Morning Bell: No Tax And Spend Stimulus, Please

Conn Carroll /

As Iraq has stabilized in recent months and job creation has slowed, many voters are turning their attention to economic concerns. Now that both parties are beginning to outline the principles of their preferred stimulus package, it is important conservatives prevent the left’s ‘tax and spend’ instincts from making the problem worse. So far MSM coverage of developing policy has one major flaw: it fails to put any proposed temporary tax cuts into the larger context of each party’s fiscal policy.

For example, the Los Angeles Times reports that, “the Bush administration and congressional Democrats are considering new measures, including a fresh round of tax cuts, designed to stave off recession.” By itself, this is true the Democrats are considering some temporary tax cuts, but it leaves out two important pieces of the puzzle. First, the LAT does mention but buries late in their story: “Democrats … are likely to increase unemployment benefits and other programs assisting those facing economic hardship.” And there you have the ‘spend’ half of liberals trademark instinct. But the LAT also said they favored tax cuts right? Wrong. This is the other context the LAT leaves out. Any new temporary tax cuts the Democrats propose for stimulus will be dwarfed by the increases in taxes included in their new budget. The Weekly Standard’s Brian Faughnan summarizes:

The Democratic budget calls for higher marginal rates on single middle-income Americans, higher taxes on capital gains and dividends, elimination of state and local sales tax deduction, reduction of the child tax credit, a return of the marriage penalty, reimposition of the death tax, and numerous other tax increases. Ways and Means Committee Chairman Rangel–who probably speaks for a majority of House Democrats–wants to raise taxes by another trillion or so.

Besides this return to tax and spend politics, any Democrat stimulus plan would also probably force them to break their promise to the American people to pay for any proposal to cut taxes or increase spending on the most expensive federal programs by raising taxes or cutting spending elsewhere. Although this may not be a huge obstacle for Democrats, since they already broke this promise, the first opportunity they had when they tried to fix the Alternative Minimum Tax.

A far better solution would be to make the 2001 and 2003 tax cuts permanent, offer broad based tax rebates to spur consumer spending, and lower the corporate tax rate.


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