Lately I've been puzzled by this surge of interest on the part of the Democrats in letting the Bush tax cuts for the wealthy expire. I can't understand what possible benefit that could provide us right now. It only makes sense to me as an act of vengence - I see no macroeconomic benefit. Quite frankly, I'm not interested in vengence.
Don't get me wrong, I don't think the tax cuts were a good idea in the first place. They were unnecessary at the time, and they blew a big hole in the budget for no good reason. I would have prefered they never passed in the first place (or at least that a smaller cut, with a different structure was passed). It certainly should have been reconsidered when the war really started heating up. But that was then, and this is now. When the facts change, I change my mind. And my mind simply cannot come up with anything positive that could come from letting any of these tax cuts expire.
Until this morning, when I had a thought. Perhaps letting the cuts expire would make a few key votes in Congress less concerned about additional fiscal stimulus. Generally speak, spending is the key issue during a downturn, but if you can do that spending with deficits that's all the better. But really, at this point, we're going to be dealing with a bunch of second-best options. Is it better to raise taxes on the wealthy in the middle of a severe downturn and get more stimulus than it is to keep taxes low and have no stimulus? My preference would be to let the wealthy keep their tax cuts for the time being and have more stimulus, but if I can't have that which would I prefer? We might be better off with the expiration and additional stimulus.
Of course this is all just a thought experiment. There's no guarantee at all that a compensatory stimulus could come out of letting the tax cuts expire. And it would depend on a few key votes from some deficit hawks that are not ideologically opposed to fiscal stimulus (a small sub-population indeed). Republicans would see this as the worst of both worlds. It would only really be convincing for conservative Democrats who worry more about the deficit than they do about the wealthy, and it might not even work for them.
It's a dicey political game that's very unlikely - so I'm still in the "don't let it expire camp". But it was an interesting thought.
Can anyone furnish any good reason to let the tax cuts expire (right now at least)? I simply can't come up with one.