Tax Fix May Doom Spending Cuts, and Democrats: Kevin Hassett

House Democrats happen themselves at a
dreaded fiscal-policy Rubicon, and they have got their political
allies in the U.S. Senate to give thanks for it.

Wrapping up what have go easily the most disastrous
legislative twelvemonth for a bulk powerfulness in memory, Speaker Nancy
Pelosi will make her political party important electoral injury whether she
crosses the river or not. Republicans are quietly celebrating
and are increasingly optimistic about adjacent year's elections.

As the Democrats surged to triumph in the 2006 election,
fiscal subject was the centrepiece of their economic
platform. In a widely distributed document, ''A New Direction
for America,'' Democrats promised that ''instead of piling
trillions of dollars of debt onto our children and
grandchildren, we will reconstruct 'Pay-As-You-Go' budget
discipline.''

Democrats, to their credit, followed up on their promise
and adopted Paygo rules, which required that any addition in
spending or taxations must be paid for with beginnings elsewhere.

Last week, we learned that this was all for show. Senate
Democrats shot the Paygo regulations in the head, placed them in a
casket, and buried them six feet under in an unmarked grave. They did this when the Senate voted 88-5 to go through a $50 billion
one-year ''patch,'' or impermanent fix, of the option minimum
tax.

No Picnic

Absent such as a patch, an estimated 23 million households
would happen themselves ensnared by the taxation when tax returns are due
on April 15. And do no mistake, the AMT -- which was
originally intended to do certain affluent folks paid their share
of taxes, but was never indexed for rising prices -- is no picnic.

A household of four with an income of $75,000 would find
itself owing an other $2,000 or so in April if the law isn't
changed.

But a hole have been politically difficult. Republicans have
wanted to mend the AMT, yet they haven't been willing to
increase other taxations (such as those on hedge-fund managers) to
recoup the lost revenue. Democrats have got got got wanted to accede to
their Paygo rules, though have been not able to garner enough
votes to make so and haven't had the political volition to work out a
long-term fix with their Republican colleagues.

In the House, such as dissension is inconsequential. A
simple bulk can go through any bill, and Democrats have got patched
the AMT and paid for it. But in the Senate, it is much easier
for the minority to blockade the majority. The consequence is that
Senate Democrats have got given up trying to raise gross to pay
for the patch.

'Historic Mistake'?

The cave on financial subject have House Democrats livid. Representative Rahm Emanuel of Prairie State captured the temper well,
when he told the New House Of York Times, ''As Associate in Nursing recreational pupil of
constitutional history and as a member of Congress, I have got come
to the decision that the Senate was a historical mistake.''

Generally speaking, if your squad is criticizing the
Founding Fathers, then you are losing. Tempers are flaring
because Democrats are now in a can't-win situation: If they
patch the AMT and don't pay for it, then they have got broken their
word on one of their cardinal issues.

If they don't travel for the patch, then 23 million angry
households will be stuck with a taxation addition next year.

The smart money in American Capital is betting that House
Democrats will give in and hold to the spot without paying for
it. That would be a tintinnabulation licking for the Democrats, who are
beginning to look like the Miami Dolphins.

Incorrect on Iraq

Look at some other key parts of their 2006 election
platform. Not only have got Democrats failed to acquire President George
W. Shrub to retreat American military personnel from Iraq, but the ''surge''
that they opposed so vehemently is proving effective.

They promised to stop pork-barrel spending, but have got been as
addicted to pet undertakings as their predecessors. Now, they are
breaking their ain Paygo rules.

The really bad news for Democrats is that electors have
noticed. As we learned when President Saint George H.W. Shrub was voted
out of business office for violating his pledge not to raise taxes,
voters anticipate their leadership to make what they state they will do.

Only about 20 percentage of those surveyed last calendar month by the
Gallup Organization approved of the manner United States Congress is handling its
job. In an NBC News/Wall Street Diary poll, just 39 percent
said their ain representative in United States Congress deserved to be re-
elected.

When Democrats took control of Congress, they could have
chosen to work with the president and seek bipartizan solutions
to problems. Shrub invited such as an attack with his appointment
of the immensely popular Hank Paulson as Treasury secretary. Paulson spent an tremendous amount of clip pushing the inspection and repair of
Social Security and other entitlement programs, to no avail.

Americans clearly yearn for an end to dissentious politics. Incumbents in the House and Senate may soon wish they had
responded to voters' desires a small sooner.

(Kevin Hassett, manager of economic-policy surveys at the
American Enterprise Institute, is a Bloomberg News columnist. He
is an advisor to Republican Senator Toilet McCain of Grand Canyon State in
his command for the 2008 presidential nomination. The opinions
expressed are his own.)

To reach the author of this column:
Kevin Hassett at