The biggest battle in the lame duck session of Congress may well be over whether or not to extend the Bush administration's tax cuts, which are scheduled to expire in January. The fact that this decision has been left until late in the eleventh hour, even though the expiration date has been known for years, tells us a lot about the utter irresponsibility of Congress.
Neither businesses nor individuals nor the Internal Revenue Service will know what to do until this issue is resolved. In a stalled economy, we do not need this prolonged uncertainty that can paralyze both consumer spending and investment spending.
Republicans want the current tax rates to continue and Democrats want only the current tax rates for people earning less than "the rich"-- variously defined-- to continue, with everyone making more than some specified income to have their tax rates rise next year.
What makes predicting the outcome of this battle very iffy is that Republicans won a big majority in the House of Representatives in the recent election, but the tax cuts are scheduled to expire before the new members of Congress are sworn in-- and the Democrats have a big majority in both Houses of Congress in the lame duck session, where this issue will be decided.
Theoretically, the Democrats could win, hands down, since they have the votes. But Congressional Democrats are well aware of how they lost big in the recent election, and some Democrats don't want to gamble their own jobs in the next election by going the class warfare route.
Neither the Republicans nor the Democrats can afford to have all the tax rates go up in January because they couldn't get together and pass a bill to prevent that from happening. But the nature of that bill matters, not just for politicians but-- far more important-- for the economy.
Former Secretary of Labor Robert Reich, now a professor at Berkeley, has made the case for the liberal Democrats' position in an article in the November 28th issue of the San Francisco Chronicle titled "Extend benefits for jobless, not tax cuts for the rich."
Professor Reich points out that both Republicans and some conservative Democrats say that we cannot afford another extension of unemployment benefits because the deficit is already too large. Then he adds: "But wait. These are the same members of Congress who say we should extend the Bush tax cuts for the wealthy."
Reich advocates "extending unemployment benefits for struggling families without a breadwinner" because "These families need the money. The rich don't."
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