Sweet, sweet smell of compromise is in the air on the matter of extending the Bush tax cuts, but that perfumed scent disguises the sweaty odor of opportunism. The Republican Party, flush with success in the House, but in the Senate limping over the finish line in an improved position, though still in second place, are rife to be waylaid. They don't seem to perceive the danger. The Democrats act like they are playing soft ball, but in reality they are playing the long game.
If the Bush tax cuts are extended for two years-otherwise known as until after the next presidential election-there's a good chance they could help the economy, and Obama will of course try to take credit for it. Why else would Obama agree to such a "temporary extension" other than as a tacit admission that to do otherwise would put a further drag on economic recovery? He knows good and well that if he refuses to extend the cuts, it is likely to put us further in the hole, whereby the Republicans will have more ammunition to use against him.
So far, so good. But this begs the question if he and the Democrats recognize this, why not extend the cuts permanently, which is easily answered. They have no intention of making those spending cuts that would be necessitated by such tax cuts.
The GOP should change its focus. By no means should they moderate their demands for making the tax cuts permanent, but they should emphasize in addition to this the need for regulatory reform. For without this, in addition to spending cuts, the tax cuts in and of themselves might lessen the amount of the deficit spending, but they certainly won't come close to eliminating it. The best they can do is insist that tax cuts, without the accompanying spending cuts and regulatory reform, will increase the governments revenue by virtue of contributing to economic growth. But you have to be kidding yourself to believe they will solve all deficit problems on just their own merit.
Either way it goes, the Democrats can't lose this battle. Even if the temporary cuts work, they obviously won't be enough to do more than decrease the deficit, and this will be blatantly obvious. Worse, if it doesn't work toward contributing to significant economic growth-which is most likely-the Democrats have a further weapon with which to bash Republicans.
"See, we tried extending the tax cuts, and they didn't work."
And of course they won't work. Tax cuts not accompanied by spending cuts is a non-starter, but you will never find enough spending cuts in this divided Congress to make up the difference. The key, the true key, is regulatory reform which, by the way, is even more important than tax cuts, and for that matter maybe even way more important than government discretionary spending or entitlement cuts.
Without regulatory reform, the whole thing is an exercise in futility, and everybody knows it. Ask any owner or proprietor of any business that qualifies as a small to medium to slightly large business which they would prefer between tax cuts and spending cuts, if they had to pick just one, and I would bet good money the majority, possibly by as much as two-to-one at least, would prefer the regulatory reform. This of course is dependent on the type of business they run and the type of regulatory regime they are under, but I would actually be surprised if the percentage of those who would prefer to see relief from federal red tape were not as high as eighty percent.
That is what puts the brake on economic growth. That is what limits new hiring, it limits R & D, and it is absolute hell on business expansion. Taxes are just one of those ugly necessities of life that you can learn to work around. You don't like them, you don't want them, you would much prefer to not have them, or not quite as much of them, but by the same token if you aren't strangled every step of the way by red tape you can work around them and through them.
The GOP needs to do a better job of explaining this to people when the Democrats spew out shit like "well yeah but the actual *Real* tax rate for business is 16.5%, blah, blah, blah". And then there's my favorite one of all-
"Yo if the Bush tax cuts work so good how come they haven't been working so hot for us lately, cos nyuk nyuk nyuk, we've had them for years, wuuuuuur's all the jobs wingnuts?"
Just once I'd like to see somebody get right back in their face and point out that even a zero percent tax rate might well be useless in the face of a regulatory regime that has all but declared war on American business.
Regulatory reform has got to be the wave of the future if the GOP expects to make a coherent case for economic growth based on tax cuts, because otherwise it just sounds like another appeal for corporate welfare.
Granted, that would be a battle royal in its own right but its one that has to be fought. I don't know how. My own idea is to charge the states with enforcing their own regulations with a minimum of federal oversight. This would be appropriate since any actually necessary regulations are also state law in most cases. Most regulations could then probably be drastically reduced and in some cases scrapped all the way around. Just as importantly, the states, for the most part, can manage what is left over more quickly, efficiently, and thus more cheaply than the federal government, who would only need to provide a small presence for the purposes of oversight.
Then those tax cuts could finally be made permanent, and then we would actually find ourselves walking the long path toward eliminating the budget deficit, and eventually the overall national debt.
The best part of it is, further spending cuts beyond what you accomplish through regulatory reform would not seem so ominous then, in fact, they might not even be necessary. What might be required could probably be accomplished by a freeze on further federal hiring for a year or two and strict limitations on new hiring over a following five-to-seven year period, and in the meantime updating computer systems, maybe even eliminating a few agencies here and there, beyond those reductions and possible eliminations of regulatory agencies. Reductions in the defense department could be achieved gradually over a period of seven to ten years to coincide with our final withdrawals from Iraq and Afghanistan. And by the way, we should finally end the NATO nightmare. But that's a subject for another time.
Don't tell me this stuff can't be done. It can. It just takes something resembling a spine and a set of balls, from denizens of both political parties.
What we need in Congress is far fewer Lindsay Grahams, who could be replaced by the Carl Paladinos of the world, if necessary. And if things keep going the way they have been, it might not only be necessary, but inevitable. Many people might balk at the idea of such a political culture that would portend, but bear in mind, we are faced with a series of problems that, while no means are they minor, are made unnecessarily worse than they ever had to be. To cure what ails us all is going to require a sea-change in the political culture, and a rethinking as to what actually is the art of the possible.
