Extension of the Bush Tax Cuts

For the first time in US history, the Bush Administration enacted tax cuts in 2001 and 2003 at a time when the US was engaged in two wars. With regards to this article, (http://www.nytimes.com/2010/12/03/us/politics/03million.html?_r=1) the top marginal tax rate on income was reduced from 39.6% to 35%.  Since Republicans and democrats knew that the cuts were not sustainable over the long run, the tax reductions and a sunset provision requiring the cuts to lapse at the end of 2010. As Paul Krugman wrote at  the time: “The administration, knowing that its tax cut wouldn’t fit into any responsible budget, pushed through a bill that contains the things it wanted most — big tax cuts for the very, very rich — and used whatever accounting gimmicks it could find to make the overall budget impact seem smaller than it is.”
Now that the tax cuts are expiring, the Republicans are engaging in a new round of deception and demagoguery. Democrats have proposed keeping the lower rates for couples making 250,000 or less, the Republicans are pushing for an extension of the lower rates for all tax payers. While deficit reduction was a major part of the Republican’s campaign strategy, their support of the tax extension for the wealthy will add $700 billion to the federal deficit, taking Republican hypocrisy to new heights of fiscal irresponsibility. The GOP plan to borrow these billions, mostly from less well-off Americans and their children, to give already wealthy Americans more continued relief each year than many military officers earns in an entire career, is reprehensible. Have they no shame?  If our economic elites insist lower taxes at a time of war and surging debt, then the people with wealth and power have lost their moral bearings.
Having taken a shellacking as President Obama called the defeat of Democratic candidates in the mid-term elections, the President and the Democratic Party are eager to compromise with the Republicans on the tax cut issue.  It appears that the Democrats will agree to the GOP proposal to extend tax cuts for the wealthy for one to three years or increase the tax cut income cap from $250,000 to $1 million. Based on responsible economics and opinion polls showing 51% support for the Democratic position and 31% for the GOP position of extension for all, the Democrats should agree to no more than a year’s extension of the tax cuts and not fall once again for the Republican trap of extensions that are politically inconvenient to repeal.