July 27 2010
Sinking the Ship
Support for the extension of the Bush tax cuts of 2001-2003 doesn't cleanly divide along partisan lines. Almost all Republicans favor the keeping the cuts, but some Democrats do too. Rep. Bobby Bright, a Democrat from Alabama, gave his opinion to The Hill:
"I don't care if it's the wealthiest of the wealthy, you don't raise their taxes," he said. "In a recession, you don't tax, burden and restrict. The economy is like a ship, and if you sink the ship, all the good you might do goes down with it."
Bright is right - taxing the wealthy hurts consumer spending. According to an analysis of Federal Reserve data by Moody's Analytics, the top 5% of earners are responsible for 30% of consumer spending. The Bush tax cuts affect these consumers the most, and as Michelle Bernard has already explained here, bringing back the taxes would further hinder job creation.
Our economy - the ship that Bright mentioned - is already sinking. To reverse the Bush tax cuts would be tantamount to asking the most valuable sailors aboard to walk the plank. We need small business owners and other wealthy employers to have every resource available to invest in growth and job creation.
The budget is a big problem. But the solution is not a tax hike. The solution is allowing consumers to spend more while Congress spends less. Government has been growing at a record breaking pace, which means there is plenty of room for government to cut. For the economy to grow, we need a healthy, growing private sector. Unfortunately, recently it's just been the public sector that's been growing, and that growth comes at the expense of the private sector. No wonder the ship is sinking!