Last week, 42 senators voted for a proposal by Senator Jim DeMint (R-SC) to permanently extend all of the Bush income tax rate cuts while cutting programs to pay for it (though they didn’t specify which ones). Supporters included all Senate Republicans except Senator George Voinovich, plus two Democrats — Senators Ben Nelson and Blanche Lincoln. This vote, which has received little media attention, constitutes a major warning to anyone concerned about the nation’s fiscal future and its basic priorities.
This fall, Congress will decide which of the tax cuts to extend, in the context of a weak economy and an unsustainable long-term budget path. While the question of how long to extend the middle-class tax cuts is subject to debate, there’s a powerful case for letting the high-end tax cuts expire on schedule. They’re extremely inefficient at creating jobs in the short term, they’d add about $1 trillion in deficits and debt over the next decade alone if they’re not paid for, and they’d worsen the already stunning upward shift in income and wealth in recent decades.
The DeMint proposal instructed the Senate Finance Committee to pay for the tax cuts through cuts in programs under its jurisdiction. The largest programs, by far, that the committee oversees are Social Security, Medicare, Medicaid, and unemployment insurance.
While policymakers will have to make wrenching budget decisions in a number of areas to bring long-term deficits under control, the idea of cutting programs like these to provide the richest 2 percent of households with tax cuts (worth roughly $125,000 a year to people with incomes above $1 million) would strike most Americans as deeply irresponsible.
When the Senate tax-cut debate begins in earnest, these 42 senators are unlikely to propose specific offsets. Instead, they probably will try to extend the tax cuts for the affluent without paying for them, which would mean large increases in future, already unsustainable, deficits and debt.
Generally, 41 senators have the power to advance their priorities by threatening a filibuster and, on a critical fiscal decision, 42 senators have now signaled that extending the high-income tax cuts is one of their priorities. We should heed this warning. At least a few of these senators must be persuaded to head in a different direction.