The real budget solution, revisited
On Monday, I blogged in praise of Jonathan Chait's New Republic column suggesting that the solution to the budget crisis was to let all the Bush tax cuts expire. Jonathan also laid out a clever political analysis of how this might happen.
Clive Crook in The Atlantic came back wondering why I singled out Chait:
Can he really think that Chait is the first to come up with this? For a start, it's the letter of current policy. Here's a new idea: call me crazy, but let's do what we're already doing. Unfair, you might say: up to now, nobody has actually advocated leaving current law in place. Not so. The idea of reversing all the Bush tax cuts after a temporary extension has been in the air for ages.
Just to be clear: Clive is perfectly right that this idea is not brand new, so of course I did not think Jon came up with it first, and he did not claim to have done so. Indeed, a number of my colleagues at the Brookings Institution -- and, I am glad to say, Clive was once one of them as a guest scholar -- have long been arguing for the benefits of restoring the Clinton tax rates.
But since the Bowles-Simpson commission report, this obvious solution to our budget problem has fallen by the wayside. Lots of people who love all the cuts the commission proposed don't want it widely known that restoring the Clinton rates would reduce the deficit by about the same amount as all the complicated proposals put forward by Bowles-Simpson would. That's why I was glad Jon put the Clinton rates back into journalistic circulation.
Clive also makes this point:
It's ridiculous to think, as Chait and Dionne both seem to, that Obama will be able to campaign in 2012 without committing himself one way or the other on this. If a tax reform hasn't already been done by then, would he be willing to campaign on the pledge to let all the Bush tax cuts expire? But in replying to Clive, Jon correctly noted that the central point of his colum was that Obama would not have to campaign on this. As Jon writes, Obama
can campaign on maintaining the Bush tax cuts on income below $250,000. All he has to do is refuse to sign an extension of the tax cuts for income over $250,000. If he does that, Republicans will block the whole thing, and we'll revert to Clinton-era rates. Obama can turn the GOP's fanatical attachment to tax cuts for the rich against them. He can be in favor of middle-class tax cuts, and he can let Republicans block those cuts for him.
Jon's original point was that Republicans care far more about the tax cuts for the wealthy than the rest of the tax reductions. They would play chicken, and the likelihood is that no bill would pass. In the absence of legislation, we revert back to the Clinton rates.
In the course of his blog, Clive endorses bipartisan tax reform. I am all for tax reform, but we should start with the Clinton rates as the basis for a reform plan, not current rates. Starting with the Clinton rates would begin the discussion on the basis of a tax system that produces sufficient revenue to begin restoring fiscal sanity. This, in turn, would put less pressure on the reform process to raise lots of extra money, and might thus give reform a better chance.
But here's to Jonathan for provoking Clive to come back to an idea he had endorsed in the past, and to Clive for giving me a chance to plug it again.
| February 11, 2011; 10:06 AM ET
Categories: Dionne | Tags: E.J. Dionne
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