09/20/2010 12:32 pm ET | Updated May 25, 2011

The Politics and Economics of Tax Cuts: Make Each Bracket a Separate Bill, and a Separate Vote

It is very important for the Democrats to cut taxes for 98% and allow taxes to rise (4.6%) for the top 2%. To do that, they should write a separate tax bill for each bracket. They should bring each bracket, starting with the lowest, to a vote. This should be done in both Houses of Congress.

The economic recovery depends upon both ends -- providing more income to the 98% of the people to help repair their home balance sheets so they can feel comfortable about spending prudently again, and increasing revenues from the top 2% to build confidence in domestic and world financial markets that we can make some tough decisions.

Republicans' bitching and moaning would not get them very far. They would get a vote on the top 2%, and see how it fared. That process would shine klieg lights on the tax cuts, and debates and arguments could be advanced for each bracket. In the Senate, a filibuster of the lower rates would be a god-send to Democrats' political fortunes, especially since Republicans can hardly argue that they will not get their vote for the wealthy, the people George Bush called "his base".

It would position the President to sign the cuts for each of the lower brackets, and defer deciding on the top 2% until the deficit commission reports in December whether the top 2% cut passes or not.

The economic recovery that occurred under Reagan and under Clinton did not begin until each President raised taxes. That was not a coincidence. It had little to do with economic theory and everything to do with psychology: by biting the bullet, these Presidents showed domestic and world markets they were serious about deficits. Confidence grew and that led to investments and job growth.

Cutting taxes for the top 2% would, on the other hand, very likely tank the stock market, send the dollar into a nose-dive, cause gold prices to soar and, through the lost-wealth effect, cause even further economic contraction. Why? Because it would show domestic and world markets that the United States of America is incapable of making tough fiscal decisions. Confidence in the United States would plummet and a vicious cycle could be triggered.

It would also be a political disaster. It would portend even more draconian spending cuts in essential services down the road and, by causing a further economic decline, exacerbate the deficit even further. Republican extremists would like it, the Koch Boys would declare victory, but not everyone has the spare billions they do to ride it out.

Republicans exist primarily for one purpose: to provide tax cuts for their wealthy paymasters like the Koch Boys and to allow as much economic anarchy as possible, each in the name of "limited government" that, curiously, does not seem to apply to staying out of peoples' bedrooms, or end of life decisions, or lying us into wars, or voter intimidation. Of the two, tax cuts are much more important, since they can always pay their way out of regulations.

That's it. Everything else they do can be related directly back to these core imperatives.

Of course, it is difficult to sell tax cuts for the wealthy alone, since 98% of the country is not financially wealthy. So, they drag in claptrap about lowering taxes for the wealthy creating more jobs (demonstrably false, and the worst alternative for stimulating growth) or "paying for themselves" (a canard dropped now even by rightwing economists who cannot sustain professional credibility by promoting it).

So, it will be up to the Democrats to do the heavy lifting. Positioned properly, it will demonstrate to the mid-term electorate just who is on whose side. And, it will enable the economic recovery to pick up a bit of steam.

"Class warfare", you say? Such as that Republicans have been waging against the middle class?

Well, it takes two sides to have a "war". It is time our side showed up.

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