I just love the formulation of the headline, contrived to maintain the "tax cuts for the rich" demagoguery. But it's inside the story that the truth gets told. A truth, I might add, that we, among others, have been telling you for quite some time.
WASHINGTON — Democrats in Congress are poised to play a leading role this month in thwarting their party's effort to raise income tax rates on the wealthy.
Tax cuts enacted in 2001 and 2003 expire at the end of this year. President Barack Obama and Democratic congressional leaders have been eager to extend the breaks for individuals who earn less than $200,000 annually and joint filers who make less than $250,000. Those who earn more would pay higher, pre-2001 rates starting next year.
However, a small but growing number of moderate Democrats are balking at boosting taxes on the rich. Many face electorates that recoil at the mention of any tax increase. Some represent areas that are loaded with wealthier taxpayers. Further, some incumbent senators who don't face voters this fall are reluctant to increase taxes on anyone while the economy remains sluggish.
Without their support, the push to raise rates on the rich probably will fail.
"The economy is very weak right now. Raising taxes will lower consumer demand at a time when we want people putting more money into the economy," said Sen. Evan Bayh, D-Ind., who isn't seeking re-election.
When you've lost Senator Bayh you've lost ... Senator Bayh, who's retiring at the conclusion of this Congress. But you know who else thinks lowering taxes might just help a struggling economy?
Democrats play a funny game on taxes. The game is called "let's pretend the economy is a frictionless plane," wherein taxes have no effect on behavior. You can raise taxes on the wealthy and it'll have no effect on the financial behavior of those wealthier individuals. You can run up huge deficits with bogus "stimulus" spending, but there's no economic drag from the "revenue enhancements" that everyone will then see down the road. But here we are, with the economy bogged down, economic uncertainty causing the withholding of business investment and job creation, and the more honest Democrats speak up, not only demonstrating that they really do know a little economics, but demonstrating that their previous statements were political bluster. Sen. Bayh, after all, did vote for both the "stimulus" and ObamaCare.
There's one member of the administration's economic team who remains in denial, however. Or, rather, make that former member.
Our prediction? In desperation Democrats will eventually support extending tax rates at their current levels, and business will breathe a sigh of relief and capital investment and hiring will begin to pick up. This may or may not save them some seats in the House and Senate, but with improving economic numbers Democrats will proudly face the cameras and pronounce that ...
...the "stimulus" is finally working, and that another stimulus would be even better.
...the now-Republican led Congress should raise taxes to close the deficit.
Hey, paraphrasing Dennis Green, they are who they are.
9/3/10 1300: Whoa. The WSJ editorial staff looked at the clues and drew the same conclusion.
With the economy struggling and the polls turning sharply against them, Democrats are at sea about how to prevent an electoral rout in November. Reports yesterday said the White House may be panicked enough to contemplate new tax cuts. Allow us to suggest a salvage plan that would help the economy and perhaps also save the Democratic majorities on Capitol Hill: Return after Labor Day, extend all of the 2001 and 2003 tax rates at least through 2013, and then go home.
The editorial doesn't actually suggest that that's what'll happen, but what should happen if Democrats are concerned with either a) the economy of b) their own majorities.
Also, AEI's Kevin Hassett and Alan Viard, also writing in the WSJ, who note that taxing businesses as well as those who invest in business will propagate the problems of poor job growth.
For those who are determined to tax the rich at all costs, and are therefore willing to accept the claims of the Obama administration without scrutiny, the tax hikes may well make sense. But the evidence is clear that lifting the top rates will hamper the business investment upon which our nation's prosperity depends. That affects all Americans, not just 3%
