US Budget Deal May Hinge On Ending Debate on Bush Tax Cuts

Author: Market News International | Category: News

–Budget Experts Says Little To Be Gained By Refighting Old Battles
–House Tax Chief Camp Urges Focus on Comprehensive Tax Reform

By John Shaw

WASHINGTON (MNI) – Donald Rumsfeld, the two-time defense secretary
and former corporate executive, is the author of a raft of management
aphorisms that are of varying levels of profundity and insight.

One of “Rumsfeld’s Rules” is not only relevant, but may in fact be
critical to the coming negotiations on fiscal policy. In it, Rumsfeld
quotes Dwight Eisenhower as saying “if a problem can’t be solved,
enlarge it.”

This idea relates to the fate of the so-called Bush tax cuts.

Few issues continue to divide Democrats and Republicans more
viscerally and passionately than the term “Bush tax cuts.”

For many Republicans, the phrase refers to a well intentioned
effort by President George W. Bush to cut taxes to spur economic growth.

For many Democrats, the phrase refers to a reckless policy that
played a central role in ending America’s short period of budget
surpluses and ushering in an era of seemingly endless budget deficits.

“I think we should stop arguing about the Bush tax cuts,” says Bob
Bixby, executive director of the Concord Coalition, a budget watchdog

“We’ve been arguing about them for about 12 years now and I
don’t think a lot of minds are changing. The debate should move forward
and consider fundamental tax reform. It’s a far more productive debate
to have. When you connect tax reform with entitlement reform, you can
actually help solve a lot of our fiscal problems,” he says.

Bixby said that a critical test of the coming talks is if they are
able to sidestep — or enlarge — the debate on the Bush tax cuts and
focus instead on overall revenue levels.

In a recent speech on tax reform, House Ways and Means Committee
Chairman Dave Camp said that the comprehensive tax reform must go
forward next year — and will.

“Comprehensive tax reform is THE path forward. Tax reform can get
more revenues for the president and Democrats. And tax reform can get
more economic growth and job creation for the American people,” Camp
said in remarks to the Tax Foundation.

“We intend to move a comprehensive tax reform bill in 2013 — no
matter what,” he said.

In his remarks, Camp praised the 1986 tax reform effort as one that
was done “methodically, meticulously, and the result of work on both
sides of the aisle.”

A careful study of the passage of the Bush tax cuts in 2001 and
2003 by UCLA political scientist Barbara Sinclair provides a case study
in how tax reform can ignite partisan acrimony for more than a decade.

Sinclair notes that Bush pressed for deep tax cuts in his 2000
presidential campaign, largely to prevent anticipated budget surpluses
from going into spending programs.

When he came into office in 2001, he shifted his rationale for the
tax cuts, saying the tax cuts were needed to revive an economy that was
slowing down.

Sinclair said Bush and congressional Republican leaders
aggressively used budget reconciliation procedures to pass large tax
cuts with tiny GOP majorities in Congress. They largely ignored
Democratic leaders in Congress and focused on picking up the votes of
some conservative Democrats.

Sinclair writes that, “Republicans were able to enact huge tax cuts
in 2001 and 2003 over intense Democratic opposition and despite their
narrow margins of control.”

Sinclair says the GOP designed intricate phase-in and expiration
provisions to allow for the tax cuts to make it through Congress under
budget reconciliation rules which allowed for simple majority passage.

“By adjusting the dates when tax provisions went into effect and
when they expired, Republicans fit a much bigger tax cut into the
amounts specified by the budget resolution than would otherwise have
been allowed. The sunsets on a number of provisions would never go into
effect, most Republicans believed; when they became imminent, political
pressure would force extensions of the tax cuts. Proponents of the tax
cuts called the strategy clever; opponents labeled it dishonest and
charged it was intended to fool the public,” she writes.

Some analysts have charged that Democrats employed a similar
strategy and used the same procedural technique in passing health care
reform in 2010 on a partisan vote.

Budget experts have said that one of the virtues of divided
government is that it requires both parties to participate in critical
negotiations and ensures that any final product has a considerable
degree of bipartisan support — or at least acceptance.

** MNI Washington Bureau: (202) 371-2121 **

[TOPICS: M$U$$$,MFU$$$,MCU$$$]