Both Sides are Right about the Tax Deal; and What that Portends

Since the passage of the “bipartisan” tax deal to extend the Bush tax cuts, the Republican Party has engaged in an argument with itself over the wisdom of what was enacted. Those on the more conservative side of the ledger argue that while the preservation of the current tax rates was absolutely imperative, the Republicans in Congress paid far too high a price to achieve that objective. They cite:

  • The plethora of liberal goodies that Obama extracted as the price – extension of unemployment benefits, continuation of various targeted tax cuts and credits that do little but enrich the coffers of Democratic supporters, and the seemingly worthwhile but actually temporary and phony stimulus of a reduction in the payroll tax.
  • The fact that the preservation of the Bush rates is again temporary – and at two years, ridiculously short – leaving continued uncertainty in the business community and the public in general about the future of tax policy in the nation.
  • And most seriously, the lack of any corresponding spending reductions that would help to pay for the legislation and more importantly set the government on the path to fiscal responsibility as demanded by the voters on November 2.

Moreover, say conservative critics of the deal, we could have secured far better legislation if we had waited until the new Congress was seated. In fact, given that Obama had already acceded to the argument that not extending the rates would have brought renewed calamity to the economy, he would have had no choice but to go along with whatever the new Congress proposed, regardless that it would have addressed some or all of the criticisms just enumerated. Conservative, i.e., Tea Party critics of the bipartisan deal complain that it represents a sellout by the Republican Party to the big government mentality that continues to govern the nation and reveals that the GOP has learned little from the fundamental lesson that the voters offered up in the last election.

The “establishment” wing of the Republican Party is having none of this. According to the Mitch McConnells of the GOP, this was a huge victory for Republicans and conservatives. According to their reading of November’s Tea leaves, the prime directive was to forestall any tax increase on any Americans. Therefore, they were determined to ensure that the current rates would be preserved for everyone. They claimed – correctly – that a tax increase on so-called wealthy Americans would impact a large percentage of America’s small business community and consequently inhibit job creation and prolong, if not exacerbate, the unemployment situation in the country. Virtually any price that Obama exacted to secure the continuation of the Bush rates, for however long, was a price worth paying. The liberals’ silly targeted tax credits, extension of unemployment benefits, etc. were small potatoes compared to the critical goal of extending the current tax rates for all.

Both arguments are logical, convincing and easily defended. Moreover, the underlying rationale for either argument emanates from the right side of the political spectrum. Demanding spending cuts and fiscal restraint is as conservative as it gets. But so is the plea for low taxes and job creation, as is the fight against progressive taxation. Thus in some sense, both sides are “right” in their arguments.

So should conservatives be celebrating the deal or ruing the day that it was struck? I believe the answer lies in what conservatives believe to be the current political and economic status of the country, how one measures the degree to which the ongoing progressive onslaught has altered our nation and how radical a course correction one believes is required in order to right the ship of state. Much has been written – from Codevilla’s The Ruling Class to DeMint’s Saving Freedom to Levin’s Liberty and Tyranny – arguing that the political and economic nature of our nation has been radically altered over the last century. According to those arguments, we are no longer a Constitutional republic whose fundamental values are based upon individual liberty, free enterprise, American exceptionalism and Judeo-Christian culture. We are now much closer to a Euro-style, social welfare state in which feasance to the Constitution has been replaced by dependency on big government to satisfy our needs and desires. If one accepts Codevila’s thesis that the Democratic Party is the engine that drives the transformation, abetted by a compliant Republican Party whose leaders aspire to no more than to be admitted to the board rooms of power that administer the social welfare state, then clearly the tax deal represents yet another step down the road to serfdom – even if only a halting and ambiguous baby step. But if one rejects that argument, and instead sees the political landscape comprising a true oscillation between conservative and liberal advances and retreats, not reflecting a persistent, overwhelming advance by progressives, then the tax deal is a small victory for conservatives and should be celebrated.

If the latter are right, we should expect little in the way of fundamental change in the next two plus years. Obama’s natural, hard left inclinations will be held in check to some extent and then who knows what will ensue in 2012? It depends on who is elected president. But the country will continue to bounce back and forth – indulging its equally strong impulses to conserve and liberalize, and while conservatives have the upper hand, they should achieve what they can.

But if Codevilla is right, and we do not initiate a Constitutional revolution in the nation, to wit:

  • drastically, broadly and permanently cut the size and scope of government;
  • overthrow the unholy alliance between the mainstream media, public sector unions, government bureaucrats, crony capitalists and multiculturalists that have and continue to push America to the left;
  • restore a Constitutional republic in which a limited government serves the interests of the people rather than rules them according to elitist ideals;

then we are doomed to complete the progressive trajectory to utopian socialism, second class status as a nation, enforced egalitarian poverty and loss of freedom.

Which side of the argument are you on?
This article also appeared in The Land of the Free at