It seems like just yesterday that we were worried about the budget deficit. But now we're going to cut taxes - including for the wealthiest of the wealthy in America - and greatly increase the deficit. Doesn't that seem kind of funny?
Of course, Republican rants about the deficit always did ring hollow, considering that it was their policies - the Bush tax cuts, two wars waged without paying for them, the interest payments on a deficit Republicans have steadily increased since Ronald Reagan, and the economic collapse itself, brought on by deregulating banks and creating a huge asset bubble (also helped by cutting taxes on the rich) - that gave us these record-breaking deficits.
GOP eagerness to cut income and estate taxes for the rich - indeed, they refuse to conduct any other legislation until they get that particular goody - demonstrates that their ranting about the deficit was only political in nature, just another way to attack the Obama administration (relying on most Americans being hopelessly ignorant about these things). But yeah, we knew that, didn't we?
And what about the Democrats? Oddly enough, in this tax agreement, Obama even had to bribe Republicans with tax cuts for the rich in order to get business tax cuts. How weird is that? But the whole thing is loaded with tax cuts, although the Democrats get cuts for the lower and middle classes. But think about it. Should we be doing tax cuts at all, at the cost of adding nearly another trillion dollars to the federal deficit?
True, tax cuts to lower-income Americans will help stimulate the economy, but not nearly as much as other forms of stimulus (we need jobs, not tax cuts). Tax cuts are an expensive form of stimulus, greatly increasing the deficit for a relatively small result.
And as Paul Krugman points out, those parts of the agreement that do stimulate the economy (like the extension of unemployment benefits) run out at the end of 2011, while the tax cuts for the rich continue for another year. That means that the economy will be slowing in the run-up to the 2012 election, giving Republicans both a political advantage and another great "hostage situation." (President Obama promises to fight them this time, but since that would be the first...)
So how did we end up with this tax cut agreement? First, I think it's because the entire Democratic Party has moved to the right as the Republicans moved to the far right. That's normal, I suppose, since politics abhors a vacuum. But it's not going to be good for our country unless it completely marginalizes the right-wing lunatics in the GOP - and I don't see any sign of that happening so far. (Indeed, they won the most recent election, as hard as that is to believe.)
Second, tax cuts are always popular with the ignorant American electorate. Democrats have been hit over the head for so long by Republicans mindlessly ranting "tax-cuts, tax-cuts, tax-cuts" (when the Dems have tried to be rational), that they've finally gotten the message, I guess. Now, even Democrats are going to mindlessly rant "tax-cuts!"
Of course, America desperately needs a little less mindlessness, don't you think? But politicians have to get elected. And as long as we're this dumb,... well, we get the kind of representation we deserve.
And finally, for some reason, Barack Obama seems to be eager to fight his own supporters, in order to appease people who will hate a black, Democratic president (black or Democratic, either one) no matter what he does. Obama regularly repeats Republican talking points, even when they're demonstrably wrong, and he only seems to get angry at his own side. I have no idea what's up with that, because it's really hard to understand.
At any rate, we seem to be cutting our own throats, both economically and politically. Politically, yes, because if the Republicans take back the presidency in 2012, considering how loony they've become, we'll be looking back fondly on even the Bush administration! If you think we're in trouble now, just wait.
But economically, too, because budget deficits do matter. (That's just one of the many things I disagree with Dick Cheney about.) We started cutting our own throats during the Bush administration, racking up record-breaking budget deficits even in relatively good economic times (not that the Bush years were particularly good, but the economy was doing OK part of the time).
And so we were already in a huge hole when we entered this economic collapse, the worst since the Great Depression. Of course, that automatically increased government expenses and decreased government revenues as people lost their jobs and stock prices collapsed (stock prices have recovered strongly, but not the revenue from capital gains, since the tax laws are so favorable to investors). The deficit increased mostly because of the economic collapse, not in response to it.
The thing is, the best thing we could do right now is to spend government money to stimulate the economy. The last thing you want to do during a recession is to cut spending. You tackle the deficit when the economy gets humming again (just as Bill Clinton had started to do in the 1990s).
If we hadn't started this downturn in such a deep hole, it probably wouldn't matter much if we used an inefficient form of stimulus, like tax cuts. But we did. And we have to live with the mistakes of the past. This tax cut agreement will greatly increase a budget deficit that's already too big - and for relatively little positive result. We are continuing to cut our own throats.
OK, I understand the political realities. And in a democracy, you really need an intelligent, informed, and active electorate. So maybe we're just doomed, I don't know. But I would like to see at least my side fighting for what's right.
And frankly, the Democrats are losing anyway. Would it be so much worse if they actually stood for something?
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