OPINION:
Was it the best of deals or the worst of deals? While the final word on the Great Tax Compromise of 2010 will not be written for some years, the immediate road ahead will be more easily navigated if we avoid the potholes of neglect and spin, instead focusing on solutions most Americans think will work.
For months, the American public has watched the lackluster performances of Congress (13 percent approval rating) and President Obama (47 percent approval rating) in dealing with the economy. For years, Congress has known that the tax cuts of 2001 and 2003 would expire this year. But like the procrastinating student who fails to prepare for finals, leaders of both parties failed to come to consensus and lead. Little wonder even now, despite passing votes, that there is little consensus from Washington on the matter. Was the tax deal a statesmanlike compromise or an abdication, a hijacking of process or a mutual agreement? Is it ultimately good or bad?
It depends on who’s spinning at the moment. Could Mr. Obama have held out for higher taxes for the wealthy? Probably not, given the changes in Congress next year. Could the Republicans have held out to defeat the extended unemployment benefits? Probably not, given the record of previous extensions and wanting to avoid the perception that they are willing to pad the pockets of Scrooges while saying “bah humbug” to the unemployed.
Mr. Obama, who campaigned for years against “tax breaks for the rich” was forced to change his position. In his initial assessment, he likened his surrender as akin to negotiating with hostage-takers by pitifully confessing he had no choice. Several days later, as if the Stockholm syndrome had taken affect, an epiphany: “All told, the overall package is one that will help the country continue to recover.” So which is it? Still a bad deal he was forced to accept? Or is he simply spinning a “bad” to look “good?” Or is this a soft admission that previous efforts have not worked as planned and maybe, just maybe, lower taxes might, just might, stimulate economic recovery? Or was his change from hostage to cheerleader a result of taking the pulse of the American public?
According to polls, the majority of Americans across the political spectrum approve of this compromise. However, this approval will be short-lived if action doesn’t follow on matters of substance and process. The success of the conservative movement over the past two years has been its articulation of core ideas, its identification of candidates who share these beliefs and its grass-roots efforts to replace those who don’t believe with those who do. The successes of November must be focused toward three strategic goals as Washington deals with budgets, taxes and spending in the coming years.
First is to revise tax policy. The current tax code is ineffective and confusing. Alternative proposals - such as the flat tax or Fair Tax - offer creative solutions that would provide for a fair and equitable system that would be understood by both taxpayers and tax collectors.
Second is to permanently reduce tax rates. In general, higher taxation weakens an economy, slowing growth and job development. Given that, personal income-tax rates must be reduced. Despite tax reductions, average household taxes have continued to rise: $21,000 in 2008, which is $5,000 over the historical average. Likewise, the corporate tax rate must be cut. Often as high as 40 percent and ranked second-highest in the world, it serves only to make America less competitive in the global economy.
Obviously, the latter is impossible without a limitation on spending, and spending will not be limited until Washington has no choice but to do so. Thus, a third necessity is a balanced-budget amendment. Washington has proved its inability to make tough decisions unless constitutionally required to do so. A balanced-budget amendment would do that. While some will deride that action as restrictive, shortsighted and unwise, what could be more so than allowing uncontrolled spending now, with the bill being sent to future generations - if we have that long - to pay?
In the end, without some meaningful reform along these lines, expect business as usual in the coming Congress, regardless of which party is in control. The best compromise for the American public is an honest promise to bypass the neglect and spin, instead focusing on a new idea: to work above personal and party concerns for meaningful and sensible reform. That is what the electorate asked for in November and, unless voters see meaningful action, what they will be demanding even louder in two short years.
John M. Bell is a retired military officer and member of the San Antonio Tea Party Board of Directors.
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