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Bush tax cuts are not pragmatic

There were two promises made during Obama’s 2008 presidential campaign that still have yet to be kept. The first was, “If you make less than a quarter-million dollars a year, then you will not see your income tax go up, your capital-gains tax go up, your payroll tax, not one dime,” Obama said. The second was to battle the astounding federal deficit that had been accrued during the reign of the Bush administration.

The conundrum emerges with talks of what action should be taken once the tax cuts enacted by the Bush administration in 2001 expire. This creates a double-edged sword for the Obama administration, because the decision of renewing the tax cuts has implications on the federal deficit and to his pledge of not raising taxes. On one hand, not passing any new legislation regarding tax cuts would regress tax rates to what they were during the Clinton administration and potentially reduce the deficit to a manageable level. While on the other hand, by signing tax cut legislation Obama would be adhering to his campaign promise and not raise the taxes of any Americans who make less than $250,000. Should Obama dance to the tune of good politics and permanently extend tax cuts?

The current state of the economy and its economic fragility must be taken into consideration. When the tax cuts were proposed a decade ago, the United States had not experienced the exponential decline of the housing market and near double-digit unemployment rates. The Obama administration should take into consideration the condition of the economy then and now. To permanently extend the 2001 tax cuts would be taking an unnecessary gamble on an already slow economic recovery. According the Congressional Budget office, raising taxes on families earning more than $250,000 would only recover 15 percent of overall revenue loss. It must be also taken into consideration that the majority of American households now fall below the $250,000 threshold. Exempting such a number of Americans from tax increases would pose a problem for a government attempting to generate revenue to lower the deficit. There is another implication of placing the tax burden on the wealthy; they have become self conscious about the size of their nest eggs as a result of the housing and stock markets. Bearing in mind that they make up about a fourth of consumer spending, if wealthy Americans were to cut back their spending, it could prove to be injurious to an already frail recovery.

The prudent middle-ground approach that could be taken would be to provide the middle class with a temporary two-year tax cut equal to the Bush tax cut. This could be a compromise that would work to appease both sides of the looking glass. A two-year temporary tax cut could provide middle class American families with the relief they are seeking, and in the long run would not adversely damage the United States’ chances for a full economic recovery. Once the economy makes a steady recovery with both housing and stock market prices rising and the American middle class seeing an increase to their income, the sentiment against the expiration of tax cuts would not be as heated. A practical middle ground could prove to be beneficial to all classes, as a fully covered economy and reduced federal deficit would enable the creation of jobs and stimulate a growth in investments.

So, does a dilemma exist for the Obama administration on whether tax cuts should be renewed? It should not. Given, a temporary two-year tax cut might not be received as well as a permanent tax cut, it might provide enough relief for middle class Americans while also alleviating the federal deficit. The vitality and stability of the economy must be considered in the long run and can be done best with a pragmatic approach.

The pragmatic approach, however, is unlikely to be implemented. Both sides will argue for their own desires and revert to ad hominems to battle their opponents.

Coming from the opponents of anything proposed by the president, the thoughts of House Republican Leader John Boehner are often echoed.

In an interview with CBS on ‘Face the Nation’ Boehner communicated his desire to eschew anything pragmatic.

“If the only option I have is to vote for those at 250 and below, … I’m going to do that,” Boehner said.

Published in The New York Times, Paul Krugman reported that “according to the nonpartisan Tax Policy Center, making all of the Bush tax cuts permanent, as opposed to following the Obama proposal, would cost the federal government $680 billion in revenue over the next 10 years,” Krugman wrote.

The economy needs a pragmatic sensible tax cut approach, and giving $680 billion to the rich is not the answer.

Mai Tran is a political science junior and may be reached at [email protected].

1 Comment

  • "The economy needs a pragmatic sensible tax cut approach, and giving $680 billion to the rich is not the answer."

    From what I gather in this statement, you assume that the government asserts 100% ownership of American citizens and the $14 trillion economy. Instead of saying that the government is not taking by force money that has been earned by these "rich" people, you are saying the government is giving it to them. I would suggest that you donate 39.5% of your income if you believe the government needs it.

    The more pragmatic approach would be cutting non-essential spending including money that IS given to rich people such as agricultural subsidies and other forms of corporate welfare and letting honest people keep the money they earn.

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