McClatchy Papers: Senators DeMint, Graham divided on Obama’s tax deal

From James Rosen of the McClatchy Newspaper group of papers (including Columbia’s The State)

U.S. Sens. Lindsey Graham and Jim DeMint once against canceled each others’ votes on major legislation Wednesday as Graham backed but DeMint opposed a compromise two-year extension of the Bush-era tax cuts.

Incidentally, I don’t buy the logic that Graham and DeMint canceled each other out.  Both votes were counted. It’s not like South Carolinians could ever be completely unified on any issue.  Both politicians represent aspects of the state.   Rosen’s chosen a curious kind of either/or argument for his intro.   But anyway…

Graham said the deal between President Barack Obama and Republican congressional leaders isn’t perfect – but that it achieves the critical need to prevent tax hikes on some Americans.

Only four other Republican senators joined DeMint in voting against the tax legislation, while Graham was among 37 GOP senators who voted for it.

Graham praised the Senate’s 81-19 vote to pass the tax bill as an early payoff from the Republican rout in the Nov. 2 elections.

“The Obama administration agreeing to extend the tax cuts for all Americans is one of the first dividends from the election of more Republicans to the House and Senate,” the Seneca Republican said

“Overall, I think the agreement is a good one for the American people,” Graham said. “No agreement is ever perfect. There are, of course, areas I would have liked to see improved. But overall it is worth supporting as it will give certainty to those concerned about what a tax increase would mean to their businesses and family budgets.”

DeMint, whose amendment to make the tax cuts permanent was rejected before the vote on the broader bill, said the package will increase the deficit too much as it trades more federal spending for extended tax cuts.

“I’m concerned the bill currently under consideration does not permanently extend tax rates – and thus will have a marginal, if any, benefit to our economy,” DeMint said on the Senate floor. “Temporary rates make for a temporary uncertain economy.”

The legislation extends all Bush-era tax rates, including those on the very wealthy, for two years; they are due to expire Dec. 31.

[…]

We’re not in favor of reducing revenue, especially when demands on unemployment and healthcare assistance are growing.   Regardless of what you think of the President’s deal to extend the tax cuts, it does seem like he’s found common ground with the GOP, at least for the moment.  DeMint and the three other senators who voted against the tax cuts are speaking from a position of eliminating taxes first, then worrying about government services.  That is a position that the other more political GOP senators probably would endorse in a stump speech, even if they would bow to the reality of funding the government.

But let’s examine the logic behind DeMint’s statement that only “permanently extend[ed]” would benefit the economy due to the certainty of the benefit.   A look at the history of the current economic depression refutes DeMint.   The Bush tax cuts were introduced in the Economic Growth and Tax Relief Reconciliation Act of 2001 then deepened and extended in the Jobs and Growth Tax Relief Reconciliation Act of 2003.

The tax cuts were in no way intended to be permanent, since the 2010 expiration date was part of Bush’s compromise to peel off right-wing Democratic approval.

DeMint’s contention that the impermanency of the nine year old tax cut led to the downturn in the economy is ridiculous. After all, the tax cuts precede the economic meltdown by five to seven years.   DeMint wants us to believe that the a “permanent” reduction in the tax rate for the wealthiest Americans would have so benefited the economy that we would have avoided the the explosive housing bubble and Wall Street’s frenzy of speculation on securitized mortgages.

There is evidence to suggest that by reducing the tax rate on the wealthiest Americans, that the Bush (now Bush-Obama) tax cuts fed the housing and securities bubble by freeing cash for speculative investment.  Mark Thoma notes, as part of a longer article on the negative impact of the cuts:

Even the part of the tax cuts used for investment purposes may not result in enhanced long-run growth. Suppose, for example, that the money is invested in housing to take advantage of rising prices, but people are unaware that the price increases are being driven by a housing bubble. This will look at the time as though growth is robust — and this helps to explain the little bit of growth that did come about in the period before the housing bust — but the growth disappears as soon as the bubble pops. In fact, this type of investment leads to reduced growth relative to what could have been achieved with other investments. Thus, to the extent that tax cuts helped to fuel the housing bubble, they actually harmed rather than helped long-run growth.

A nuanced argument like Thoma’s is of no interest to DeMint, Cornyn and the rest, who begin with the idea of reducing the role and size of government in all areas but national security.  The ultimate extension of which is to put a vise on any socially responsible role for government.

Looking at a typical DeMint stump speech (like this one for example) you’ll find a lot of talk about freedom, with very little specifics about actual policies.  Maybe this is typical of a politician.  Given that DeMint is unquestionably radical (frequently holding up legislation on his own and being on the losing end of lopsided votes), the voters and media of SC deserve answers to tough question about DeMint’s real priorities.

DeMint and the rest hope to exclude human welfare from the political debate, throwing questions of health, education, quality of life and so on into the market while maintaining U.S. military interests abroad, where in both cases might makes right.

Read the rest of Rosen’s article, which concerns the reactions of other Senators, here: http://www.mcclatchydc.com/2010/12/16/105383/sc-sens-graham-demint-divided.html#ixzz18TjodXYr