under pay-as-you-go rules adopted by Democratic majorities in the House and Senate in 2007, tax cuts or increases in entitlement spending must be offset by tax increases or entitlement cuts. Entitlements include big health programs like Medicare and Medicaid, for which spending is on autopilot, as well as some other programs for veterans and low-income Americans. (Discretionary spending, which includes defense, is approved separately by Congress annually.)

The new Republican rules will gut pay-as-you-go because they require offsets only for entitlement increases, not for tax cuts. In effect, the new rules will codify the Republican fantasy that tax cuts do not deepen the deficit.

It gets worse. The new rules mandate that entitlement-spending increases be offset by spending cuts only — and actually bar the House from raising taxes to pay for such spending.

Say, for example, that lawmakers want to bolster child credits for families at or near the minimum wage. One way to help pay for the aid would be to close the tax loophole that lets the nation’s wealthiest private equity partners pay tax at close to the lowest rate in the code. That long overdue reform would raise an estimated $25 billion over 10 years, but the new rules will forbid being sensible like that.

Even worse, they direct the leader of the House Budget Committee to ignore several costs when computing the budget impact of future actions, as if the costs are the natural course of politics for which no payment is required.

For example, the cost to make the Bush-era tax cuts permanent would be ignored, as would the fiscal effects of repealing the health reform law. At the same time, the new rules bar the renewal of aid for low-income working families — extended temporarily in the recent tax-cut deal — unless it is fully paid for.

House Republicans obviously believe they have a good thing going with voters by sanctifying tax cuts and demonizing spending. That’s been their approach for 30 years after all, and it unfailingly rallies their base.

The challenge for President Obama and Democratic lawmakers is not to get drawn into that warped mind-set. They need to present an alternative, including investments — in energy, technology, infrastructure and education. They also need a plan for long-term deficit reduction that recognizes what the Republicans ignore: Never-ending tax cuts make the deficit worse. Prudent tax increases need to be part of the solution.

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