Romney on the Tax Cut Deal

USA Today: Romney: Why Tax Cut is a Bad Deal

The deal has several key features. It reduces payroll taxes, extends unemployment benefits and keeps current tax rates intact. So far, so good. But intermixed with the benefits are considerable costs of consequence. Given the unambiguous message that the American people sent to Washington in November, it is difficult to understand how our political leaders could have reached such a disappointing agreement. The new, more conservative Congress should reach a better solution.

Of course, delay now is better than an immediate tax hike. But because the extension is only temporary, a large portion of the investment and job growth that characteristically accompanies low taxes will be lost. When entrepreneurs and employers make decisions to start or expand an enterprise, uncertainty about tax rates translates directly into a reduced propensity to invest and to hire. With only a two-year extension, investors know that before their returns are realized, tax rates may be jacked up to the levels favored by President Obama. So while the tax deal will succeed in temporarily putting more money in the hands of consumers, it will fail to deliver its full potential for creating lasting growth.

It will also add to the deficit. In many cases, lowering taxes can actually increase government revenues. If new businesses, new investments and new hiring are spurred by the prospects of better after-tax returns, the taxes paid by these new or growing businesses and employees can more than make up for the lower rates of taxation. But once again, because the tax deal is temporary, a large portion of this beneficent effect is missing. What some are calling a grand compromise is not grand at all, except in its price tag. The total package will cost nearly $1 trillion, resulting in substantial new borrowing at a time when we are already drowning in red ink.

For those without jobs, the tax compromise extends unemployment benefits for 13 months. A decent and humane society must have a strong safety net for the unemployed. I served for 15 years as a lay pastor in my church and saw the heartbreak of joblessness up close; a shattering loss of faith in oneself is but only one of many forms the suffering can take. Nonetheless, the vital necessity of providing for those without work should not be used as an excuse to ignore the very real problems of our unemployment system … To remedy such problems we need a very different model, perhaps establishing individual unemployment savings accounts over which employees would exercise direct control when they lose their jobs, or putting in place financial incentives for employers to hire and train the long-term unemployed. One thing is certain: While we cannot rebuild our flawed system overnight, we are surely not required to borrow the funds to pay for it. In spending $56.5 billion to extend benefits, the deal is sacrificing the bedrock Republican principle that new expenditures be paid for with offsetting budget cuts.

I think Mitt Romney gets it.

In the meantime, I still don’t understand why the Republicans in this current Congress were so eager to deal. Yes, we supposedly have a new GOP headed to Congress in January, one that will be committed to conservative principles — but why not start early?

Romney is also correct in noting that the total cost of this “grand compromise” will be in the neighborhood of $1 trillion, rivaling the cost of the American Recovery and Reinvestment Act. And while Republicans who clamored for more tax cuts in the original Obama “stimulus” package may be getting that tax relief now, it should not take another trillion dollars to accomplish that.

While still technically in the minority, the GOP nonetheless holds all of the cards. They should have conducted themselves as such. By standing firm and making any response to pending tax increases specific to solving the tax increase–and thus keeping all of the unemployment extensions and extraneous nonsense out of the deal–the GOP would have given congressional Democrats two choices: either do the right thing and extend the tax cuts now, or come January the new GOP majority would do it right, do it permanently, and in the process characterize the Democratic Party as the party who dared increase taxes in the middle of an economic downturn.

The Republicans had nothing to lose by standing fast. America, too, would have come out better with permanent tax cuts done right. The Republicans, instead, had everything to lose by dealing with the Democrats. And, as Mitt Romney pointed out, so did America.

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Comments

  1. Boston Blackie says:

    They STILL do not get it in D.C. even a month after the election. Anyone who has worked in the private sector knows that companies do a five year plan, so these temporary cuts will not help them to plan for the future. Give me someone like Romney who has run successful companies in the past over that empty suit who thinks his job is just a four year party. BTW, have you ever seen a sitting president hold a press conference only to walk out and let a former president continue it !?! Is that like having to do a presentation for school and bringing your parents to finish it when your ADD kicks in ?
    “President Obama has reason to celebrate. The deal delivers short-term economic stimulus, and it does so at the very time he wants it most, before the 2012 elections.”
    This is ALL about the 2012 elections, do we really think that the temp tax cuts or unemployment benefits will end then. Of course not, not unless the heartless, meanspirited republicans are to blame. I think Oebyme actually likes the fact that the republicans are now the majority in the house. Going into the 2012 elections, they will be to blame for everything, including the Limburgh kidnapping.

  2. Anonymous says:

    But, does Mitt have any community organizing experience?

  3. Randy Wills says:

    I’m no fan of Romney’s based on his record as governor of MA, but he’s certainly got this one right.

    My take on it is that the Republicans believed that the Administration could out-politic them in the run-up to the 2012 election by beating on the “mean-spirited, hostage-taker” theme. They were so anxious to appear “bi-partisan” that when Obama opened the door, they fell flat on their faces in their rush to demonstrate how “bi-partisan” they could be.

    That’s unwavering principle for you. Obviously, the Tea Party has much more work to do.

    Randy

  4. Dean says:

    And if the Republicans had “stuck to their guns” to prevent the “bad” parts of the extension, we would still be stuck in the same “muck and mire” of stalemate as we have been lo these past 9-11 months. You, and the Republican leadership, are beginning to sound EXACTLY like the Dems when they took control of Congress two years ago – “Why should we compromise on anything, we son the election so let the other party give in to US.” NO ONE seems to care about the citizenry – NOT Dems or Reps – all of you seem to care only about holding to the purity of your political philosophy. NO country can continue to exist and be prosperous ruled following ONLY a Conservative mind set or a Liberal mind set. The danger in trying to do so comes from the radical parts of both philosophies. There has to be room for the best of BOTH. I am basically a conservative but will support any liberal, progressive, or libertarian based proposal that is in the best interests of this country and its citizens. It is time in this country for MODERATION – on the part of ALL politicians and political hacks and observers – myself included!
    Merry Christmas to All and God’s Peace be with you and yours.

  5. Randy Wills says:

    Dean, if I understand you correctly, you would seem to belive that there are multiple correct answers to the same question. I don’t agree. A vote to continue the current tax rates did not have to be combined with other tax-related measures and along with the extension of unemployment benefits. They could – and should – have been considered separately rather than “bundled” so that each issue was truly negotiated what is best for the whole country, not just isolated constituencies.

    One step forward and one step backward, or a “bone” for everyone, does not represent progress nor solve any problems. It usually means just kicking the can down the road. It’s time to stop the bundling and start confining the bills to single issues so that each can be argued on its individual merits and resolved with an up-or-down vote.

    Randy

  6. Excuse me? says:

    No more compromise on spending money we don’t have, no to not having a budget, no to nationalizing industries, no to runaway ridiculous illegal immigration, no to laughable borders, ….. sorry, but sometimes ‘no’ is just common sense percolating to the top and being voiced.

  7. Anonymous says:

    We shoulda just compromised with the red coats at Concord and Lexington.

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