Why – Bush tax cut compromise

I am truly amazed. There was the Democratic position where the Bush era tax cuts would be extended to only to the first quarter of a million dollars in income and the Republican position that the that the tax cuts should be extended to all income levels. And the estate tax position also varied and that added to the price tag. There is a bit of uncertainty in the figures, but in round numbers let’s say the Republican position would cost about 500 billion over the next two years and the Democratic position would have cost only 400 billion. (And if nothing at all happened, everyone would pay the pre-Bush tax levels.)

So what did they do? A reasonable person might expect compromise on a package between those 2 numbers (400-500 billion). Perhaps a half a million or a million in income would be the cut off. But they reached agreement on a package that would cost 800-900 billion. Seemed to give both sides what they wanted but the cost was high.

You can argue about whether that was needed as a stimulus but certainly it was not a position you would expect from the Republicans who claim to be the fiscally responsible ones or the deficit hawks.

One thought on “Why – Bush tax cut compromise

  1. I hope this didn’t read as disapproval. I was just surprised. I expected that if there was a compromise, it would somehow split the difference between the 2 positions.

    I think is is a reasonable deal; each side gets a bit of what is important to them. As to the long-term I’m not sure. Fixes a short-term problem of uncertainty which was caused by the unwise temporary tax cuts of President Bush (and the resultant delayed Bush tax increase. And offers a permanent fix to the estate tax dilemma.

    The cost may be more than a fiscal conservative would like but I tend to think of the deficit and national debt as a long-term problem. I think it is OK to run a deficit and increase the debt in times of need (stimulating the economy in this case) but we should pay that debt down when times are good. In the long-term excessive debt (and interest payments) is a bad thing and may preclude using deficit spending when needed.

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