Dear Wizer #2: Bush Tax Cuts

Dear Wizer,

Bush Tax Cuts?

Signed,

Puzzled

Dear Puzzled, Yes, it can be confusing, because there is so much doublespeak involved. The "Bush Tax Cuts" refers to a set of tax reductions entered during the last recession that were designed to forestall the country from falling into a deeper recession. That action expires on January 1st.

The tax cuts were a way to kick a number of the cans down the road, because the dotcom bubble and 9/11 kind of swamped out the real economy there for a while. These cuts should have been made permanent, but for political reasons they were not. So now, there's all this confusion about whether we are talking cuts, hikes, and for who. So I'll try to break it down for you later in this article, but first a little history:

Way back in In 2008, the government sponsored mortgage industry failed due to lax lending standards and poor management. Then government sanctioned banks began to fail for the same reason, and then because nobody wanted to loan money to anyone (especially the riskiest of ventures), the government decided to own all the risk, including the shakiest of them all, the auto companies. Of course bigger stimuli are needed to keep all these plates spinning. So, we have big spending, and the propping up of Wall Street, DC, and Union HQs across the land.

Meanwhile, the real economy had not recovered from 2001, so the tax cuts' only function if there was one  was to allow the underlying problems to go another 6 years under the radar. We are now faced with a scenario where doing nothing will increase the average guy's taxes by $3000/ year. That's just to keep things steady.  Even the economically misinformed Keynesians and Socialists in and around the administration know this is a big problem. Take $3000 out of anyone's budget, and you will see what economic stagnation really means.

So now, there's this bill that the administration is concocting with the help of the senate, which is said to be bipartisan, and which will "extend the Bush Tax Cuts" another two years.

Here's the thing. It's not a good bill. You might hold the opinion that two opposing sides agreeing on something would make it a reasonable thing to do. The fallacy in that idea is that there are two opposing sides. Both of these sides want the wheels of big government to spin merrily along, and are simply praying that the economy will recover soon enough that they can take credit for having passed this stupid bill. Here's what it does:

1. Extends (by 13 months) a generous federal subsidy for persons wanting to avoid work.
2. Promises not to raise taxes for two years for people who actually do work, but requires them to subsidize this first group.
3. Provides Congressmen with 300 more pages of earmarks and set asides for the "good of the constituency".
4. Extends the misery that is New Orleans by continuing a now perpetual subsidy for not finding your own post-hurricane home (and countless other malappropriations)

In essence, our leaders are saying "We promise not to rob you in such a way that you can detect it".

Sadly, the only debate is not whether to kick the can down the road, but who's turn it is to get in the can. It's your turn, of course.