Making Tax Cuts Permanent, and Nonpartisan debate

Two good questions that came up through the comments:

1. Nell Lancaster (who may be the original and most reliable reader of this weblog) asks, for the second time: "What is the timetable for the inevitable fight over whether the Bush tax cuts expire? Is there a mechanism in the law itself that gives any timing framework, or is it utterly up to Rove?"

The simple answer is, no, there's no automatic, statutory point at which the choice must be made, so, yes, it's up to whoever is calling the shots. It's also worth remembering that these "sunsets" were not enacted with the idea that Congress should in a few years come back and look systematically at the results and decide thoughtfully whether to renew them, as was ostensibly the case with older sunsetted provisions like the Research and Development Tax Credit. All the many and overlapping sunsets in 2001 and 2003 were blatantly gimmicks, designed to make the cost of the tax cuts seem lower or to fit within the budget rules that allowed the majority the tax cuts through with limited debate, limited amendments, and only 50 votes in the Senate.

Making the cuts permanent, however, cannot be pushed through under those rules. One of the provisions of the "Byrd Rule" governing these expedited budget bills is that they cannot include anything that increases the deficit in the "out years," that is the years beyond those foreseen in the current budget window, whether that's five or ten years.

There's plenty of reason to do it sooner rather than later, though. Most significantly, the extension will appear to cost more within the current budget "window" the longer you wait. So, for example, if you score the the 10-year cost of making the cuts permanent starting in 2006, five of those years won't be very different from current law. (Most of the tax cuts expire in 2010, though some expire earlier, and some, like the child tax credit, partially expire then come back then expire again.) The Center on Budget and Policy Priorities has a nice paper up showing that the cost of making the tax cuts permanent is $2.1 trillion over the 2005-2015 period, including interest costs, while the cost over the following decade, 2016-2025, would be $7.2 trillion. (Just to put that number in perspective, that's the entire GDP of Japan, Germany and the UK, the world's second, third, and fourth largest economies, combined.)

Here's a graphic from the Center's report:

If Frist doesn't have sixty votes to make the cuts permanent, he could do a ten-year budget bill, and extend everything until 2015. It is astonishing, though, that there seems to be some doubt about this. As recently as December, there seemed to be very little doubt that the Republicans had the 60 votes to make the cuts permanent. Obviously, the Social Security fight intersects with this in a way that is unhelpful to the Republicans. For one, it is eroding the command-and-control system in Congress, for another, raising the alarm about the financing "crisis" in Social Security and suggesting that there is no choice but to cut benefits makes for a tough environment in which to give away another $9.3 trillion. Democrats are in a good position now to suggest that instead of more tax cuts, we should "save Social Security."

There is another political possibility, which my wife suggested last night: The minute they make the tax cuts permanent, that's the last tax cut they'll ever deliver. A political strategy founded on "a tax cut every year" would come to an end. And the money that politicians can raise from interests seeking tax breaks would largely dry up. In other words, members of Congress would probably be happier to be in a position to extend the cuts for another year, every year. That's what they've always done with the R&D tax credit, and it makes for a nice little gravy train of corporate money.

That's the cynicism you develop after three months in Washington!

2. Nell also says, "If you can answer only one question, please make it ellen1910's." I don't think I'm limited to answering one question, though. Ellen's question was, "How do you make this debate nonpartisan?" This is in the context of my post about foundations, which must avoid the taint of "partisan" politics.

For me this question isn't that complicated. Just because a debate breaks down along party lines doesn't make it partisan, in the sense that I'm thinking of it, which is the sense that foundations have to worry about it. If my intention is to ensure that this country has adequate revenues for the challenges we will face as a nation in the decade ahead, pursuing that objective is not partisan just because the only people who think otherwise, at this particular moment, are Republicans. At other times, the issue has been much more bipartisan and in the future it will be again.

If my intention is to use issues any way I can in order to elect Democrats and destroy Republicans, that's the kind of partisanship that foundations have to worry about, and that's real partisanship. And that's baaad. But it's not hard to see the difference. Real partisans avoid any possibility of bipartisanship or sharing credit; they try to set up the starkest, sharpest contrasts possible. Those who really care about the larger goals embrace allies, seek common ground, etc.

I've just seen a superb example of this: The Center for Community Change -- a great progressive organization -- sent me an e-mail encouraging me to send a "thank you" to Senator Voinovich of Ohio, a Republican, for expressing opposition to further tax cuts. I haven't even been able to find exactly what Voinovich said, but by embracing him as an ally, they show beyond any doubt that their interest is in having adequate revenue to deal with future social needs, not beating up or defeating Republicans. That battle is very much a political one, but it does not have to be a partisan one, and even if Voinovich scurries back into Bill Frist's amen corner like he did in 2003, they have demonstrated that they are not making it one.

The Republican polarization campaign has many purposes, discussed here before, including the desire to compromise as little as possible. But one aspect of it is that, by making issues appear to be partisan, they scare off foundations and encourage the Samuelsons and Kristofs of the media to treat the whole thing as sordid. But there's nothing inherently partisan about these debates.