From Bruce Bartlett in the FiscalÂ Times:
“The truth is that there is virtually no evidence in support of the Bush tax cuts as an economic elixir. To the extent that they had any positive effect on growth, it was very, very modest. Their main effect was simply to reduce the governmentâ€™s revenue, thereby increasing the budget deficit, which all Republicans claim to abhor.”
See below for a graph of theÂ effect on revenue.
Extending the tax cuts for the middle class is a good idea, but extending them for the rich is a bad idea.Â Paul Krugman:
Greg Sargent notes the growing number of Republicans suggesting a â€œcompromiseâ€ in the form of temporary extension of high-end tax breaks, and urges Democrats not to take the bait. His argument is essentially political: Republicans are obviously aware that theyâ€™re in a fix, and Democrats shouldnâ€™t help them out.
But there are reasons beyond partisan maneuvering to reject any deal here.
First, temporary tax breaks for the rich are stunningly bad economic policy. As I tried to explain, basic economic theory â€” Milton Friedmanâ€™s theory! â€” tells us that affluent taxpayers are likely to save the great bulk of a transitory tax break. And bear in mind that while a 2-year extension wouldnâ€™t increase debt as much as a permanent extension, it would still be much more expensive than measures like aid to the unemployed and to small businesses that would do far more for the economy, yet spent months held up in Congress because of alleged concerns about the deficit.
Second, this is obviously â€” obviously â€” a setup. The whole point is to avoid a vote on the middle-class tax cuts while Democrats control the House; when and if Republicans regain control, they can refuse to let anything but a full extension reach the floor. So the goal is actually permanent extension; what theyâ€™re offering isnâ€™t a compromise, itâ€™s a trap.
So just say no.