In the renewed battle over tax cuts, there's an emerging logic from Tom Daschle and most of the Senate Democrats: The best policy is to let rates fall dramatically until 2010 when the Bush tax cut expires; rates will then bounce back to their 2000 levels.
It's crazy, of course, but a bizarre form of political reasoning has led Senate Democrats, almost inexorably, to this very point. In January, after criticizing President Bush for being fiscally irresponsible, Daschle nevertheless made clear that he wasn't advocating a repeal of the tax cut that he and 37 other Democratic senators opposed or abstained from voting for last year. Daschle didn't even follow Ted Kennedy's lead in calling for a delay of provisions benefiting upper-income taxpayers that haven't taken effect yet. Yet now, faced with a bill already passed by the House to make that tax cut permanent, he has refused to even allow a vote, save on a renewal of the estate-tax repeal (which seems unlikely to pass).
Daschle's January decision was driven by crude politics. While it was easy to talk the talk by calling Bush on the huge future cost of his tax cut, walking the walk proved trickier. That's because 12 Senate Democrats voted for the tax cut last year and many of them, including Jean Carnahan in Missouri and Tim Johnson in South Dakota, face tough re-election battles. Daschle didn't want to put them in the tight spot of defying their party leaders or facing calls of hypocrisy.
How then, to explain the Democrats' suddenly firm resolve to oppose the Republican push to make the tax cuts permanent? Politically, it allows Daschle and gang to escape internal divisions while still advocating their familiar line of fiscal responsibility and saving Social Security. Many of the 21 Democrats in the House who supported the tax cuts last year but didn't vote for extending them this time claimed the economic climate has changed so much that the country can no longer afford them. And House Minority Leader Dick Gephardt nailed a triple-word score with his comment on the proposal: "We intend to raise this vote as the vote on whether or not you want to keep Social Security strong or you don't care about Social Security and want to keep spending the Social Security surplus."
There's some obvious demagoguing going on here on the Democrats' part, but they're clearly on the right side of the issue when it comes to long-term costs. A Center on Budget and Policy Priorities analysis found that making the tax cuts permanent would cost $374 billion through 2012 and an astounding $4 trillion in the decade thereafter.
But while the Democratic opposition is sound at the long-term macro level, it's terrible in the short-term micro view. Republicans may be to blame for making the tax cuts temporary in order for the bill to pass with fewer than 60 votes, as required under Senate rules. But that makes House Speaker Dennis Hastert essentially correct in his claim that, barring a permanent extension, in 2011 we'll have an "automatic tax increase [that] will play havoc with the lives of the American people." Imagine, as a middle-income family, finding in 2011 that your income-tax rate has gone up three points -- or that the child-tax credit has been cut in half.
The obvious solution and more responsible policy would be freezing tax rates at some point along the way and stopping future cuts included in last year's law before they take place. But that would necessitate that the Democrats who voted for the tax cut admit it went too far, and that they were wrong to vote for it. And with Daschle's slipperiness on the issue in January, it would now mean a turnaround from the Senate majority leader as well.
Perhaps, as Mickey Kaus has suggested, future Democrats will seize on this as a campaign issue, calling for a freeze in tax cuts to support new social initiatives. That, however, would require a new breed of Democratic leadership: one that advocates sensible tax policy rather than the easiest short-term political escape.
