The Republican trial balloon
has nothing to do with actually
reducing the deficit.
Via
Brian Beutler, Stephen Moore
kvels over the latest bad idea from Super Congress Republicans:
One positive development on taxes taking shape is a deal that could include limiting tax deductions, perhaps by capping write-offs on charities, state and local taxes, and mortgage interest payments as a percentage of each tax filer’s gross income. That idea was introduced on these pages by Harvard economist Martin Feldstein.
In exchange, Democrats would agree to make the Bush income-tax cuts permanent. This would mean preventing top rates from going to 42% from 35% today, and keeping the capital gains and dividend tax rate at 15%, as opposed to plans to raise them to 23.8% or higher after 2013.
This proposal is a sham. Why? Because agreeing to a pittance of short-term revenue increases in exchange for busting the budget over the long-term by extending the Bush tax cuts not only makes no sense, but has nothing to do with debt reduction, which is supposed to be the whole point of the deficit committee. In fact, cutting unproductive tax cuts does nothing but make the problem worse.
As Beutler points out, it would take away Democratic leverage in negotiating fiscal policy:
Compared to a current policy baseline, it would generate new revenue all on its own. Compared to current law it’s a giant tax cut — which brings us to the other key point.
This isn’t offered as a concession Republicans are willing to make in exchange for entitlement cuts — a key Democratic demand. It’s designed as a concession Republicans are willing to make if Democrats will agree to make all of the Bush tax cuts permanent — and thereby throw away an enormous amount of leverage they have over Republicans who are committed to extending them.
All that's true. But then again if Democrats are committed to ending the Bush tax cuts, all they need to do is wait. Under current law, the Bush tax cuts expire at the end of next year. They've got all the cards they need to make a good deal and enact good policy.