Tuesday, December 7, 2010

Republican Leaders Are Part of the Incumbent Party, Too

Here, the WSJ reports on the "deal" struck by "Republican leaders" with BHO to extend the Bush era tax cuts.

Problem is, the deal calls for more really lousy tax policy.  In other words, business as usual in Washington.  Lots of economists understand that temporary tax cuts are quite unlikely to lead to increased economic growth.  That's because people understand that their taxes will go up  in the future when the temporary tax cuts expire. 

Pay me now or pay me more later.  That's the real deal with temporary tax cuts. 

The Republican leaders are already starting back down the path to business as usual.  It's hard to imagine, but evidently, Republicans think the November vote was a mandate for Republicans.  It wasn't.  It was a vote against incumbent politicians.

The November vote reflects we the people telling the incumbent party that we've had enough.  Apparently, Republican leaders are already choosing to behave just as they always have --- as part of the incumbent party.

Here is a believable explanation of what's really going on.  Republicans and Democrats are getting ready to raise the federal debt ceiling once again.  It doesn't really matter whether Congress spends from taxes or from borrowing that creates new money via the Fed.  Congress has no budget constraint, and that is a serious problem, as I've explained before here.  

What really matters is that the federal government and its incumbent politicians will command real goods and services, instead of private households and businesses.  Members of the incumbent party are really quite dense, evidently.  They need to remember that November 2012 is on the way.

Go Tea Party.

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