- The Washington Times - Thursday, December 16, 2010

The tax deal has exposed major divisions within the Republican Party. It has triggered deep fissures in GOP ranks - especially among many potential candidates for the 2012 Republican presidential nomination.

Establishment Republicans have embraced the deal. They argue that letting the George W. Bush-era tax cuts expire would threaten the nascent recovery and even could plunge the economy into a “double-dip” recession. It is bad policy and bad economics to impose massive tax increases during an economic downturn. This is the argument being made by the congressional GOP leadership, former Arkansas Gov. Mike Huckabee, Minnesota Gov. Tim Pawlenty and former House Speaker Newt Gingrich. They have aligned themselves with inside-the-Beltway Republican elites - and against the Tea Party.

There is, however, a growing populist rebellion against the package. Rush Limbaugh has come out against it. Tea partiers are upset. Former Alaska Gov. Sarah Palin, former Massachusetts Gov. Mitt Romney and Rep. Mike Pence of Indiana - likely GOP front-runners in the 2012 race - have announced their opposition. The reason: The deal heaps even more onto the mounting national debt.

They are right. The GOP tax deal, which was hammered out with President Obama, will cost nearly $900 billion. It is too expensive; no responsible conservative should support it. The package does more than temporarily extend the Bush tax rates. It also has something for almost every constituency: gimmicky expensing deductions for business, a one-year cut in payroll taxes for middle-income and working-class citizens, extended earned-income and clean-energy tax credits to satisfy the poor and environmentalists, and continuation of jobless benefits for the long-term unemployed for another 13 months - a disguised form of welfare. Hence, it amounts to another massive stimulus.

Moreover, the estate tax will be set at 35 percent, excluding the first $5 million. Democrats want 45 percent after $3.5 million. Republicans are touting this as a significant concession. It isn’t. Confiscating 35 percent of a dead person’s estate - whether more than $5 million or not - is not a victory. Rather, it represents a win for big-government liberalism, legitimizing Uncle Sam’s reach even into the grave to ensure that income accumulated over a lifetime is taxed not once, but twice. It is state-sanctioned theft. There is only one proper rate: zero.

The package is fiscally reckless and immoral. The greatest threat facing America is the skyrocketing debt. Everything else - the war on terror, Afghanistan, the economy, securing the border, health care, abortion, gay marriage - is insignificant if the country goes bankrupt. This is the reality of dysfunctional Third World states: Debates on issues are irrelevant because changes cannot be implemented effectively. The countries lack the capacity to do so. That’s what runaway deficits eventually lead to - the destruction of national cohesion.

Washington is drowning in red ink. The bailouts under the Bush administration, Mr. Obama’s trillion-dollar budget deficits, Obamacare, out-of-control entitlements and the nearly $1 trillion stimulus have put America on the path toward financial insolvency. In several years, the country will reach the tipping point: Total national debt as a percentage of gross domestic product will exceed 100 percent. That is Greece. No country has ever come back from those fiscal depths.

The Tea Party movement seeks to rein in public spending and roll back the federal leviathan. It is the revolt of the adults - people who understand that governments, like households, must balance their books. Republicans campaigned on upholding the core values of Tea Partiers - slashing spending, curbing deficits and reducing the debt. Yet, when confronted with their first major challenge, most of them reverted to their old Beltway habits: Let’s make a deal.

Taxes, especially on income and business, should never be raised in a recession. In fact, they should be cut to stimulate economic growth and job creation. Calvin Coolidge in the 1920s, John F. Kennedy in the 1960s and Ronald Reagan in the 1980s all permanently slashed income tax rates across the board. The result: The economy boomed and tax revenues substantially increased.

In the current package, the tax rates are not permanent and there are no offsetting spending cuts. The deal is therefore not paid for. We are - again - mortgaging the future of our children to satisfy the needs of today. We have become the selfish generation.

Republicans should have waited until early January, when the 112th Congress will be sworn in. With a large majority in the House and bolstered numbers in the Senate, the GOP would have been in a stronger position to negotiate a far better deal - perhaps one that could have phased out the death tax, pushed for longer extensions on the tax rates and, most important, insisted on deep spending cuts to make it deficit-neutral.

Congressional GOP leaders refused to do that because compromising with Mr. Obama is easier - and politically less risky - than governing responsibly. Establishment Republicans are not fools. They can see what is happening across the Atlantic. Throughout Europe, austerity measures have sparked riots, strikes and protests. For example, Britain’s minority Conservative government has been facing a wave of street opposition to its budget-slashing measures. Spending reductions are painful. They cause social unrest and are deeply unpopular - at least with some segments of the electorate. That is why Republicans often talk like Barry Goldwater but act like George W. Bush. It takes courage to implement fiscal discipline.

The Obama-GOP compromise signifies the betrayal of the Tea Party movement - and of the American people. A reckoning with reality cannot be avoided. We are going broke. We can no longer afford expensive entitlements, massive stimulus programs or phony tax deals. There’s no more money.

Jeffrey T. Kuhner is a columnist at The Washington Times and president of the Edmund Burke Institute.