Matt Beck's blog

Breakdown: Peggy Noonan | Obama Is Likely To Lose | April 14 2011

Peggy Noonan has an article in the WSJ this weekend that I think deserves a little closer examination. View the article here if you have a WSJ subscription, or on her blog here if you don't.

Her premise is that President Obama is likely to lose re-election. On that point I don't necessarily disagree; his numbers have been dropping, showing that he is vulnerable to events outside of his control, and I think forecasters are spending too much time thinking about the current crop of Republican contenders. Against a solid, middle-ground Republican like Huntsman, Daniels or maybe Romney the President's incumbency during a time of national distress can easily become a disadvantage. 

And, indeed, that is what Noonan is getting at. She is advocating for the GOP to pull it's collective head out of its arse and to nominate a grown up. Good for her, and I hope they listen. 

Nevertheless, Noonan's article is full of reasoning that doesn't stand up on it's own two feet. 

Noonan begins the article by commenting on where things are right now with the President:

"The president is immersed in another stressed and unsuccessful spring after a series of losing seasons. Internationally, he’s involved in a confused effort that involves bombing Libyan government troops and sometimes their rebel opponents, leaving the latter scattered and scurrying. Responsibility to protect is looking like tendency to deflect."

Tax Cut Extension Means Spending Cuts More Likely

The extension of the Bush tax cuts for the middle class seems to be a foregone conclusion, and, in general, I am in favor of lowering the tax burden of America's middle class. The middle class, after all, is the reason we thrive on the economic stage (70% of GDP is consumer spending).

However, let's not forget some basic facts about the Bush tax cuts:
1) The polling at the time indicated that 60% of Americans were opposed to them. Opposed to tax cuts! That little nugget should speak volumes.

2) They were set to expire after 10 years exactly because of the drain on revenue they would cause if extended beyond that. This was the #1 reason people were opposed to them.

3) They were passed by a partisan congress, with a 50-50 vote in the Senate which needed VP Dick Cheney's tie-breaking vote to pass.

4) They were passed via reconciliation, despite the fact that they do not balance the budget as required by the Reconciliation Act.

5) Extension of all Bush tax cuts will cost about $4 Trillion over the next decade. Since they are already in effect and represent no change, arguments about offsets by increased revenue, which have been disproved in any case, are here moot.

In comparison to the health care bill, the Bush tax cuts truly were shoved down the throats of the American people, and cost nearly 5 times as much with absolutely no offsets.

Now, most of that I take as water under the bridge, but setting the context for this discussion is important. The main take-away from the above points is that the tax cuts were seen as destructive when they were passed, and there is no evidence that they did anything positive in the long term for America's economy. Which is why I'm a little perplexed as to why it's suddenly seen as a good thing that we permanently extent the middle class tax cuts. Even Krugman, in today's Times, seems to be in favor of the extension.

But what worries me is not the overall tax rate. What worries me is that Obama's bipartisan fiscal commission is set to provide recommendations after the elections, and they must be working with the assumption that the middle class cuts (or, more accurately, cuts for everybody on income up to $250,000) are a done deal. Which mean permanently less revenue, which means more cuts in government spending are necessary to balance the budget.

I am truly eager to see what this commission comes up with, but I am beginning to think the Republican strategy of starving the government has already won the day.