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Morning Bell: Liberals Leave The Reservation

Posted By Mike Gonzalez On December 13, 2010 @ 9:17 am In Economics | Comments Disabled

Any piece of legislation must be both constitutional and improve the condition of the American people. When President Obama and Congressional Republicans first announced their tax deal early last week, our reaction was to hold our noses against its bad elements; on balance, we thought the extension of the current tax rates was laudable. Now, however, the full text of the bill has been released and we see all the bad things that were in the original deal. Meanwhile, liberals in Congress are walking away even from that deal, and are holding the country hostage to their hatred of those they call “the rich.” The tax cut deal, we now know, has been so freighted with liberal special interest tax giveaways that true conservatives cannot support it in good faith.

The blame for this state of affairs will be on the left. Tax rates will go up on all Americans on Jan. 1, hitting a country beset with 10 percent unemployment and a stagnant economy. It’s baffling that, two decades after the fall of the Berlin Wall, the left has held fast to its belief that penalizing success will somehow incentivize hard work and produce wealth.

If House Speaker Nancy Pelosi and Senate Majority leader Harry Reid engineer this massive a tax increase in a faltering economy, they will join two Republicans — Reed Smoot of Utah and Willis Hawley of Oregon — in the pantheon of economic fools. Before they do so, Ms. Pelosi and Mr. Reid should consider that history has still not forgiven their predecessors for the Smoot-Hawley tariff that led to the Great Depression.

Of course, the pain of an Obama-Pelosi-Reid tax hike would be somewhat lessened by the fact that they would hopefully be temporary. As Rep. Paul Ryan (R-WI) said on Fox News Sunday yesterday, the first order of business next month for the incoming Tea Party House of Representatives will be to undo the tax hikes the Lame Duck Congress may be about to pass this week. (We would have preferred to have seen that first order of business to be the repeal of Obamacare, but given the circumstances, throttling that unbearable act must move to the second spot.)

We recognize that having taxes go up, and then down, will increase volatility, which never helps businesses, investors and families. It was that concern that led us to be initially open to the extension of the current tax rates, even though it was only for two years and was accompanied by other onerous measures such as a 35 percent death tax. All along we have shared the concerns of such friends as Sen. Jim DeMint (R-SC), who said in a Thursday speech at Heritage that the line “this is the best deal we can get” has been used to justify too many bad deals in the past.

Now that we see what is in the full text of the bill, we have serious reservations even about the original deal.  So just to be clear, what The Heritage Foundation wants is a plain extension of the current tax arrangements. Congress should have a straight up or down vote on full extension, including the AMT.  It can have a straight up and down vote on the unpaid for unemployment benefits, too, if progressives want that.

If this cannot be had without other hurtful additions, it is time to look forward.  The new 112th Congress will have to pass new tax legislation that holds the line against all the other negative provisions of the current deal, such as yet another unpaid-for extension of unemployment benefits (which perversely only helps perpetuates long-term unemployment).

Ditto for all the goodies progressives in the Congress are now busily adding, such as subsidies for windmills in California  (already in the tax extenders – or you need to say even larger ethanol subsidies). All this came on the back of the extension of stimulus tax credits, which expanded the refundability of the Earned Income Tax Credit and the Child Tax Credit, and created the new refundable American Opportunity Tax Credit.

And, to be sure, including goodies for the whole liberal power base that were already there as part of the annual tax extenders package: the Indian employment tax credit; the railroad track maintenance credit; the seven-year recovery period for motorsports entertainment complexes; the expensing of environmental remediation costs; the deduction allowable with respect to income attributable to domestic production activities in Puerto Rico and the tax incentives for investment in the District of Columbia.

Is there a progressive protected group that hasn’t been laden with pork in this deal?

The new Congress that assembles in January should give enactment of the permanent tax relief top priority. The recently elected conservatives, who will arrive in January with a commitment to cut spending, deficits, debt and taxes, should provide the foundation for building momentum in Congress to make the tax relief permanent. But, of course, in the absence of tax relief, the Pelosi-Reid tax hikes will be in effect, doing their damage to the economy, while the conservatives work to get legislation through Congress to make the tax cuts permanent.

Do they hate successful Americans more than they profess to love the jobless and others who need our help?

You can follow Mike Gonzalez on Twitter @Gundisalvus [1]

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Article printed from The Foundry: Conservative Policy News from The Heritage Foundation: http://blog.heritage.org

URL to article: http://blog.heritage.org/2010/12/13/morning-bell-liberals-leave-the-reservation/

URLs in this post:

[1] @Gundisalvus: http://twitter.com/gundisalvus

[2] there are enough votes in the Senate to pass the Obama tax deal: http://www.politico.com/blogs/politicolive/1210/Durbin_Senate_will_pass_tax_package.html

[3] House Democrats will not hold up the Obama tax deal: http://www.politico.com/blogs/politicolive/1210/Van_Hollen_House_Dems_wont_scuttle_tax_cut_deal.html?showall

[4] weekly votes: http://thehill.com/blogs/blog-briefing-room/news/133295-boehner-cost-cutting-measure-per-week-coming-in-new-congress

[5] judge is expected to rule today: http://online.wsj.com/article/SB10001424052748704058704576015631138296112.html?mod=WSJ_hp_MIDDLENexttoWhatsNewsThird

[6] California’s Super Train to Nowhere: http://www.foundry.org/2010/12/10/the-obama-stimulus-super-train-to-nowhere/

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