Of course the Republicans knew that when they put a sunset clause into the law, this would require that the tax cuts would end. But how dare the Democrats let a Republican tax cut come to an end! Why that is tantamount to a tax increase, and everybody knows how Democrats love to raise taxes. The simple fact that the Republicans put in the sunset clause that would end the cuts and therefore increase taxes is a simple distraction. The obvious villains in this story are the Democrats!
Well... Gale takes the time to identify 5 myths to this tale of woe being retailed by Republicans (and happily consumed by media as God's unadulterated truth):
1. Extending the tax cuts would be a good way to stimulate the economy.If the Republicans really want to end the deficits and get rid of the federal debt, I suggest they bring back slavery and sell off any man, woman, and child who is unable to point to personal assets of at least $1 million. That would solve the debt problem, get rid of the riff raff on the streets, end all the howling about unemployment, and bring back the glorious days of King Cotton where one's inferiors were either in the fields or in livery serving you in the mansion.
As a stimulus measure, a one- or two-year extension has one thing going for it -- it would be a big intervention and would provide at least some boost to the economy. But a good stimulus policy can't just be big; it should also offer a lot of bang for the buck. That is, each dollar of government spending or tax cuts should have the largest possible effect on the economy. According to the Congressional Budget Office and other authorities, extending all of the Bush tax cuts would have a small bang for the buck, the equivalent of a 10- to 40-cent increase in GDP for every dollar spent. ...
2. Allowing the high-income tax cuts to expire would hurt small businesses.
One of the most common objections to letting the cuts expire for those in the highest tax brackets is that it would hurt small businesses. As Sen. Orrin Hatch (R-Utah) recently put it, allowing the cuts to lapse would amount to "a job-killing tax hike on small business during tough economic times."
This claim is misleading. If, as proposed, the Bush tax cuts are allowed to expire for the highest earners, the vast majority of small businesses will be unaffected. Less than 2 percent of tax returns reporting small-business income are filed by taxpayers in the top two income brackets -- individuals earning more than about $170,000 a year and families earning more than about $210,000 a year. ...
3. Making the tax cuts permanent will lead to long-term growth. ...
I have used standard growth and investment formulas to calculate that the overall effect of the Bush tax cuts on economic growth has therefore been negative -- and it will continue to be negative if the cuts are extended.
4. The Bush tax cuts are the main cause of the budget deficit.
Although the cuts were large and drove revenue down sharply, they are not the main cause of the sizable deficit that exists today. In 2007, well after the tax cuts took effect, the budget deficit stood at 1.2 percent of GDP. By 2009, it had increased to 9.9 percent of the economy. The Bush tax cuts didn't change between 2007 and 2009, so clearly something else is to blame.
The main culprit was the recession -- and the responses it inspired. As the economy shrank, tax revenue plummeted. The cost of the bank bailouts and stimulus packages further added to the deficit. In fact, an analysis by the Center on Budget and Policy Priorities indicates that the Bush tax cuts account for only about 25 percent of the deficit this year.
5. Continuing the tax cuts won't doom the long-term fiscal picture; entitlements are the real problem.
One theory holds that the country's long-term budget shortfall is "just" an entitlements problem, the result of rising costs associated with growing Social Security rolls and increased health-care spending (via Medicare and Medicaid). Republicans like this idea because it plays down tax increases as a potential solution. Democrats like it because it makes the recent health-care package seem like even more of a triumph.
But it just isn't true. The deficits we face over the next decade reflect a fundamental imbalance between spending and revenue, one that goes beyond entitlements. ...