Republicans are holding middle-class tax cuts hostage to get high-end tax cuts extended
Now that the Democrats have passed by 51-48 an extension of the Bush tax cuts, there is a clearly defined line for politicking the differences between the two parties’ positions. Of course, the Senate bill is meaningless because it would have to be first introduced in and passed by the House, and if that ever happened,
hell would freeze over the Republicans would not hold their filibuster fire that they direct towards anything Obama supports.
The economics of the two plans are clear though: the Senate bill continues the tax cuts for the middle and upper-middle classes (all the way up to income levels of $250,000). The wealthy get the same tax cuts for the most part, but not the additional tax cuts that make the cost much higher with little economic benefit. To benefit the economy as a whole the money would have to get invested, which is unlikely since there is plenty of capital already around and insufficient demand to justify much more new investment, or be spent, and the wealthy spend a smaller proportion of their income than people with lower incomes. All it does is balloon the deficit further (which the Republicans sometimes like to pretend they care about, but actually don’t).
So, now we wait for the election to get any resolution on the automatic budget cuts in the sequester and the run up to the December 31st deadline for the entire Bush tax cuts to expire. And, from where we sit now, Obama refuses to let the high-end Bush tax cuts be extended (rightly, in my view) and the Republicans say they will hurt the economy by allowing the parts of the tax cuts expire that have the most impact on consumer spending, at a time when the economy is weak.
Go here for more of our commentary on tax policy and the Bush tax cuts.