During this current economic downturn, in which the nation is one bad policy away from a deeper crisis, it is vital that the Bush Era tax cuts be extended. If the exemption for the wealthiest Americans must be dropped, so be it. The middle class cannot afford to pay more money to the federal government when they are already struggling to pay off debt, mortgages, higher tuition rates and health insurance. At the same time, 9.6 percent of the labor force is unemployed. If the tax cuts expire, their taxes go up as well. This year only, the first $2,400 of unemployment insurance is tax-free. Next year, all unemployment benefits will be fair game.
Politicians disagree over which income levels can afford to see their taxes go up. President Barack Obama wants to continue cuts for couples who earn less than $250,000 a year and for individuals who earn less than $200,000. Anyone with a higher income – the top 3 percent of the population – would get a tax hike. Republicans want tax cuts for everyone, regardless of income level. Unlike Democrats, they are more likely to believe in trickle-down economics, the theory that greater disposable income for the wealthiest will trickle-down to lower wage earners in the form of job opportunities and better pay. Some members of the Senate Democratic caucus, however, side with Republicans in supporting tax cuts for all. One of which is Joe Lieberman of Connecticut. The president’s former budget director, Peter Orszag, supports a two-year extension.
There is room for compromise. Just two days ago, House Republican leader John Boehner said he would support a bill that extends tax cuts to the middle class, even if tax cuts for the upper class are allowed to expire. This is the correct decision.
On Boehner’s part, it shows a willingness to compromise and do what is right for the American people, even if it does not represent everything he wanted. Supporting the president’s plan also undermines Obama’s attempts to depict Republicans as the “Party of No.” For the White House, Boehner’s words are a challenge. If the leader of the opposition party in the House is willing to swallow his pride and make a deal, Mr. Obama should be grateful and courteous. Boehner’s candidness could also serve as an example of political tact for Obama, who may need to make some compromises of his own after November.
Alongside this issue of tax cuts is spending. Boehner originally opposed the president’s plan because he thought that simply cutting federal spending to 2008 levels – a 22 percent reduction – would fill the budget gap otherwise filled by taxes. President Franklin Roosevelt made a similar choice when he cut spending in the middle of the Great Depression. As a result, unemployment skyrocketed and stocks plummeted.
The only way the government can balance its budget and prevent a worse recession is by cutting both spending and taxes. In theory, the size of government would shrink without preventing the private sector from leading a recovery. For this to happen, both Republicans and the Democratic president would have to make significant concessions.
Obama must entertain the conservative principle of limited government and show more faith in the private sector. Republicans must work with a president whom they distrust and do not entirely respect. In doing so, both political parties must put down their electoral calculator and do what is best for the middle class. The American people will not forget this act of conscience when it comes time to cast their votes.