Informed Speculation

The big elephant in the room (pun most definitely intended) during the first day of the Democratic Congress is the Bush tax cuts:

President Bush is all but daring Democratic leaders to attack his signature tax cuts as they take over Congress. But Democrats, perhaps to his frustration, are having none of it.

In an opening salvo on Wednesday, Mr. Bush proclaimed that he would present a budget next month that manages to project a balanced budget by 2012 while permanently extending more than $1 trillion in tax cuts.

“It is also a fact that our tax cuts have fueled robust economic growth and record revenues,” Mr. Bush wrote in an op-ed article for The Wall Street Journal. “We met our goal of cutting the deficit in half three years ahead of schedule.”

The implicit message, which Republican lawmakers reinforced later, was that their tax cuts were popular with voters, that Republicans had proven the economic benefits of tax cuts and that Democrats would court disaster if they even hinted at rolling them back or repealing them.

But even as Democratic leaders continue to accuse Mr. Bush of having a reckless fiscal policy, they have refused to discuss dismantling his tax cuts or even to engage in a debate with him about the best way to stimulate economic growth.

“It’s always the same old tired line with them — ‘Tax and spend, tax and spend, tax and spend,’ ” said Senator Kent Conrad, the North Dakota Democrat who is chairman of the Senate Budget Committee. “We’re not going there.”

At least not now. Democratic leaders say they see no need to revisit Mr. Bush’s tax cuts for several years because they are not set to expire until the end of 2010. And they contend that the government could increase revenues as much as $100 billion a year simply by closing the “tax gap,” taxes that are owed but not paid.

When asked about their tax plans, as they have been again and again since Nov. 7, Democratic leaders insist they want to preserve many of the middle-class tax cuts like the child tax credit and a reduction in the so-called “marriage penalty” for two-income households.

The Democrats’ coyness is less than candid.

Now THAT’s the truest statement I’ve ever read in the New York Times. 

A note to my rivals across the aisle: you want to be heroes? Leave the tax cuts in place and tackle the earmarks – because the deficit is quite manageable if the economy continues to grow.

Heresy, you say? Not so fast:

Largely because of big back-to-back increases in tax revenue for the last two years, the deficit shrank to $248 billion in 2006 from a peak of $412 billion in 2004.

Measured as a share of the total economy, the approach economists view as more meaningful than the deficit size in dollars, the shortfall is 1.9 percent of the gross domestic product, modest by historical standards.

Shrink the deficit by growing the economy, and by targeting earmarks – that should be the mantra for both sides.  It’s a win-win – it’s good for the country, and it’s good politics…