Tax cuts against human nature?

Extending the Bush tax cuts: Human nature?

Of all the coverage of the debate over whether or not to extend the Bush tax cuts, and there is plenty today, given that the White House appears to be quietly giving ground to Republicans on extending the tax cuts temporarily, today's money quote comes via Howard Kurtz over at The Daily Beast. He quotes former President George W. Bush communications director Dan Bartlett as saying, "We knew that, politically, once you get [a tax cut] into law, it becomes almost impossible to remove it. That's not a bad legacy. The fact that we were able to lay the trap does feel pretty good, to tell you the truth."

Ouch. Nothing like leaving your successor with a thorny problem to solve. But while the admission is disturbing--setting time bombs for your successor, whatever party they may be a member of, hardly seems like an act of leadership--the other sentiment in Bartlett's statement is worth exploring, too. He's right: When it comes to benefits, leaders should be careful what precedents they set, and what perks they hand out. Taking them away later is much easier said than done.

I'm sure a behavioral economist could show us the research on what this says about human nature. Something is introduced as a temporary benefit, a reward during surplus times, and yet we seem to take it for granted, getting angry when it's taken away rather than thankful while it lasted. One need look no further than Wall Street to see this phenomenon at work. So-called "bonuses" became a complete misnomer as, over time, a once-a-year gift for a year of profitable growth became an ingrained way to send compensation packages ballooning into the stratosphere. Talk about an entitlement culture.

On the far less exorbitant end of the spectrum, I recall reporting a story about a few companies adding gas card benefits or testing out four-day work weeks to cut down on commuting costs during 2008's oil price spike. Still, their numbers remained fairly small. When I called to talk with big companies and their H.R. consultants about whether or not they were considering adding similar benefits, many explained they didn't want to institute perks they'd later have to take away when gas prices fell.

Of course, plenty of companies have ignored this truism of human behavior, and have cut salaries, 401(k) matches and bonuses during the downturn. Those that reconstitute those benefits when the company's fortunes improve again--and that required similar sacrifices from their executives--aren't likely to see a run for the exits. Those that don't, however, could very well suffer the consequences when flush times return.

What does this have to do with the news that the tax cuts are likely to get a temporary extension? Plenty. Those who favor ending the Bush tax cuts on the wealthy seem most worried about what this does to the deficit during the temporary extension, or about what this does to Obama's political fortunes--it was a campaign promise, after all, and many on the Left see such "negotiations" as preliminary caving to Republicans.

Rather, they should be concerned that this extension could simply be the first of many. Future leaders, too, don't want to be the ones accused of removing a benefit people have grown accustomed to. As William G. Gale, a senior fellow at the Brookings Institution and co-director of the Urban-Brookings Tax Policy Center wrote in this op-ed, "if the tax cuts don't die now, they probably never will."