Tax Dealing
The compromise afoot to extend the Bush-era tax cuts over the next couple of years makes good short-term economic sense and good political sense, even for President Barack Obama.
Sure, he's getting flack from the left about missing the chance to jack up taxes on the wealthy. Some Democratic lawmakers are balking at the prospect of making a concession to the GOP. But raising marginal rates, especially with the tax year ending in a matter of weeks, would hurt an economic recovery still on life support. Obama knows he needs all the growth he can get.
Obama also knows that after his party's defeat at the polls on Nov. 2, he needs to show that his administration can work with newly energized Republicans, who will control the U.S. House.
Republicans have an incentive to deal as well. They remember from the Newt Gingrich-led "revolution" in the mid-1990s that voters resent gridlock on Capitol Hill.
So there's some good to find in Democrats and Republicans coming together to extend tax cuts and restore long-term unemployment benefits.
If, if, if, that doesn't become the end of the story. Because let's acknowledge this: the deal creates an even greater deficit hole. Republicans gets tax cuts and Democrats get more spending … but nobody is reducing the cost of government to make up the lost revenue.
Our advice to Obama: When you announce this deal, challenge everyone on Capitol Hill to start work today on the ideas presented by your bipartisan commission on deficit reduction.
The commission's work can be a catalyst for historic change.
The panel's plan involves cutting everything from defense to Social Security, simplifying the tax code and imposing new discipline on politically motivated federal spending. Everyone from senior citizens to post-office customers have complained about the pain involved if the plan were enacted.
Exactly. That's unavoidable. Everyone is going to feel some pain when the nation makes its government live within its means.
It was encouraging that 11 of the 18 commission members voted in favor of its findings. We tip our hat to Sen. Dick Durbin, who voted in favor. "All politicians, left or right, Democrat or Republican, have to acknowledge the deficit crisis our nation faces," Durbin wrote in the Tribune on Friday. "Borrowing 40 cents out of every dollar we spend for missiles or food stamps is unsustainable. And being indebted for generations to China and OPEC does not make America a stronger nation."
Exactly. It's irresponsible for our nation to go on accumulating unaffordable debts that will force even more painful cuts down the line.
The coming agreement on tax cuts will avoid an unwelcome shock to the U.S. economy. It will buy time. But it has to lead to an agreement on long-term deficit reduction.