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Today, when President Bush proposed a $145 billion economic aid package, he “called again for Congress to make permanent the tax cuts that were enacted several years ago and are to expire in the next three years.”
Passing a new growth package is our most pressing economic priority. When that is done, Congress must turn to the most important economic priority for our country, and that’s making sure the tax relief that is now in place is not taken away…So it’s critical that Congress make this tax relief permanent.
Bush’s cynical attempt to seize the current economic downturn and press Congress to make his tax cuts permanent was recently rebuffed by Federal Reserve chairman Ben Bernanke. As Kevin Drum pointed out, extending Bush’s tax cuts wold have “no effect on the economy right now, but it would likely make future economic problems even more intractable.”
Bernanke is saying, as clearly as he can, that a temporary economic downturn shouldn’t be used as a cynical excuse to pass new long-term tax cuts or to make existing tax cuts permanent. Not only would that have no effect on the economy right now, but it would likely make future economic problems even more intractable. In other words, Bernanke isn’t nuts: he thinks tax cuts reduce revenue and make long-term deficits worse.
According to the Washington Post, “Bernanke explicitly and repeatedly urged Congress not to conflate policy changes that might make sense in the long run with those that would provide immediate help for the economy.”