Lest we forget: the fiscal cliff happened from 2001 to 2010

All of the gnashing of teeth and wringing of hands about the need to avert the US “fiscal cliff” in January is dishonest. The truth is that the fiscal cliff began in 2001 when the then Republican-led Congress committed to funding two foreign wars in Afghanistan and then Iraq without cutting offsetting spending in other areas but while rolling out a series of time-limited tax cuts cited as necessary to revive the private sector from the 2001-02 recession.

These programs became known as the “Bush tax cuts” and specifically were implemented via the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) and the Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA). The Bush tax cuts as originally agreed had sunset provisions that made them expire at the end of 2010. When this deadline approached however, whether to renew the lowered rates, and how, became the subject of extended political gridlock wherein the Democrats proposed an extension for only those earning less than $250,000 and the Republicans refused to agree to a rate increase for those earning more than $250,000. This stalemate resulted in a further two-year extension of lowered tax collection that was part of a larger tax and economic package, dubbed the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010. In the meantime, and since 2001, government spending has continued apace while revenue collection has continued at the lowest levels in more than 50 years. This has resulted in the US government’s escalating reliance on debt issuance to fund its commitments.

Those who argue that the resumption of higher tax rates are disastrous, anti-growth and anti-America, are also succumbing to unsubstantiated hyperbole. Most developed countries including Canada have been paying tax rates at or above the US rates slated to resume in 2013. The US itself was collecting similar and even higher rates during its longest and most prosperous economic expansion in history from 1982 to 1999.

So the next time someone argues that tax cuts and current spending levels must be extended now “or else” the country will suffer dire financial consequences, let us not succumb to partisan nonsense. The crisis is already here and it has been well earned by both sides. For most it will never seem like a good time to cut spending and resume more responsible tax collection. The truth is that the time has come for adults to do both.

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5 Responses to Lest we forget: the fiscal cliff happened from 2001 to 2010

  1. Dr j. kuhn says:

    Danielle. Today’s editorial in the WSJ claims tax receipts have been increasing and paints a different picture. Any comments?

  2. Do you have a link to the article?

  3. Robert Lynn says:

    This seems to be another very partisan, “It’s all Bush’s fault” posting which is complete nonsense. I suggest you get a copy of “Bin Laden: The Man Who Declared War on America” by Yossef Bodansky before you say any more about Bush starting two wars. Bodansky’s book was released in 2009 well before 911 and lays out the long term involvement of Saddam Hussein in supporting terror groups including Bin Laden’s. Republicans and Democrats both voted permission for these wars except that Democrats along with their media allies saw the wars as an opportunity to gain power and undercut the Bush administration’s prosecution of the wars for the next five years until 2006 elections when they gained complete control of Congress. Every time Republicans made any effort to reign in spending the Democrat claque started screaming “racists” in front of a constant facade of body counts, body bags, and war crimes. Democrats including Obama voted down every effort to deal with deficit spending and reform. Bush was not the best President and he allowed Reid and Pelosi a free hand and signed everything they presented to him. Democrats actually had a four year dictatorship from 2006 through the 2010 elections.

  4. dave says:

    If you look at the wall street article link and in particular the it shows that Obama has been on a wild spending and tax binge. Both have went up and the fear is now that his spending will become permanent.

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