Many of us never thought that the Republicans would hold tough long enough to get President Obama and the Democrats to agree to a budget deal that does not include raising income tax rates. But they did -- and Speaker of the House John Boehner no doubt desires much of the credit for that.
Despite the widespread notion that raising tax rates automatically means collecting more revenue for the government, history says otherwise. As far back as the 1920s, Secretary of the Treasury Andrew Mellon pointed out that the government received a very similar amount of revenue from high-income earners at low tax rates as it did at tax rates several times as high.
How was that possible? Because high tax rates drive investors into tax shelters, such as tax-exempt bonds. Today, as a result of globalization and electronic transfers of money, "the rich" are even less likely to stand still and be sheared like sheep, when they can easily send their money overseas, to places where tax rates are lower.
Money sent overseas creates jobs overseas -- and American workers cannot transfer themselves overseas to get those jobs as readily as investors can send their money there.
All the overheated political rhetoric about needing to tax "millionaires and billionaires" is not about bringing in more revenue to the government. It is about bringing in more votes for politicians who stir up class warfare with rhetoric.
Now that the Republicans seem to have gotten the Democrats off their higher taxes kick, the question is whether a minority of the House Republicans will refuse to pass the Boehner legislation that could lead to a deal that will spare the country a major economic disruption and spare the Republicans from losing the 2012 elections by being blamed -- rightly or wrongly -- for the disruptions.
Is the Boehner legislation the best legislation possible? Of course not! You don't get your heart's desire when you control only one house of Congress and face a presidential veto.
The most basic fact of life is that we can make our choices only among the alternatives actually available. It is not idealism to ignore the limits of one's power. Nor is it selling out one's principles to recognize those limits at a given time and place, and get the best deal possible under those conditions.
That still leaves the option of working toward getting a better deal later, when the odds are more in your favor.
There would not be a United States of America today if George Washington's army had not retreated and retreated and retreated, in the face of an overwhelmingly more powerful British military force bent on annihilating Washington's troops.
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