Reportedly, the Obama administration and Congressional Republicans are cooking up a “compromise” when it comes to the expiring Bush tax cuts. In return for a temporary extension of all the Bush tax cuts — including those for the richest two percent of Americans — Congress would also extend long-term unemployment benefits (which are currently expired) and keep in place some of the tax breaks included in the American Recovery and Reinvestment Act (like the “Making Work Pay” tax credit).
Of course, this deal would reveal the consistent Republican deficit hysteria of the last two years as a complete sham, since it will cause a big increase the short-term deficit. Today, Sen. John Cornyn (R-TX) was asked about this obvious contradiction, and instead of admitting that Republicans are fine with deficit spending so long as it is done in the name of reducing marginal tax rates for the wealthy, he scoffed at the notion that tax reductions increase the deficit at all:
Q: I take your point, that we have a spending problem, not a tax problem, but you have to acknowledge that extending these Bush tax rates for all Americans exacerbates the deficit just as much, and in fact more than, the extension of unemployment benefits, correct?
CORNYN: Savannah, I don’t agree that extending current tax policy, which has been the law for ten years, exacerbates the deficit, unless you assume that all of this is the government’s money and they just let ‘we the people’ have some of it back. The fact is, we need to continue to stimulate our economy, not through the sort of Keynesian approach of spending borrowed money that we’ve seen over the last two years.
To be clear, this “compromise” is hardly a compromise. It involves Republicans getting exactly what they want when it comes to the Bush tax cuts, in return for agreeing to some steps to alleviate economic pain that past Congress’ approved without hesitation time and time again.
Cornyn, like many of his colleagues, may incorrectly believe that tax cuts pay for themselves, or he may just be engaging in rhetorical somersaults, but the fact remains that extending the Bush tax cuts reduces federal tax revenue (which is the lowest its been in sixty years), thereby increasing the deficit. According to the Center on Budget and Policy Priorities, the Bush-era tax cuts are one of the largest drivers of the country’s long-term structural deficit.
Finally, in the same breath that he scoffs at Keynesian-style stimulus, Cornyn is endorsing just that, in the form of large, deficit-financed tax cuts for the rich (which the Congressional Budget Office ranks as the least effective tax policy for boosting economic growth). Just because the borrowing and spending is done in the name of tax breaks doesn’t make it something other than Keynesian fiscal stimulus. After all, the Recovery Act was one-third tax cuts, for just that reason.
In fact, the first Bush tax cut was passed under the guise of Keynesian stimulus. All of which goes to show that Congressional Republicans are willing to embrace any rhetoric that enables them to extract from Democrats tax cuts which the public opposes.