Former President Bill Clinton told CNBC that extending all the Bush tax cuts past their scheduled expiration at the end of the year “is probably the best thing to do right now” to help Congress and the country “avoid the fiscal cliff” of expiring tax cuts and scheduled spending cuts. The former policy-wonk-in-chief did not endorse extending the cuts permanently, but said “I don't have any problem with extending all of it now, including the current spending level.”
This is not helpful.
The term “fiscal cliff” sounds scary and implies a situation in which the budget deficit will dramatically worsen if no one intervenes. But the undeniable fact is it would dramatically improve if Congress simply does nothing – and stops extending the tax cuts! In fact, the CBO has published yet another report indicating that the federal budget deficit would stabilize if not for the budget-busting legislation that most observers expect Congress to enact when it extends all kinds of tax breaks into 2013. And the report confirms that the measure that would add the most to the deficit would be an extension of the Bush tax cuts.
Of course, it’s entirely true that Congress should set aside concerns about the budget deficit for the time-being and focus on job creation. The thing is, this focus should lead to increasing federal spending, and NOT to tax cuts. As is often noted, most economists agree that spending measures would do more to stimulate job creation than making the Bush tax cuts permanent.
For example, the widely respected economist (and former adviser to John McCain) Mark Zandi has concluded that for every dollar of revenue the federal government would lose from making permanent the Bush income tax cuts, U.S. economic output would increase by only 35 cents. On the other hand, this private sector economist finds that for every dollar the federal government spends on increased food stamps, work share programs, or unemployment benefits, U.S. economic output would increase by $1.71, $1.64, and $1.55 respectively. Versus 35 cents. Tax cuts don’t work; spending does.
Extending the Bush tax cuts is not about protecting a fragile economy. At its worst, it’s about an ideology that most Americans reject, and at best, it’s passing the buck and kicking the can down the road and every other idiom we have for short-sighted and irresponsible fiscal behavior. Anyone with the clout, credibility and smarts of Bill Clinton knows that and should be making an unambiguous call for these disastrous tax breaks to expire, once and for all, at the end of this year.
(Photo courtesy PBS.org.)