David Leonhardt argues that Obama should compromise with Republicans on the Bush tax-cuts for two reasons: First, it would be politically bad for Obama and the Democrats to stubbornly allow all the tax cuts to expire (note: the Democrats want to let only the taxes of the most affluent Americans expire; Republicans want to extend all the Bush tax-cuts). The second reason is the economy. Raising taxes during a recession has an anti-stimulative effect, possibly sending the economy back into tailspin, and definitely hurting Obama’s chances for re-election. In other words, the economic consequences would lead directly to the political consequences:
I agree. While I’m not sympathetic at all with the Republicans on this one – I think the notion that we can dig our way out of the deficit through spending cuts alone is ludicrous, and I have very little sympathy with top-earners in the first place – I do think Leonhardt is right that now is not the time for Obama to draw hard lines in the sand. Allowing the tax cuts to expire for all Americans would have a deleterious effect on the economy. Then again, my position is short-term stimulus and long-term austerity. Now is not the time to jack up taxes or seriously cut spending.
Here’s an interesting comparison chart on the tax savings under the Republican and Democratic tax plans: (in the photo box to the right…)
Again, I think we need to separate the questions here. Tax reform is necessary, both to make the tax code more fair and more friendly to growth and we need to balance the budget. But right now the number one problem is the economy – not fairness, not the budget deficit – but jobs. So should we work toward tax reform? Absolutely, but it can’t be the top priority during a recession. Should we work toward a more fair and simple tax code? Yes, but again this isn’t something we need to tackle this very instant. And for liberals, worrying more about fairness than about economic stimulus will be a political disaster in 2012. Democrats would do well to follow Leonhardt’s advice.
