Archive for the ‘Bush Tax Cuts’ Category

Jon Stewart Explains the Ryan Plan

Wednesday, April 20th, 2011

The Daily Show – Ryan’s Private Savings – Path to Prosperity
Tags: Daily Show Full Episodes,Political Humor & Satire Blog,The Daily Show on Facebook

If you have more than a few minutes, here is the intro.

I’m With Krauthammer

Tuesday, January 4th, 2011

Just catching up from the holidays and posting a few things I missed while gone.

This is from the aftermath of the tax deal.

While the Democrats were damning the president for giving up core principles and Republicans were crowing about the fact that they got their number one priority (tax cuts for the top 2%) by threatening to stop all legislative activity, (including benefits for 9-11 first responders and tax cuts for 98% of Americans) Fox News Commentator Charles Krauthammer wrote this piece, in which he called the tax cut deal a “really big win for the president.”

He cited some of the same reasons that I had given for arguing that it wasn’t such a bad deal for Obama, namely that Obama, in effect, tricked the Republicans into running short term deficits to stimulate the economy after they spent two years arguing that deficits were no good and very bad, even during a recession.

In a somewhat discordant note, Krauthammer noted that the deal “will add as much as 1 percent to gross domestic product and lower the unemployment rate by about 1.5 percentage points.”… Sounds good to me so far… but, he quickly added, ”that easily could be the difference between victory and defeat in 2012.”

For someone who spends their time writing and thinking about politics, that is a stunning statement to make. We’re in the greatest recession since the Great Depression, hiring has stagnated and we are debating a policy that you believe will add 1% to the GDP and lower unemployment by 1.5%… But you consider that a bad thing because Obama might get re-elected when more people have jobs? That’s positively Limbaugh-esque.

But I digress…Krauthammer followed this one up with another article in which he said that, if Obama is reelected, “historians will mark his comeback as beginning on Dec. 6, the day of the Great Tax Cut Deal of 2010.” There’s a lot of water that needs to pass under that bridge, but this may ultimately be true. If the economy comes back, Obama’s going to get the lionshare of the credit. The stimulus effectively built a floor under the economy and (we can hope) the new package will prime the pump for more private sector hiring to get this economy going.

All in all, Obama ends his 2nd year with a ton of challenges, but also a ton of accomplishments.

As I joked recently, Obama’s first two years have been a total failure:

  • preventing a Great Depression
  • stabilizing the US banking system
  • rescuing the American Auto Industry
  • equal pay for women
  • a children’s health care expansion
  • ending subsidies to corporate banks for college loans
  • a major national service program expansion
  • the largest federal investments in energy and education in the country’s history
  • the largest federal investments in infrastructure in the country’s history
  • health care for 30 million more Americans (which eluded progressive presidents for 70 years)
  • significant increases in assistance for veterans
  • repeal of Don’t Ask Don’t Tell
  • a new START Treaty with Russia

And even though the Democrats had historic losses in the House, his approval is still better than Reagan and Clinton at the same time in their presidencies.

and now comes the pivot to the center.

All this against the backdrop of a Republican Congress that ended the year explaining how some $17 billion in unemployment extensions during the worst recession since 1932 “need to be paid for” but $140 billion in tax cuts for the top 2% can just be added to the deficit.

As Krauthammer notes, soon after they voted for the tax deal,

Republicans began righteously protesting $8.3 billion of earmarks in Harry Reid’s omnibus spending bill. They seem not to understand how ridiculous this looks after having agreed to a Stimulus II that even by their own generous reckoning has 38 times as much spending as all these earmarks combined.

Hey, I’m all for ending earmarks. They’re symbolic of a broken process in which even the so called “fiscally conservative” bring home the goodies for their constituents. But let’s get real: they account for one half of one percent of the federal budget; and defeating a proposal that has $8.3 billion in earmarks with one hand while you increase the federal deficit by $900 billion with the other does not show “fiscal responsibility.”

As I noted before, the biggest short term benefit to this deal for Obama is to show how hypocritical the Republicans are when it comes to running deficits that benefit their core constituency (those in the upper income brackets).

At least on that point, I’m with Krauthammer.

Obama Makes Lemonade out of Lemons

Friday, December 17th, 2010

I have to say that I have been surprised at the liberal fulmination over the two year extension of Bush tax cuts. On one level, I get it: it’s frustrating as hell that the Republicans acted as irresponsibly as they did over the past two years and have been rewarded with a control of the House, 6 new seats in the Senate and the policy that they care about the most: tax cuts for the rich (which are also the least economically stimulative of the policies that have recently been considered). Still, it’s hard to say that you couldn’t see this coming and I would argue that the total package is not a bad deal either politically for Obama or economically for the country.

Regarding the extension of tax cuts for the rich, the die was probably cast when the Democrats punted on taxes in the run up to the election. They didn’t have the votes in the Senate for an extension of tax cuts for just the middle class (due to Republican filibuster threats and Democrats that vote like Republicans) and didn’t want to put a handful of their own members in a situation of filibustering the Democrats’ tax bill just before a tough election. The House, in turn, refused to take another tough vote if the Senate couldn’t pass the bill.

The Democrats problem here was the same one that they had for the past two years: they were afraid to stand up to the Republicans and provoke a fight over taxes. What they should have done is made the Republicans (and Lieberman, Ben Nelson, Blanch Lincoln, etc.) filibuster….and I don’t mean have a cloture vote, say that they couldn’t get 60 votes and then go home early for the weekend. I mean make them stand up on the Senate floor and talk and talk and talk about why they were filibustering tax cuts for 98% of the people so that they could preserve taxes for the top 2%.  They may not have gotten their bill passed, but it would have been a clear contrast for the American people and they could have prepared the public for the fight we are having now and put pressure on Republicans for a better deal. Senate Democrats have complained that Obama is not standing up enough to the Republicans, but they are the ones responsible for not dealing with this issue until the last two weeks of this session and giving the Republicans maximum leverage.

And while the deal cut with Republicans is far from an optimal deal, there are a number of ways that this deal works politically as well as economically for the President and the country as a whole. First, most economists agree that the economy needs additional stimulus and that the worst thing you can do during a deep recession is to cut government spending and raise taxes. Obama clearly believes this as well, since he has argued for it both domestically and internationally again and again, even when he can’t get agreement from allies.

A comparison of the framework agreement between the Obama administration and congressional leaders and another option

Just after the election, I commented on Peter Beinart’s lamenting ”the Death of Keynesianism” as a result of the Republican victory. In the aftermath of the election it seemed that the dysfunction in Washington left Ben Bernake’s Fed holding the only weapon in the fight to revive our economy. But the president is showing that the death of Keynesianism has been greatly exaggerated, at least for the short term. While the policies agreed to in the compromise are far from the most effective stimulative policies, they will provide some lift to the economy that would have been missing had the Republicans governed like they campaigned.

As I’ve said before, I’m not completely opposed to a 2 year extension of the Bush tax cuts for the top 2%, although I would rather see those provisions expire and the money be redirected to tax cuts that actually stimulate more (like a payroll tax cut that benefits employers as well as employees (instead of just employees)). It also would have been nice to get some construction projects to deal with our crumbling national infrastructure, but perhaps this was a bridge too far for the Republicans. What we will get is a  package of tax cuts that, depending on how you break them out, amount to close to a stimulus of $900 billion (or $600 billion over and above what had previously been supported by both parties).

In addition to the economic benefits of the tax cut deal, Obama may reap some political rewards as well. As Chuck Todd has pointed out, part of Obama’s problem over the past two years has been that he has acted more like a Prime Minister trying to shepherd his agenda through Congress than a President using the bully pulpit to call legislators out in order to build support for his agenda (as he was able to do so effectively in the 2008 campaign). And while the strong reaction from the left has been surprising, recent opinion polls have showed broad support for the deal. In addition, economists have projected that the tax cuts will increase the  GDP by as much as 1%, create an additional 3 million jobs and decrease the unemployment rate by close to 1.5%.

As an added bonus, the debate has shown just how hypocritical the Republican party’s leaders really are. For the past two years, they consistently complained about the budget deficits that were run in order to prevent an even larger economic collapse than we actually had. They pretended that they couldn’t distinguish between short term deficits to prop up the economy, and long term structural deficits that were unsustainable. As my conservative uncle liked to say, the Tea Party led Republicans were going to bring “fiscal responsibility” back to Washington. And what did they do within a month of their election? Add another $900 billion to the deficit before the new Congress even got there. Like I said previously, I understand that you need to run deficits in times of economic downturn. But I didn’t spend the last two years running a constant campaign against those deficits. 

Some have argued that the Republicans may be successful at extending the Bush tax cuts for the top earners in 2012. But this also sets up a fight that Obama can use to his advantage. If the Republican House brings up the extention in 2012, it should die a quiet death in the Senate. Plus, the country will be focused on deficit reduction by then, and Mitt Romney can explain to the country in the presidential debates why he wants to add another $700 billion to the debt and the onus will be on him to propose cuts to programs in order to pay for them.

The deal is far from perfect. But, all in all, it’s a much better deal than I thought Obama could get just a few months ago.

But don’t take my word for it. Take Charles Krauthammer’s.

The Millionaires are Doing Just Fine

Saturday, December 4th, 2010

The Republican Senate minority blocked the extention of tax cuts for all Americans today in an attempt to make sure that the top 2% get to keep all of their tax cuts. As part of this effort, Senate Republicans even voted against changing the threshold to $1,000,000 a year for the Americans who reaped almost all of the benefits of the past decade.

Just to be clear, what that would mean is that the first $1,000,000 (after deductions) that everyone makes would be taxed at the same rate as it was during the Bush years. The 2nd million, would then be subjected to a 4% increase over Bush rates. Not good enough for Republicans. They want to extend Bush tax cuts permanently for not only your first million, but your second million too.

How will they pay for that? They won’t. Just add it to the deficit they’ve been complaining about for two years straight. And what about extending unemployment benefits during the worst recession in 90 years? No, that has to be paid for.

Here’s what Bernie Sanders thinks of that.

Wish the president would give a speech like this. It might help to clarify a few things.

Compromise, Not Capitulation Mr. President

Thursday, December 2nd, 2010

Here’s Joe Scarborough from a couple of days ago.

This is a long discussion (fast forward to 6:45 if you don’t have a spare 20 minutes, or 11:45 if you have less time).

Scarborough talks about how there is a lot of revisionist history with regards to Bill Clinton. While it’s true that he tacked to the middle after his defeat in 1994, Scarborough points out that Clinton ”beat the hell out of us for a year” before he compromised and that Clinton would have hung the Republicans current position on taxes and unemployment benefits around their necks and only then cut a deal with them.

I’m not one of these people on the left that thinks extending Bush tax cuts for the rich for two years (insuring that any additional extension will be vetoed by Obama) is a great betrayal of principles, but I do think the president needs to take the opportunity to draw a clear distinction on this issue.

The Republicans are planning on filibustering an extention of middle class tax breaks so that they can preserve tax breaks for the top 2%. In the House today, 168 Republicans refused to vote for an extention of tax cuts for 100% of Americans on the first $250,000 they make next year because they couldn’t get tax cuts for the 2% of people who make over $250,000. At a time when there are five job seekers for every one job opening, the Republicans are refusing to extend unemployment benefits for 2 million people unless the benefits are “paid for.” At the same time, they are refusing to allow any other votes until they get tax cuts for the top 2% that will add $700 billion to the deficit over the next 10 years (the same deficit they’ve been complaining about non-stop for two years).

I’m fine with an eventual compromise (even a quick compromise). I just want the president to take the opportunity to let the Republicans show how out of touch with the American people their priorities truly are, just as they insist that their month old victory shows how much  Americans agree with them.

Take a lesson from President Clinton, Mr. President. He might have compromised with the Republicans after 1994, but he would never have let an opportunity like this pass him by.

Holding Middle Class Tax Cuts Hostage?

Tuesday, October 5th, 2010

Just think of how much more effective this video would have been if there was an all night Republican filibuster happening on the Senate floor right now…

Hypocrites vs. Cowards on Taxes

Sunday, October 3rd, 2010

I’ve been wanting to write about the Democrats punting on tax cuts ever since it became clear that this was the plan, but haven’t had time.

Here’s a nice little piece from Rex Nutting on the issue.

The roots of this issue go back to the early Bush Administration when the Republicans were working on their tax plans. Congressional Republicans (for parliamentary reasons as well as to hide the disastrous long term effects of their tax cutting spree) setup the tax cuts to expire after 2010. As a result, in 2011, taxes will increase to the levels they were during the Clinton Administration for all income brackets, on capital gains and on dividends. The estate tax will also revert to Clinton levels along with a number of additional smaller changes.

In typical fashion, the Republicans are in favor of extending all Bush tax cuts forever, but offer no plan to pay for those tax cuts. These are the same people who have been complaining incessantly about the deficit for 2 years (they apparently discovered it as soon as a Democrat was elected president), but they have no plan to cut it and, in fact, they are insistent that $3 trillion be added to it in the form of tax cuts. 

Meanwhile, the Democrats have a slightly less irresponsible plan, which is that the tax cuts should be extended for 98% of the people, but allowed to expire for the top 2-3%. They’re out there campaigning on the fact that they’re opposed to the additional $700 million and hoping the American people ignore the approximately $2.5 trillion that they’re in favor of adding.

I’ve talked about this issue in detail here. Basically, my take on the tax cuts is that they should be allowed to expire for all income levels because we just can’t afford them as a country. We have a $9-$10 trillion deficit on the books for the next ten years and these tax cuts represent $3-$4 trillion of this. The defcit is one of the biggest and most intractable issues in American politics and in one action (in fact one inaction) $3 trillion could be wiped off of that deficit. At the same time, as I’ve been arguing for some time, the economy still needs stimulus in the short term and I’d be okay with extending all of the tax cuts for two years and then letting them all expire. This is the optimal compromise and has been endorsed by experts like Obama’s former OMB Director Peter Orzag.

Th Republicans’ budget gimmickry allowed the Democrats to craft a great political plan around the tax cuts. Since all tax cuts would expire in 2011, the plan was to allow only the middle class tax cuts come to a vote. It was assumed that the Republicans would filibuster this attempt, effectively holding 98% of Americans’ tax cuts hostage to the top 2% (which some 60-75% of Americans oppose) and giving the Democrats a clear contrast and a great issue to run on.

This looked good until the Senate Democrats met two weeks ago and found that (surprise!) their caucus was divided on the issue. They decided to punt the vote on taxes into the lame-duck session. 

It’s really unbelievable. Somehow, faced with a multitude of options, the Democrats managed to do the wrong thing for their party as well as for the country.

I’m as partisan as the next guy (perhaps more so) and I would love to have an issue to bash the Republicans over the head with,  but more importantly I want to do what is right for the country and for the economy. Whether you think that decreases in tax rates are stimulative or not, the reality is that we’re nearing the end of the year and individuals and businesses are setting their business plans for next year. After two years of debate and legislation over changes to health care,  financial regulation, energy, etc it’s time for some certainty: certainty over what the rules are and certainty over what the tax rates will be.  

The bigger picture here is that we elect leaders to lead and they should do that, not wait for the results of the election and then tell us what they think. The Democrats held large majorities in the House and Senate and the Presidency for 2 years. Saying that they ran out of time or that they don’t want to vote on raising taxes because the Republicans will attack them on it is ridiculous, cowardly and irresponsible. The Republicans are going to attack on taxes no matter what. Democrats: whether you’re giving out tax breaks to 98% of people or just extending all tax cuts for everyone, let us know where you stand. Give people a reason to vote for you. Take tough votes and then defend them.

Don’t act so cowardly. I’ll be voting for you because I’d rather have the cowards than the hypocrites, but I can’t speak for everyone else. This year, you might want to consider giving the other people a reason to vote for you, not just against the other side.

Tax Cuts Do Not Pay For Themselves

Saturday, August 14th, 2010

With the Bush tax cuts about to expire and Democrats planning to make the argument over extending Bush tax cuts for the rich a key to their positioning for the November elections, there has been an increased focus on the effects of all of Bush’s tax cuts.

In defending the extentions the Republicans have backed themselves into a bit of a rhetorical corner. Specifically, they just spent two years complaining incessantly about the $9 trillion dollar deficit that Obama has somehow created in just two years (as if they were asleep during the previous 8 years) and now they are proposing to continue the tax policies that have significantly contributed to those deficits. In an attempt to justify this irresponsible policy, a number of Republicans have fallen back on the familiar supply-side argument from the Reagan years that “tax cuts pay for themselves.”

In addition to this general statement, I have also heard from some Republicans recently that “there was no revenue problem” during the Bush years and that if spending hadn’t increased at the time, Bush would have been able to balance the budget. While that may be technically true, it fundamentally ignores the fact that the Bush tax cuts tacked on an additional trillion and a half to a budget that was aleady bloated by recession and two wars (wars that almost all Republicans supported).

A few minutes of Google research was enough to dispel the fantasy that tax cuts pay for themselves. Studies by both the liberal Center on Budget and Policy Priorities and the free market Heritage Foundation have both pegged the cost of the Bush tax cuts at close to $1.7 trillion over a ten year period. Even the most conservative estimates of the stimulative power of the tax cuts assume that they would have created a 25% increase in tax revenues during that period, making the cost of those tax cuts at least $1.3 trillion (if not more).

Going forward, the cost of extending the Bush tax cuts for all income brackets is estimated at $3 trillion over 10 years.

So now Republicans–who complained seemingly non-stop for two years about how Obama had created trillion dollar deficits–are in the position of running for office on a plan to keep all the Bush tax cuts in place, but not providing any plan to offset the estimated $3 trillion revenue loss.

This dichotomy was on display pretty dramatically on Meet the Press last Sunday. The week before David Gregory had Alan Greenspan on and had asked the former Fed Chairman if he favored extending the Bush tax cuts. “I’m very much in favor of tax cuts but not with borrowed money” he said, “and the problem that we have gotten into in recent years is spending programs with borrowed money, tax cuts with borrowed money; and at the end of the day that proves disastrous.”

Gregory probed more: “you don’t agree with Republican leaders who say tax cuts pay for themselves?”

“They do not,” replied Greenspan. 

When Boehner was on last Sunday, Gregory played Greenspan’s clip from the week before and asked him how he could be concerned about the deficit, but at the same time in favor of extending the Bush tax cuts indefinitely.

“Do tax cuts pay for themselves?” Gregory asked.

Boehner was evasive, but Gregory kept at him until he burst out that Gregory wanted to “get into this Washington game…and their funny accounting over there.” 

Nice try Boehner, but this isn’t a Washington game, and it’s not a trick question to ask if you have a plan to pay for the $3 trillion in tax cuts that you are proposing, especially if you just spent the past two years blaming Obama and Pelosi for the deficit.

We just finished a long debate over the health care reform bill and the Republicans’ main argument was that we couldn’t afford to move toward universal health care and that they didn’t like (or believe in)  the way it was financed. That’s fair enough, I didn’t like how it was financed either, but it was financed, which is more than we can say about extending the Bush tax cuts, or the Medicare prescription drug benefit that the Republicans passed under Bush.

We are closing out 30 years of history in which the Republicans have consistently said that they would cut government, but when push came to shove, just cut taxes and let government increase in size. Does anyone think that we should just trust these guys to do the right thing this time?…and more importantly, if anyone does believe that they have a plan to balance the budget, don’t we deserve to know what that plan would look like?

As I’ve said before, I think that there are good arguments to maintain low taxes for the next couple of years to stimulate the economy (I would rather see the income tax cuts be replaced by a short-term payroll tax holiday), but we are facing a $9 trillion deficit over the next ten years and neither party seems serious about the changes that will need to be made. Canceling  the tax cuts would slash that deficit by one third overnight and make the job of deficit reduction significantly less daunting.

Americans need to understand that hard choices (on both benefits and taxes) need to be made, and we should have a debate that illuminates this reality. The politicians are doing what they always do. Obama promised not to raise taxes on the middle class, so he’s in favor of extending the tax cuts for everyone but the top 2%. Republicans like low taxes more than they hate deficits, so they’re in favor of adding on another $700 billion over 10 years for the top 2% (while they filibuster jobless benefits because “we can’t afford them”). Both sides complain about deficits, but both sides are also in a mad dash to stuff the budget full of their individual priorities before they have to start negotiating on what programs to cut and what revenues to raise.

The country deserves a debate on bigger issues instead of a narrow debate along the partisan lines that the parties have layed out. We deserve a rare outbreak of candor from our politicians. 

This may be to much to ask right now, but dispensing with the canard that “tax cuts pay for themselves” is a good start.

The Politics and Pragmatism of Extending Bush Tax Cuts

Tuesday, July 27th, 2010

Jonathan Chaitt has an interesting piece on the politics of extending the Bush Tax cuts in yesterday’s New Republic.

All of the Bush income tax cuts are scheduled to expire at the end of this year under current law and Barack Obama (along with most Democrats) support letting the taxes on the top 2% expire while leaving the cuts for 98% of Americans in place. Chaitt argues that, politically, this is a slam dunk for the Democrats since Americans overwhelmingly support increased taxes on the wealthy.

His article discussses the strategy proposed  by a number of Democrats, whereby the Senate would put extending the cuts for middle-class and the poor on the table and dare the Republican’s to filibuster it. If they can get Republicans to agree to middle class tax cuts, they’ll get their agenda. If not, tax cuts will expire for everyone and the Democrats can run  a campaign on how the Republican’s refused to allow the tax cuts to be voted upon because they wanted tax cuts for the rich. While Republicans would lament losing the tax cuts for the rich, neither party would particularly bemoan the loss of middle class tax cuts since neither one particularly wanted them, according to Chaitt. 

There are a number of problems here. First of all, it’s not a strategy without risk, because it assumes that the Democrats will be rewarded for Republican obstructionism instead of blamed for not being able to get anything done even though they have 59 votes in the Senate. Second of all, it’s not clear that the Democrats have the votes for this strategy and a number of their members have expressed doubts about allowing the tax cuts to expire during the largest recession since the Great Depression. Given that Harry Reid has not once in the past two years asked Republicans to actually fillibuster (Mr Smith Goes to Washingtn style) instead of just hold votes to close debate, it seems unlikely that he would force 4 or more Democrats to actually bring out the cots and spend the night on the floor defending tax cuts for the rich. However, nothing focuses the mind like a hanging and perhaps Harry will start acting like his career depends on showing some grit (since it does).

More important than these political issues are the economic and fiscal issues. As I’ve argued before, I think that pretty much all of these tax cuts are irresponsible given the budget deficits we face. However, I also believe that the economy is in a precarious position and needs the short-term stimulus. 

I would be okay with the following: leave all of the tax cuts in place for another year and set them to sunset at the end of 2011. According to CBO, this would cost about $110 billion for the year.  This insures that, if nothing is done, the cuts will expire, so no matter who controls Congress, there will be no chance that President Obama will be stuck with tax cuts for the rich if he doesn’t want them. By 2011, the Deficit Reduction Commission will have reported it’s recommendations, hopefully the recession will have eased slighltly and (again hopefully) the political debate will have shifted to a more serious discussion of the fiscal disaster looming. I may be overstating the impact of the deficit reduction panel, but I think it will be a game changer. I’m not positive that Obama will feel he has enough cover to abandon his pledge not to increase taxes on the middle class, but certainly this is a possibility.

Perhaps as part of a bargain for a temporary extention of the tax cuts and negotiations over the Estate Tax, the Administration can also get some of the additional stimulus programs that they have been pushing, including tax breaks for business and aid for teachers.

The worst outcome would, in my opinion, would be for the politicians to put these tax increases off indefinitely. This would send the unmistakable signal that, once again, the politicians are refusing to make the tough decisions to put our fiscal house in order in the long term.

Lockbox

Wednesday, July 14th, 2010

A few weeks ago, NBC debuted SNL’s Best of the 2000′s. Included was the now classic skit where Al Gore and George W. Bush are asked to sum up their campaign in one word. Gore (Darrel Hammond) thinks a while and then replies in his thick-as-honey Tennessee accent “…Lockbox.” Bush (Will Ferrell), looks straight at the camera and says with Bushlike certainty “Strategery.”

That skit has become iconic, but when I saw it, I was reminded that at least one politician did see the oncoming crisis and had a plan to deal with at least part of it. For the past year and a half (ever since Barack Obama was elected and the Republican’s discovered that deficits were bad), I have wondered many times how we could have gotten into this situation. For years it was clear to anyone who took a look at budget projections that Baby Boomers were going to start retiring and becoming eligible for Medicare and Social Security soon. Entitlement spending would increase at the same time that the number of people paying into the system was going to decrease. This system resembled a ponzi scheme more than a funding mechanism.  Who, I thought to myself, is responsible for the fact that we now are facing this situation and everyone seems to be acting as though it is a surprise to them?

Well, the answer is that we all are. For years, we elected politicians who said that they were going to balance budgets, but when the rubber hit the road, didn’t. Not only did we not kick these people out of office, we encouraged them to act irresponsibly by punishing any politician who promised to increase taxes or actually did increase taxes in order to balance the budget, and we punished any politician that tried to cut benefits by kicking them out of office (Think Walter Mondale in 1984, Gorge HW Bush in 1992, or Congressional Democrats in 1994).

Being good at their profession (getting elected), it didn’t take the politicians long to figure out this game. Anyone who acted responsibly and asked for sacrifice from individuals for the good of the nation was punished, so politicians just gave the voters what they were requesting through their votes: big government and low taxes.

On each side of the aisle, you can see the cynical calculations taking place over the past decades. The Republican strategy was called “Starve the Beast.” The idea was that you would continue to cut taxes so much that there would be no money for social programs. Then when a crisis hit, the “Permanent Majority” that Karl Rove was carving out would cut social programs and say that they had no choice.

The longstanding pattern was pushed to its most outrageous lengths under the Administration of George W. Bush. Bush and Congressional Republicans pushed through close to $1.8 trillion in tax cuts, while at the same time increasing both domestic discretionary spending and fighting two wars. For the first time in American history, taxes were decreased while America was at war. Included among Bush’s increased domestic spending was a ($500 billion over 10 years) Prescription Drug Entitlement Bill. This bill was passed with absolutely no funding.

Think about that for a second. For all of the Republican fulminating about the gimmicky accounting for the funding of the health care bill, at least it has funding. This prescription drug benefit’s costs were tacked on directly to the deficit. Imagine if Obama had tried to do this in 2010. The Republican’s would have tried to gouge his eyes out. In 2003, they barely batted an eyelash.

Republican’s have made stimulus a bad word over the past year and a half, but looking back, the entire Bush presidency looks like a giant stimulus plan, with trillions of dollars being pumped into the economy through tax cuts and increases in government spending.

Like most politicians, Barack Obama learned his lessons from this history. Not to be outdone by Republican’s, Obama ran on a platform of rescinding the Bush tax cuts for the top income tax bracket, but leaving in place all other Bush tax cuts. In addition, he also proposed an additional tax cut of $500 for individuals and $1000 for families not among the top 5% of earners, even if those families or individuals only paid payroll taxes for the year.

The Democrats in Congress and President Obama followed up their tax cuts (slightly cut down and lasting for only two years) with a long awaited plan to move the country toward providing the benefit of health care that every other industrialized country has. But instead of having a real debate about the coming deficit avalanche, they pushed through Health Care Reform with a budget that was narrow enough to fund the specific plan, while ignoring the fixes that will be needed for the coming crisis. In fact, as funding for half of their plan, they used $500 billion of cuts in Medicare services over a 10 year period. While this technically qualifies as funding, it basically cuts an existing “entitlement” program that is in crisis to fund a new entitlement. The tactics here are different, but the strategy is the same: put a popular status quo (near universal health care) on the table as the starting point for negotiations.

The cumulative result of this recklessness is dramatic. In 2010, tax rates were the lowest that they have been in 50 years (47% of people paid no federal income tax) and federal spending was the highest it has ever been. Not coincidentally, deficits were also at record highs.

To be fair, much of this is an artifact of the unprecedented steps the government has made to keep us out of a Great Depression and I support many of them. In the short term deficits are appropriate and necessary. But for the long term, we need a plan to get our accounts back in balance.

In a recent debate with my conservative uncle, he tagged me for always referring to Bush Tax cuts as “Tax Cuts for the Rich” and pointed out that everyone got a tax cut under Bush (although, to be fair, the rich got hell of a lot more). “Do you support rescinding the Bush Tax cuts for the other 95% of the population,” he asked (assuming that he knew the answer). I thought about it for a second and then responded: Yes. Yes, of course. Because this is a huge crisis and what’s at stake is the future of America.

Look, I know what it feels like to get a check that barely pays your bills and then have the government take more out of it. And I’m sure that if I was lucky enough to be making over $200K, it wouldn’t be fun to have 40% taken out of my paycheck from that point forward. But as conservatives like to say, “Freedom Aint Free.” You can’t maintain a military that polices the globe and provide even the lamest social safety net for 300 million people without raising a lot of revenue.

So I’m open to ideas on how to solve this mess, but I think we need to level with ourselves and accept that it can’t be done without cuts in spending as well as tax increases. If anyone tells you something different, they’re either lying or they don’t know what they’re talking about.

The bottom line here is that, for years, politicians acted irresponsibly and voters allowed them to or even encouraged them to continue those policies. For the past few decades, the question shouldn’t have been “how big of a deficit should we be running,” but “how much of a surplus do we need to be saving so that we don’t have to face a massive fiscal crisis once the Baby Boomers retire?”

Unfortunately, for the past decades we didn’t ask those questions, our politicians didn’t encourage us to ask those questions and the media was (as always) asleep at the switch. Now we face the worst of both worlds. Just as we are recovering from the worst recession since the Great Depression, we are going to be forced to make tough choices that will necessitate sacrifice from all of us.

I don’t expect any progress to be made on this in the months ahead. Requests for sacrifice will not be on the minds of too many congressmen in the months before the election. But the months after the election will be key. Whether the Democrats maintain control of the House is an open question. But certainly, the House will be more conservative in 2011. Soon after their election, the new Congress will be splashed in the face with a cold bucket of water called the Simpson/Bowles Budget Deficit Reduction Commission. In it will be a plan to cut deficits to $550 billion by 2015. The debate that follows should highlight the crisis that we are in…as well as the stakes of failure. It will allow us to take real measure of the seriousness that our elected leaders bring to their job. As we watch the debate unfold, we are going to see whether each party can finally live up to the rhetoric it has espoused for years. We will finally see if Republicans are really concerned about deficits, or if they just want tax cuts. We will finally see if Democrats are willing to ask Americans to sacrifice for the benefits that they have supported for years through borrowing.

The results should be illuminating.