USA Today editorializes today against making the tax cuts permanent, and includes an opposing view from me.

I’ll include both here. I’ve learned that he who writes the opposing view is at a disadvantage, in that they get to see what I wrote, but not the reverse. I thought I had anticipated their attacks, but I only got one of them.

Here’s the USA Today editorial:

Our view on fiscal responsibility: Dr. Bush’s economic cures begin and end with tax cuts
Extension will drive up the deficit, won’t heal nation’s financial woes.

President Bush responded to Friday’s barrage of bad economic news – oil prices and unemployment soaring, the dollar and Dow sinking – with yet another call for extending his tax cuts. “In this period of economic uncertainty, the last thing Americans need is a massive tax increase – so Congress needs to send a clear message that the tax relief that we passed will be made permanent,” Bush said.

This little act of political theater isn’t just misguided. It’s also destructive. For one thing, Americans struggling to buy gasoline and pay next month’s mortgage are unlikely to be focused on tax cuts that might or might not expire in 2011. For another, these cuts – absent matching reductions in spending that Bush has never proposed – were irresponsible when enacted during Bush’s first term, and they are even more irresponsible now that the resulting deficits have added to the nation’s mountainous debt.

Despite inheriting a budget surplus, Bush has not presented a single balanced budget during his presidency, which coincided with the top earning years of the baby boom generation, a time when the government should have been preparing for the coming fiscal tsunami of the boomers’ retirement.

The fact that these tax cuts – which include reductions in marginal rates, repeal of the estate tax and a 15% rate on dividends and capital gains – are set to expire over the next several years reflects qualms that even a compliant Congress had when they were passed. The members who voted for them knew that they could not make them permanent without making a mockery of the budgetary rules. What’s more, they saw the boomers’ retirement approaching.

The situation has been compounded by the spree of spending and borrowing that followed these tax cuts. The wars in Iraq and Afghanistan, the creation of a Medicare drug benefit and other initiatives have ballooned the national debt from $5.7 trillion in June 2001, when the first tax cuts were enacted, to $9.4 trillion today. That’s $3.7 trillion in new debt just as Medicare and Social Security are reaching crisis proportions.

It is easy, of course, for Bush to call for the permanent extension of these tax cuts. He won’t be around to deal with the consequences. Democrat Barack Obama or Republican John McCain will be, yet neither presidential candidate looks to be a model of fiscal prudence. Obama has called for rolling back the Bush cuts for wealthy taxpayers but proposes a bevy of new spending programs. McCain, meanwhile, voted against the 2001 cuts but now supports extending them without suggesting credible, offsetting reductions in spending.

At least McCain’s top domestic adviser, Douglas Holtz-Eakin, appears to recognize that there’s more to economic policy than cutting taxes. “Sadly,” he told Bloomberg Television on Friday, “it seems that is all President Bush understood in the economy.”

In opposing the extension of all these tax cuts, we do not mean to suggest that this nation can rely solely on tax hikes to bring the budget into control. Overspending is a bigger problem than undertaxation.

But the Bush tax cuts have aggravated the nation’s fiscal problems. And, to be realistic and blunt, if the country is to avoid a financial crisis much bigger than today’s appears to be, it will need both painful curbs in benefit programs and hikes in taxes.

This is not a particularly pleasant message, particularly in a presidential election year when the economy is faltering. But it is one that needs to be heard.

Here’s my piece.

Opposing view: Keep taxes low
Allowing Bush cuts to expire will slam families, strangle investment.

By Keith Hennessey

In 2001 and 2003, President Bush led a Republican Congress in cutting tax rates and the marriage penalty, increasing the child credit, eliminating the death tax, and reducing capital gains and dividend taxes. Without action by this Democratic Congress, those laws will expire in January 2011, and Americans will face the largest tax increase in history. Congress should make the tax relief permanent.

If Congress fails to act, a typical family of four earning $50,000 a year will pay $2,100 more in taxes. The marriage penalty will return in full force, and the death tax will return to life. Expensive gasoline is painful; imagine if your family also had to pay $2,100 more in taxes.

Raising taxes on work leads to less work. Americans will have less incentive to enter the workforce, work and earn more, and invest in education.

When you hear that we should raise taxes on the rich, remember that most small businesses pay taxes as individuals. Raising the top tax rate will harm these small business owners, from restaurants and dry cleaners to shopkeepers and repairmen.

Raising taxes on capital gains and dividends will strangle business investment.

If Congress instead keeps taxes low and cuts spending, firms will invest more, productivity and wages will rise, and our economy will grow.

When you hear that dividends and capital gains relief helps only fat-cat investors, remember that half of American households are invested in the market, including seniors living on dividend and pension income, and families invested in prepaid college tuition plans.

If America raises taxes on capital, that capital and the better jobs created by it will go elsewhere.

Some say we can’t afford more tax cuts. It is important to remember that our deficit challenge is a long-term problem driven by future increases in Social Security and health care spending. Washington should cut its spending so American families don’t have to cut theirs.

Future tax increases will impede further economic growth if the Democratic Congress stalls. American workers, consumers and entrepreneurs are doing their part to keep our economy growing. It’s time for members of Congress to do theirs.

Keith Hennessey is assistant to the president for economic policy and director of the National Economic Council.