Most supply-siders and conservative pundits believe that if the Dems manage to take the House and Senate, President Bush’s investor tax cuts will be safe because they have been extended to 2010.
Folks also think President Bush will veto any tax hike legislation that a new Democratic Congress might pass. Yes, yes, I believe Bush would definitely veto a direct tax hike bill. But the political story will be much more complicated than this.
Because if a Democratic Congress passes new “pay-as-you-go” rules, then the tax cuts will be severely jeopardized.
A revenue-oriented Pay-Go would show the static revenue loss each year that is scored by the Congressional Budget Office. This means that Harry Reid, Nancy Pelosi, Charlie Rangel, John Spratt and other Dems would be able to craft a so-called big bang deficit reduction package that would (falsely) cobble together spending cuts with tax revenue hikes.
President Bush might eventually be confronted with a Hobbesian choice of vetoing a so-called $500 billion dollar deficit reduction package that would overturn and rollback cap gains, dividends and the top income tax rate.
Inside the DNA of the Democratic party remains an obsessive desire to raise the income tax rate back to President Clinton’s 39.6 percent. There exists a class warfare mentality that seeks to tax and penalize the rich. It is an obsessive, biological instinct to soak American success stories as some kind of Soviet style income leveling exercise that is supposed to make the non-rich feel better.
This is all nonsense—typical liberal left-wing pabulum.
The key point here is that Bush’s tax cuts have done an amazing job in reigniting the U.S. economy. The 2003 tax cuts rallied the stock market, generated 6 ½ million new jobs, and have paid for themselves with soaring revenues that have, in turn, plunged the deficit. But this is all in jeopardy because of the potential of new pay-go rules.
I’ve checked with OMB budget officials on this. They confirm my green eyeshade memory from the days when I was President Reagan’s associate budget director. Unfortunately, bad habits and bad thoughts have long shelf lives.
So, let me warn my fellow conservative friends and the investor class: a Democratic sweep come November will put Bush’s hugely successful tax cuts front and center on the chopping block.
It’s a sobering thought.