December 26, 2012

A week from now, the United States will probably “go over” the “fiscal cliff,” and begin to implement a series of tax increases and spending cuts that will — over the course of the year — take a large bite out of economic growth. A deal to avoid the cliff is still possible, but unlikely; Republicans remain opposed to upper-income tax increases, regardless of size, and even if they come with cuts to entitlement spending.

On Monday, I wrote that this opposition is rooted in a fundamentally different view of how to


Senate Majority Leader Harry Reid reacts to a “fiscal cliff” chart. (Yuri Gripas/Reuters)

create economic growth in a recession. Republicans believe that federal spending is driving the debt that, in their view, is holding back the economy. Until Washington gets its “spending under control,” conservatives have all but promised to shoot down any tax increases.

It’s also worth looking at the other side. Yes, we know that Democrats view the current economic climate as demand-driven, but that doesn’t explain their insistence on upper-income tax hikes, despite the fact that — all things equal — it’s probably better to keep the tax cuts and wait for further economic growth before ending them.

The key thing to remember, however, is that Democrats — and liberals, in particular — care about economic inequality as much as they do growth. And as explained in The Post this morning, it’s this concern with inequality that has driven Democrats to rethink their approach on the Bush tax cuts.

Democrats say they have reconsidered their opposition to the Bush tax cuts for several reasons. The cuts were written into law from 2001 to 2003 after a decade in which most Americans saw robust income growth. Over the past decade, by contrast, median wages have declined, after adjusting for inflation, amid a weak economy.

The Post focuses its attention on Democratic support for permanently extending the middle-income Bush tax cuts, which is seen — by Democrats — as a way to put money in the pockets of ordinary people and account, in a small way, for the stagnant wages of the past decade. Higher upper-income taxes are the flip-side of this.

Rhetoric aside, there’s no doubt Democrats know that — barring a hike to pre-Reagan levels — there’s not much revenue to gain from restoring upper-income taxes to Clinton-era levels. And when it comes to deficit reduction, full employment — and robust growth — is the best solution. If upper-income tax hikes serve a purpose, it’s to slow the income gains of the wealthiest Americans, who — for the past decade — have reaped the lion’s share of gains from economic growth.

If the presidential election did anything, it put inequality on the table as a national issue, and the fiscal cliff is one battle — albeit, by proxy — in a larger fight. And, unlike most issues in politics, the lines are clear — Republican disregard for inequality is matched by Democratic attempts to, however gently, apply the breaks.

Jamelle Bouie is a staff writer at The American Prospect, where he writes a blog.