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Dems Delaying on Tax Cut Decision Dire for Economy

The opinions expressed by columnists are their own and do not necessarily represent the views of

WASHINGTON -- Many economists, and virtually the entire business community, have told the Democratic Congress that postponing a vote to keep the Bush tax cuts jeopardizes our fragile economy's future health and stability.


Businesses are thrown into uncertainty and are unable to make sound and prudent decisions about expansion plans, capital reinvestment and job creation that are vital to the economy's growth.

Whatever the Democrats decide about whether or not George W. Bush's 2001-2003 top income-tax rates will expire at the end of this year, "they should do it quickly," Mark Zandi, chief economist at Moody's Analytics, urged Congress last week.

"The uncertainty of not knowing what tax rates will be just a few months from now is adding to the collective nervousness," Zandi wrote. Delay on the tax issue is having a "discernible" impact on business decision-making, especially on hiring, he said.

But last week, House and Senate Democratic leaders ignored his sound advice and made a cold, calculated and cynical decision to postpone any vote on taxes until after the midterm elections.

Why? Because their rank and file are telling them that voting to raise taxes now in a fragile, jobless economic environment will be politically lethal for their party's incumbents in the midterm elections.

Republicans need a gain of 10 seats to take control of the Senate, and at least a dozen Democrats in highly competitive races are threatened with defeat. But the decision by Senate Majority Leader Harry Reid, who may be one of this year's casualties, and Speaker Nancy Pelosi, was a lose-lose choice for their party. Republicans pounded Democrats for postponing action on taxes, despite its damaging consequences on the economy, as well as for insisting they will raise taxes anyway in a post-election lame duck session, even if voters topple them from power.


"We will come back in November and stay in session as long as it takes to get this done," Reid spokesman Jim Manley told reporters last week. With the economy growing ever weaker, the housing industry in a freefall, foreclosure rates rising and the administration running out of ideas to turn things around, Democrats are leaving town this week to campaign without acting on the central economic issue facing the country.

Republicans pounced on them with a vengeance. "If we leave here this week and adjourn for the election without preventing these tax increases on the American people, it will be the most irresponsible thing that I have seen since I've been in Washington, D.C.," said House Minority Leader John Boehner of Ohio. Democratic leaders, President Obama and White House senior advisers like David Axelrod are blaming inaction on the tax cut issue on the Republicans. In fact, the Democrats' decision to postpone any vote is the result of growing opposition from within their own party.

The real story behind the Democrats' retreat, downplayed or all but ignored by the national news media, is that nearly three dozen House Democrats have signed a letter to Pelosi and Majority Leader Steny Hoyer urging them to extend the tax cuts until the economy recovers.


"In recent weeks, we have heard from a diverse spectrum of economists, small business owners and families who have voiced concerns that raising any taxes right now could negatively impact economic growth. Given the continued fragility of our economy and slow pace of recovery, we share their concerns," these Democrats said.

In the Senate, nearly half a dozen Democrats also want the tax cuts extended or have serious reservations about raising taxes on small businesses and investors struggling in a downbeat economy.

Other senators privately warned Reid that any vote now to raise tax rates would further endanger vulnerable Democrats who are in tight races.

Democrats appear destined to lose control of the House this year, while Senate Democrats could lose at least eight seats and possibly their majority. Pelosi and Reid, who is in a dead heat in his own re-election bid, heard the message and pulled the plug.

But the spectacle of Democrats fleeing Washington this week to save their own political hide, while the American economy struggles with the uncertainty they have left behind, will likely only worsen the majority's midterm losses this fall.

More than the top income tax rate is at stake in the Democrats' class warfare game playing. Capital gains taxes, dividend taxes, estate taxes and the Alternative Minimum tax will all rise significantly at the end of this year if the Bush cuts are not extended.


Barack Obama and most Democrats want these taxes raised, no matter how much harm that they will inflict on the economy, to pay for their big spending plans to enlarge government and expand the welfare state. Only one thing can stop them: the voters.

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