Tuesday, December 14, 2010

In Defense of the Tax Deal

Today, the United States Senate, by a wide margin, cleared the way for the recent tax deal agreed upon by President Obama and Republican leaders to eventually pass the upper chamber, meeting a key test vote in which only a few Republicans a handful of liberal Democrats opposed.

For those who haven't followed the news in the last week, the Republican leadership and President Obama have agreed on a tax package that will extend the Bush tax cuts for two years, including for wealthy Americans and reduce the payroll tax for one year. In addition, the bill will have a large estate tax (35%) for amounts over $5 million for the next two years, as well as a 13-month extension of unemployment benefits.

Understandably, liberals who want government to tax us to death and want to continue class warfare are opposed to this deal, even though it would extend unemployment for another year and includes a signficant tax reduction for the middle class. The fact is, liberals want to tax anyone who makes any money, becuase they beleive in a redistribution of wealth, plain and simple.

What surprised us here at Kaw & Border is the fact that a few conservatives -- such as the Tea Party Patriots, Erick Erickson, Sen. Jim DeMint, and others -- have come out against the deal. Certainly, the deal is not perfect:

- The estate tax coming back at all is bad.
- The unemployment benefits extension is questionable, particularly since there isn't a funding mechanism in the bill.
- The tax cuts aren't completely permanent -- only extended for two more years.

No, this deal isn't perfect. However, rarely in process of legislating are deals perfect. In our eyes, the conservatives who oppose this deal need to reminded of a few important common-sense considerations:

The first fact is that in the current Congress, the Democrats have wide majorities, and even when we take over in January, we only will control one of the three bodies necessary to enact legislation -- the House. And while conservatve ideals are certainly on the advance in Washington, the fact is if you actually want to make progress on those principles, you have to come to terms with the fact it takes 218 votes to pass something in the House, 60 in the Senate, and the President's signature.

Secondly, due to the nature of the expiring Bush tax cuts, action was needed NOW - not in January, or Americans of all tax brackets would be seeing a huge tax increase. You can't one hand campaign on extending the Bush tax cuts, and then when Obama agrees to 95% of what you asked, balk because you had to give something in return, particularly when that something was extending unemployment benefits at a time when 9.8% of Americans don't have a job and others are worried they'll be next.

Thirdly, while some conservative activists may say 'let them expire' and get a better deal later -- the fact is that reeks of playing politics with people's incomes. Yes, Republicans needed to hold out for an extension of the tax cuts for all Americans, not just those under $250,000 -- and they got that, to the anger of liberals. So, we've gotten Obama to agree on tax cuts, made liberals angry, and we're thinking about opposing this? In short, don't punch a gift horse in the mouth.

Fourth, we need to remember the concept of incrementalism while at the same time recognizing the political realities, which sometimes compromising on the small stuff in advance of the larger aim. In this case, we know that Obama still wields a veto pen, still holds the Senate, and in the short term, still carries the House. With that environment, to get these kinds of concessions is absolutely remarkable. As Keith Hennessey said in this blog post:

If someone had told me, the day after Election Day 2008, that tax rates on income and capital would not increase for the next four years, I would have laughed at them. Now it’s about to come true, and Presidents Obama and Clinton are helping make it happen.

And some want to oppose it because it’s not enough?

The fact is, we can't compare this to our ideal policy because for the next two years, it is impossible to get our preferred policy. Yes, we all want to extend the tax cuts permanently. But what is to stop Republicans from going ahead and proposing this once we take office in January? We can still criticize Reid for stopping it or Obama for vetoing it, right? We are two weeks away from the end of the year, so it is not like we have more time to negotiate this before tax hikes would go into effect -- pass the two year tax cut extension now and try to do the permanent one later.

In essence, we agree with this column in the conservative journal The American Spectator by Philip Klein, who takes issue with Charles Krauthammer and others trying to call this Stimulus II, and details the noncontroversial, borderline, and controversial parts of the legislation. In it, however, he deals with the crticism that tax cuts are the same as spending hikes:

While it's true that from a budgetary standpoint, a reduction in revenue to federal coffers will increase the deficit, just as an increase in spending would, the difference is that a tax cut allows individuals to keep more of their own money, whereas expenditures represent the government confiscating wealth and distributing it as they see fit. Seeing tax cuts as a cost to government is to accept that all income earned belongs to the government in the first place.

So, the "this adds to the deficit" argument is fundamentally weak to us. First of all, 82% of the bill deals with the tax cuts - either the Bush tax cuts or the payroll tax cut proposed by Obama -- which would meet the long-held conservative belief of giving more people their own money. Whether that money is in the form of the income tax or the payroll tax is not important to us, because it's all money out of our pockets -- it's taxes, period, and the payroll tax is the one that hurts the most among people struggling day to day.

Republicans, in short, need to be careful about being seen as simply for tax cuts for business. Yes, those need to be cut drastically too -- and those tax cuts are extended under this bill, which will help businesses create jobs who would like to in the next to years. On the other side of the coin though is the taxes seen in the paychecks Americans receive at the other end of the employer-employee transaction, taxes that would go to things like food, car payments, and such. Conservatives need to remember those Americans as much as anyone else.

Again, there are parts of this bill that we don't like -- the unemployment benefit extension is questionable, but keep in mind, we are at a period of very high unemployment, and while, as Scott Brown (who supports the bill) noted, it would be best to have a funding mechanism for it, picking a fight over unemployment benefits at a time when unemployment is 10% might not be a good way to go for Republicans.

Finally, there are a few pork barrell points of this bill, as Philip Klein also notes in his article:

But the most controversial element among conservatives is the $55 billion in so-called "tax extenders," (see a list of them here). These are various tax breaks for businesses, including tax credits for ethanol and biodiesel. Earlier today, I spoke with Ryan Ellis of Americans for Tax Reform, and he pushed back against describing these as earmarks, because they allow businesses to keep more of their own money. While it would be ideal to get rid of all the various deductions as part of a broader corporate tax reform that lowered rates from where they are now (40 percent including states, making it the highest in the world), Ellis argues that in the absence of such reform, it's better that some businesses are able to get some form of tax relief.

So, in essence, as The Weekly Standard points out in its editorial supporting the deal entitled "Good Deal", we should not let the perfect become the enemy of the good.

Other conservatives dislike the deal because it would raise the estate tax from zero in 2010 to 35 percent in 2011 and 2012. But this is just another instance of letting the perfect be the enemy of the good. If no deal is reached, the estate tax will reset to 55 percent next year. Furthermore, there’s nothing to stop Republicans from cutting the estate tax in the future. So why let it get in the way of preserving current tax rates on income, capital gains, and dividends now?

And that is the crux of our position here at Kaw & Border. For now, with two weeks to go until the tax cuts expire, we are getting one a bill that was just a dream a few short weeks ago. When we take the House and six additional Senate seats in January, there is nothing preventing us from trying to achieve even more. But to oppose the broader B- deal because it's not an A+ now seems short-sighted and would have the direct result of doing exactly what we don't want -- and that's "pocket passing" a massive tax increase on the American people. As The Weekly Standard column noted, "the most important stimulus in the current deal is that no one will see their taxes rise in 2011."

This bill doesn't mean the end of the tax debate, but rather simply moving from our own 20 to the 50 yard line. Or, if you want to look at it more broadly, the country's policies just ticked to the right a few degrees. That's a good thing.

In that spirit, we urge conservatives to two things:

One, support the bill and embrace the tax cuts; and two, continue fighting for additional, deeper, more permanent tax cuts and broader tax and spending reform.

Thursday, December 2, 2010

Our 2011 Tip for the GOP in Kansas: Be Bold!

We are now a month past the general election, and the next two to four years in Kansas politics are beginning to take shape. As Governor Brownback and his transition team line up their appointments for the new administration, and as several legislative seats change hands in the process (either by virture of the Nov 2 election or subsequent resignations or appointments), the transition we are witnessing is not only a change from one Governor to another, but indeed what could be a seismic shift in the entire landscape of Kansas politics that could very well last a generation.

In order to completely understand the signficance of what is currently going on in Kansas, we must first look at history. In truth, the current era of Kansas politics began in the early 1990's, when conservatives went from a small issues-based movement into a political one, capturing a strong foothold in the Kansas House with victories by folks such as Kay O'Connor, Phill Kline, and others. The rise of these figures served as a foundation for conservative victories in the future, including Vince Snowbarger's win against Ed Eilert in the 1996 3rd District Congressional primary, to Phill Kline's winning the Attorney General seat in 2002.

What the rise of conservativsm in Kansas meant was that Kansas was no longer a two party system, but a three party system -- Democrats, liberal Republicans (called moderates by some), and conservative Republicans.

Of course, for the first decade or so of the conservatives' existence as a credible political movement in Kansas, they had growing pains, as is typical for any new movement. While conservatives did very well in capturing federal seats -- Brownback winning the House in 1994 and the Senate in 1996 over Sheila Frahm and Jill Docking; Jim Ryun succeeding Brownback in 1996; Tiahrt winning the House in 1994; and Snowbarger winning the House in 1996 -- conservatives did not do well in state offices.

Yes, Tim Shallenburger captured the State Treasurer's office in 1998 and Phill Kline won, very narrowly, the Attorney General's office in 2002 -- but outside of that, conservatives held no -- and were really not competitive in -- any statewide offices in Kansas from 1992 until 2010. Shallenburger, in fact, was defeated for Governor in 2002 and Kline, of course, was defeated for re-election in 2006. Conservative efforts at the governorship failed miserably -- Shallenburger's defeat in 2002 to Sebelius was the closest, in 1998, Conservative David Miller was trounced by Graves in the primary and in 2006, Jim Barnett (who ran as a conservative, though he unquestionably is truly a moderate) was crushed by Sebelius.

On the legislative side, conservatives were able to get a strong foothold in the House, certainly controlling the caucus and obtaining what some might consider a pro-life majority at one time. However, that majority proved not to be as conservative on the fiscal side, with pro-life moderates, RINO's, and Democrats joining together to allow the Sebelius spending hikes to put Kansas on a path to at best, fiscal irresponsiblity, and at worst, economic and budgetary collapse. On the Senate side, conservatives have never had more than say, 17-18 reliable votes, and never controlled leadership -- even in 2008, with 31 Republicans, Steve Morris won 18-13 in his campaign for Senate President.

Point of this history lesson is to point out that while conservatives certainly rose up and had a great impact on the Republican Party and Kansas politics in general, they truly have never been anywhere near control of either chamber nor any statewide office, save two for a period of four years each.

Much of this is due to the fact, for eight years a piece, liberal Republicans and Democrats each used their one "big bat" to run for and hold the Governorship. From 1995-2002, moderate Republican Bill Graves, a very popular Governor among most Kansans, controlled things. He was, in a sense, the moderates' superstar. It was during that period of time that groups like the GOP Club, a Johnson County-based group of moderate Republicans ran by Steve Cloud and company, were the most organized, having control of the party for periods of time, including the period in which Mark Parkinson was State GOP Chair. They fielded primary challengers, in fact, a sure sign of a strength of a political movement. Graves' name was even used on postcards recommending people for Republican Precinct Committeeman.

However, when Graves left, the moderates lost their main source of control over the Republican Party. David Adkins was crushed by Phill Kline in the 2002 Republican Primary for Attorney General. Moderates were largely unsuccessful in taking out conservatives in legislative primaries. Seats they won in 2002 (like District 18) they gave back two years later, in many cases. In the 3rd District, even hero Adam Taff (pre-prison) lost to Kris Kobach in the primary in 2004. They simply were not furnishing future stars -- and ones they thought they had, such as Kevin Yoder and Dean Newton, ended up being fairly conservative. Other talented figures simply became too liberal for Republicans to swallow in general elections. The moderates, though it wasn't clear to all at the time, were clearly weakening -- slowly.

Because of the moderates' weakness, that gave an opening to Democrats. Much like the moderates needed Graves, however, they needed their own big bat. Luckily for them, there were two Democrats holding statewide office -- Sally Thompson in the State Treasurer's office, who lost to Pat Roberts for the US Senate -- and also Kathleen Sebelius as Insurance Commissioner, who soon became to the the Democrats what Bill Graves was to the mods.

Sebelius gave the Democrats life. Because the moderates didn't have anyone credible to follow Graves and because Shallenburger didn't rise to the "big bat" status necessary to beat Queen Kathleen, she won election in 2002. In the period of time she was in office, moderate Republicans began to show their RINO stripes and switched parties -- Mark Parkinson, Cindy Neighbor and Paul Morrison in 2006 and Rick Guinn, Lisa Benlon and Ron Wimmer in 2008, for instance.

While this certainly gave the Democrats a shot in the arm -- they won a major statewide office (other than Governor) and two Congressional seats in 2006 and they started to recruit more candidates for the legislature, including winning six seats in Johnson County in 2008 -- it was fool's gold for two key reasons:

- Most of their victories were based on party switchers, former Republicans with high name identification. Except for a few folks swept into office by Obamamania such as Milack Talia and Mike Slattery, most Democrats who weren't previously Republicans failed. Some, like Wimmer and Guinn, never succeeded. Others, like Neighbor and Benlon -- have since been booted out of office.

- Kansas is, at its core, a conservative state.

No more evidence is needed in the Democrats false insurgency is the the fact that all of the statewide offices, save liberal RINO Sandy Praeger (one of the last remains of the moderate GOP faction), are occupied by Democrats who were never elected to the position they hold. Parkinson, former Lt Governor, is now Governor. He appointed Troy Findley to Lt Gov, Chris Biggs to Secretary of State, and Steve Six to Attorney General. All have lost.

Indeed, Sebelius saw the writing on the wall when she took off for Washington in 2009 -- she knew that, at its core, Kansas is a conservative state and she would have likely lost to the Moran-Tiahrt winner in 2010. What she left behind was a Democratic Party in retreat -- now down to 9 (and probably less in 2012) seats in the Kansas Senate and just 33 in the Kansas House, including losing 5 of the 6 seats it had gained in Johnson County. Not only that, they lost the 3rd Congressional Seat in embarassing fashion.

The Democrats, by any measurement, are dead in Kansas, at least for now.

The moderate Republicans, by any measurement, are on severe life support, clinging onto just the Kansas Senate with a bunch of ineffective folks like John Vratil and Pete Brungardt, who have absolutely no future in politics. Brungardt, for instance, nearly lost his primary in 2008.

That brings us to 2010. Much like Graves was the mods' big bat from 1995-2002 and Sebelius was the Dems' big bat from 2003 to 2009, Sam Brownback is the "big bat" conservatives have been craving the past 20 years.

While certainly conservative success in 2010 -- capturing at least 71 seats in the House and having Kris Kobach and Ron Estes victorious in statewide races, along with the mildly conservative Derek Schmidt -- had a lot to do with the national mood and the fact the Democrats and moderates are so weak -- there is no question that Sam Brownback's presence at the top of the Kansas ticket -- and with it, the kind of resources that Graves and Sebelius enjoyed -- helped propel conservatives to a true state of governance for the first time in history.

Now with conservatives taking control in January, the question is no longer if they can get control, but what they will do once we have it -- in truth, that is the test for any new "party" when they go from complainer to leader.

Will Republicans, starting with Sam Brownback, be bold?

Will they cut taxes, including repealing the sales tax hike from last year?

Will they institute judicial reform, starting with the State Appeals Court, which only requires a simple majority to change?

Will they pursue real school choice?

Will they have the courage to cut education spending, when necessary, standing up to the education lobby?

Will they have the courage to repeal dumb laws passed in the past few years, including the ridicuously confusing teenage driving law?

Will they pursue real budget reform, which includes going to a system of zero-based budgeting, rather than relying on the previous year's spending levels as a starting point?

These are just a few of the "litmus tests" many conservatives will be using to judge the success or failure of conservative power in the next several years.

Yes, the moderates, when combined with the Democrats, still have operable control over the State Senate. However, with 31 Republicans, one would think Governor Brownback could use some political capital to influence enough squishy Republicans to get to 21 votes on a critical issue? And, more importantly, even if you can't get to a number (say the 27 needed to change the Supreme Court judicial selection method), one would hope we would actively primary the 10-15 RINO Senators who are standing in the way of conservative legislation being passed.

Our advice to Governor Brownback and conservatives in power?

BE BOLD. You have nothing to be afraid of.

Indeed, as we described earlier, the moderates and Democrats are both at their weakest in history. Their "movements' are hopelessly disorganized and morale is low. The candidates they do find are either terrible or out of step with the values of Kansans. The school lobby is weaker than ever, with Kansans sick of 18 years of massive increases in education spending, only to see the same lobby ask for yet another increase the next year, demanding tax increases to fund them.

More importantly, Kansans are embracing conservative values. It is not like Sam Brownback and Kris Kobach are, to use a popular RINO phrase from the mid 1990's, "stealth" -- everyone knew what they were voting for -- yet both won with huge margins, both bigger than the margin Derek Schmidt, someone who was part of the moderate Steve Morris leadership team, earned.

Kansans are pro-life people who want their taxes low, spending cut, the schools kept accountable, and government small. Plus, with a still-emerging tea party movement ready to serve as an enforcement mechanism for 2010 campaign promises, now more than ever, conservative elected officials will be hearing from conservative voters.

With the people at their back and the political risks small, Brownback and legislative leaders need to realize what they have in front of them is a huge opportunity -- not to simply win future elections for political gain, but to leave a lasting legacy that will have a positive impact on the lives of Kansans for generation to come. And on an even broader perspective for the nation as a whole, they have an opportunity to make Kansas a model for conservative governance for other states to follow.

Imagine a Kansas as a truly pro-life state, as far as the current Supreme Court will allow us to go!

Imagine a Kansas where taxes are low compared to our neighbors, where businesses and families want to move here instead of move away.

Imagine a Kansas where immigration laws are enforced, where voters actually have to prove who they are when they vote, and where voter rolls are cleaned up.

Imagine a Kansas where the budget is balanced and where spending is reduced and government is not just held steady, but actually shrunk.

Imagine a Kansas where the court system is like the federal one, and where Governor Brownback, rather than being forced to select from three liberals, can choose true constitutionalists to fill judgeships in Kansas, a decision which would mean no more Montoys -- ever.

Imagine a Kansas where school choice is embraced and where public schools are even more successful because they are held accountable and have real competition.

Imagine that.

This will only occur if Sam Brownback and Republican legislative leaders not only have a sense of history, but realize they have the opportunity make history -- to realize the opportunity in front of them to take bold, conservative, decisive action.

We will not comment on whether we think this will happen -- that's for another blog post on another day -- but we certainly hope it will. If it does, we will have their back as will the vast majority of Kansans. Sure, some will oppose them, but in the long run, most Kansans -- largely a conservative lot -- will reward conservative action.

Why? Because conservatism works every time it's tried. And it's time to try it here in the Sunflower State.