Thursday, January 6, 2011

New Rules

The House of Representatives has adopted a new set of rules that require any spending increases to be offset by spending cuts elsewhere. Tax cuts, on the other hand, need not be offset by tax increases elsewhere.

After thirty years of trying, one would think even the dullest witted Republican would have figured out that tax cuts do not increase government revenues. Even Arthur Laffer, creator of the famed Laffer curve that was used to justify Reaganomics, has come to that conclusion. Frankly, I don't believe even Reagan believed in the magical efficacy of tax cuts for raising revenues — he and his crew were more interested in the "starve the beast" school of reducing the size of government, especially those programs introduced as part of Roosevelt's New Deal.

That leaves Democrats, both in the Senate and the White House, in an uncomfortable position. If they are in any way serious about deficit reduction, they will have to reject every tax cut the House sends their way — and since the Republican answer to every problem is a tax cut, you can be sure the House will be sending them. Naturally, that would allow the Republicans to accuse Democrats of sabotaging economic recovery by stifling economic growth.

Actually, given the small Democratic majority in the Senate, including the remnants of the Blue Dog caucus and some who will do just about anything to keep their seats in the 2012 election, it may actually be necessary for other Democrats to filibuster tax cut bills to keep them from being enacted — or just pass them along to the President for a veto.

Does Obama have the balls to do that? Not from any of the evidence we've seen to date.

No comments: