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Tax Cut Extension Is Likely; So Is a Larger Deficit

Written by Gary North on November 30, 2011

Senate Majority Leader Mitch McConnell now says he will back an extension of the payroll tax cut. Democrats favor it. It is perceived as helping the middle class.

The Democrats want a surtax on the rich to pay for it. Republicans are unlikely to get on board.

“In all likelihood, we will agree to continue the current payroll tax relief for another year,” McConnell said Tuesday.

The statement comes after top Democrats harangued Republicans, accusing them of endangering middle-class families who could face an average $1,000 tax increase if the tax cut expires on schedule at the end of the year.

McConnell, though, stressed that Democrats will need to take a different approach if they want to win GOP votes.

The current Democratic proposal, authored by Sen. Bob Casey, D-Pa., would expand the size and scope of the current tax cut — increasing the size of the cut itself and applying it to employers as well as employees. It would also pay for the cut with a surtax on millionaires.

So, we are likely to get the tax cut extended. But the government will borrow the money to pay for it. The deficit will get larger.

We can see where the government is heading: toward bankruptcy. It takes time, but it is relentless. The government will not cut spending. Politics is about handing out favors to constituents. It is also about delaying the day of reckoning. So, the debt keeps rising.

The Tea Party favors tax resistance. This is good. The government will waste every dime it brings in. It will borrow against this flow of funds. Tax hikes rarely bring in more money, but if they do, Congress spends. It does not lower spending. It does not get the budget into surplus, paying off debt.

So, we should take every tax cut we can get. We should use our extra after-tax income to reduce all consumer debt. We should not imitate Congress. We should not conduct our affairs as though a day of reckoning is not coming.

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