October 23, 2006


The Threat of Pay-Go (LAWRENCE KUDLOW, October 23, 2006, Creators Syndicate Inc.)

Most supply-siders believe that if the Democrats manage to take the House and Senate two and a half weeks from now, President Bush's investor tax cuts will be safe.

First, the tax cuts already have been extended to 2010. Second, the president will surely veto any tax-hike legislation that a new Democratic Congress might pass. (Think Grover Cleveland, the greatest presidential vetoer in American history.)

Maybe so, but the political story will be more complicated, especially if a Democratic Congress passes new "pay-as-you-go" rules. This could put the tax cuts in jeopardy as early as next year.

There are essentially two kinds of pay-go. One is a spending limitation that was used by the Gingrich Congress to balance the budget in the 1990s.This would be good. The other is a revenue pay-go, which is not so good. In this scenario, if the Democrats cobbled together a big-bang deficit-reduction package, large tax hikes would be put in place to meet the new deficit targets. [...]

Should revenue pay-go materialize, President Bush might be confronted with having to veto a so-called $500 billion deficit-reduction package that would increase the cap-gain, dividend, and top-income-bracket tax rates.

Not that the Democrats can get such a bill even through a Congress they'd control--think Hillary is going to run in '08 on a $500 billion tax hike?--but the President would be eager to veto it. This is just one of the ways in which this election doesn't matter--except in so far as the GOP has to wait 6 years to reclaim a couple Senate seats.

Posted by Orrin Judd at October 23, 2006 8:26 AM

Even if you don't think this election matters, everyone please humor me and VOTE yourself and drag as many others with you as you think will vote the right way.

Posted by: erp at October 23, 2006 8:58 AM

I misread that as "the threat of pai-gow", and wondered who the threat was to, Texas Hold 'Em players? Slot jockeys?

And this election matters in the Senate, where it'll be interesting to see the consequences of a two year vacancy or two on the Supreme Court. (And considering who might be making the vacancies, that would in effect give the "conservatives" a defacto majority.)

Posted by: Raoul Ortega at October 23, 2006 12:03 PM

They'll confirm whoever he sends up. They can't afford to have judges be an '08 issue at the presidential level.

Posted by: oj at October 23, 2006 12:14 PM

You mean with the speed and enthusiasm they've shown the last six years?

Posted by: Raoul Ortega at October 23, 2006 6:17 PM