So President Bush signed a bill into law today that extends the 2003 tax cuts on capital gains and dividends. Outside of the provisions that raise the cap on the "alternative minimum tax" (which, because it is not indexed to inflation, has begun to affect middle class), I think they are a bad idea.
1. We have recently raised the ceiling on our national debt to 9 trillion dollars (it was at 5.95 trillion when Bush took office); it's not the time to be cutting taxes. The cuts lull people into a "something for nothing" mindset and are fiscally irresponsible. We are at war (the cost of Iraq is approaching $400 billion) and are dealing with record-breaking budgetary deficits. By failing to address this ballooning deficit and instead continuing to add to our mounting debt, we are mortgaging our children's futures (they will be the ones stuck paying this off). We're also taking considerable risks that include further devaluing the U.S. Dollar abroad and incurring significant and harmful levels inflation at home. (Note that as the President signs this bill, the House of Representatives is pushing to raise the debt ceiling AGAIN, this time by 653 billion to a grand total of 9.62 trillion).
2. Our economy is supposedly strong (the fact that median incomes for middle and lower class Americans have fallen when adjusted for inflation is another issue), so the "pro-growth" rationale here falls flat. If the rationale for the cuts three years ago was to spur growth in a slow economy and the rationale today is to spur growth in a strong economy, just when is the proper time to take accountability and seek a balanced budget? Contrary to what ideologues on the far right would have us think, tax cuts are not the cure all for everything.
3. The cuts overwhelmingly favor the rich at the expense of the middle and lower class Americans. Under the guise of reducing the deficit, Congress early this year cut student loan subsidies and funding for programs aiding the poor (see e.g., the so-called Deficit Reduction Act). It has also steadfastly avoided raising the minimum wage or implementing tax cuts primarily targeting the middle class. All this in the name of fiscal responsibility. It seems nonsensical to more than offset those "deficit reducing" measures with cuts that will significantly INCREASE the deficit even more.
In fairness to the Bush administration, both some tax cuts and increases in government spending were justified after 9/11 as the country struggled to prevent those attacks and the subsequent waves of chaos in they caused in financial markets from undercutting a slowing economy while we simultaneously began waging a war on terrorism. The problem lies with how that spending and those tax cuts were dispensed then and how Congress and the administration are continuing to handle them now. By implementing policies that cater almost primarily to the wealthiest of Americans, the administration has increased the disparity between the rich and poor in this country. While the administration should be commended for rightly focusing on job creation, it has failed to ensure that the quality of those jobs meets or exceeds the jobs that were lost. As a result the real median household income has fallen since 2001 and the poverty rate has increased to 12.7%. Meanwhile there has been a record increase in the number of millionaires in the country. In considering our economic policy, we shouldn't be preoccupied solely with the country's aggregate economic growth, but should be very mindful of what kind of growth we are encouraging.
Overall, I think we need a more balanced fiscal policy. One that doesn't ideologically embrace tax cuts as a cure all to everything, even when our economy is strong, our national debt is outpacing our GDP, and we're involved in an expensive war that is not likely to end soon. We also shouldn't extend tax cuts that almost exclusively benefit the richest Americans, especially at a time when we're cutting vital governmental programs (e.g., Student Loan subsidies) in the name of "fiscal responsibility."