The Sensible Way to Extend the Bush Tax Cuts

The rich should not mind paying higher taxes so that the rest of us can have tax cuts, and catch up.

By + More

"This is ridiculous. What are we gonna do? Road trip!"

And with such pluck, the boys from Animal House headed on down the road.

Just like the Democrats in Washington.

"This economy is ridiculous. What are we gonna do? Tax cuts!"

Hey. It worked for Otter and Boon and Pinto and Flounder.

I am a big fan of tax cuts, as long as they are aimed at those who need them, and not at those who don't.

Making the middle class and working class components of the Bush tax cuts permanent, and doing away with the Bush tax cuts for the idle rich, is a great idea. Maintaining a sensible estate tax (a policy which was championed by Teddy Roosevelt a century ago) is another good plan. Both will give relief to those who need it as we crawl out of the recession, without breaking the Treasury.

[Read more coverage on the economy.]

I would also embrace some probusiness tax cuts, like a permanent extension of the research and development credit. And as a self-employed individual (who pays gazillions more than you wage slaves to Social Security) I love the idea of a holiday for payroll taxes. That would make for a splendid Christmas at the Farrell household. We might actually buy some presents.

Off in the distance, I hear the Republicans and DINOs whining. They want all the Bush tax cuts extended. But in today's New York Times, former Labor Secretary Robert Reich offers a compelling argument against such folly--not on ideological terms, as might be expected from a Clinton cabinet official, but as a practical matter. The rich are doing really well--the top 1 percent of Americans have seen their share of the nation's annual income go from 9 to 23.5 percent over the last 30 years. But the middle and working classes? Not so good. The median male worker earns less today, adjusted for inflation, than he did three decades ago. And we need a big, vibrant middle class spending money at Ford dealerships and Walmarts right now, not socking it away in the Cayman Islands.

To make us all prosperous, Reich says, we have to widen the circle of prosperity. I don't think it's a coincidence that the last time we let our wealth get so concentrated at the top, it was 1928--the eve of the Great Depression. And since they have spent the last 30 years zooming so very far ahead of us, the rich should not mind paying higher taxes so that the rest of us can have tax cuts, and catch up a bit. After all, a rising tide lifts all yachts.

"Policies that generate more widely shared prosperity lead to stronger and more sustainable economic growth--and that's good for everyone," Reich writes. "The rich are better off with a smaller percentage of a fast-growing economy than a larger share of an economy that's barely moving."

  • Check out a roundup of editorial cartoons on the economy.
  • Follow the money in Congress.
  • Become a political insider: Subscribe to U.S. News Weekly, our digital magazine.