Resistance (on Tax Rates) Is Futile

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Obama will force you to bend to slightly higher tax rates on rich people.

It seems that Republicans are beginning to understand the futility of their opposition to higher tax rates on the wealthiest Americans. Writing for the Washington Examiner, Byron York reveals the extent to which GOP lawmakers know the weakness of their position:

[M]any in the GOP do not believe that raising the rate on top earners from 35 percent to 39.6 percent (the rate before the Bush tax cuts) would seriously damage the economy. Second, they know that most Americans approve of higher taxes on the top bracket, and President Obama, having campaigned and won on that platform, seems dead-set on higher rates. Third, they fear that if the government does go over the cliff and Democrats propose re-lowering taxes for everyone except the highest earners, Republicans would be in the impossible position of resisting tax cuts for 98 percent of the country on behalf of the top 2 percent.

It’s hard to overstate the sheer public relations disaster Republicans would face if they held middle-class tax cuts hostage to an extension of rates of upper-income earners, and forced the United States to go over the fiscal cliff. According to a recent poll conducted by Pew and The Washington Post, 60 percent of Americans believe that going over the fiscal would be a net negative for the country, 61 percent believe it would be a net negative for their personal finances, and 53 percent will blame congressional Republicans if a deal doesn’t happen, versus the 27 percent who will blame President Obama.

This is why I continue to say that Obama holds most of the cards in this fight. Republicans are boxed in by public opinion, the administration’s tough negotiating stance, and the simple fact of the cliff, which will raise taxes and cut defense spending, leaving Republicans with an even less favorable status quo to negotiate from.

With all of that said, if there’s an optimal result in this fight, it isn’t a good deal for Obama. It’s a decision—by both Congress and the White House—to kick the can down the road until the economy is in better shape. The fiscal cliff is an artificial crisis generated by over-zealous advocates for a “grand bargain,” which—for them—means lower tax rates and less spending on entitlements.

By contrast, the actual problem faced by the United States is weak demand, high unemployment, and slow growth. Tax reform—even if its progressive—does relatively little to fix these problems. If Washington is truly interested in putting our fiscal house in order, it will postpone the cliff, ignore calls for fixing the debt, and pursue measures—like deeper payroll tax cuts, aid to states, and greater jobless benefits—that will help put Americans back to work. If we can solve the problem of idle resources and high unemployment, then our debt will begin to take care of itself.

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