One surefire way for President Obama to lose his liberal base is to give in on the Bush Tax Cuts on the same night the draft of the fiscal commission suggests massive, fundamental transformation-esque cuts to Social Security, Medicare/Medicaid, and discretionary spending. That’s a game changer.
Let’s review how we got here first: George W. Bush in 2001 and 2003 enacted tax cuts that lowered rates across the board on income, dividends and capital gains. Those tax cuts will expire at the end of the year, December 31st to be exact. Republican leaders, with their passion for campaign slogans and distaste for reality, want to extend all of these cuts permanently, or at least until they can elect a president who will do so. The White House’s plan was to protect the middle class and permanently extend the tax cuts for an individual’s first $200,000 and a family’s first $250,000 of income, but to let taxes on income above that level come back to Clinton-era rates.
Now there’s a question of which side will cave. And according to the Huffington Post, it’s the White House that’s blinking first. The Huffington Post brandished its usual 734-point ALL CAPS font to say: “WHITE HOUSE GIVES IN ON BUSH TAX CUTS.”
President Barack Obama’s top adviser suggested to The Huffington Post late Wednesday that the administration is ready to accept an across-the-board, temporary continuation of steep Bush-era tax cuts, including those for the wealthiest taxpayers.
That appears to be the only way, said David Axelrod, that middle-class taxpayers can keep their tax cuts, given the legislative and political realities facing Obama in the aftermath of last week’s electoral defeat.
“We have to deal with the world as we find it,” Axelrod said during an unusually candid and reflective 90-minute interview in his office, steps away from the Oval Office. “The world of what it takes to get this done.”
“Not so fast, my friend,” says the White House doing an impression of Lee Corso. Greg Sargent writes in his Plum Line blog at the Washington Post that the White House is “sharply” denying the story and its position remains unchanged:
There is not one bit of news here. I simply re-stated what POTUS and Robert have been saying. Our two strong principles are that we need to extend the tax cuts for the middle class, but we can’t afford a permanent extension of the tax cuts for the wealthy.
And White House comm director Dan Pfeiffer adds:
The story is overwritten. Nothing has changed from what the President said last week. We believe we need to extend the middle class tax cuts, we cannot afford to borrow 700 billion to pay for extending the tax cuts for the wealthiest Americans, and we are open to compromise and are looking forward to talking to the Congressional leadership next week to discuss how to move forward. Full Stop, period, end of sentence.
So we’re still nowhere. And this will no doubt play out in the national media and on Twitter and the blogs. But for those of you, and those Republicans, who believe extending the Bush tax cuts for the wealthiest two percent is a stimulative move that will save the American economy, know this nonpartisan fact: The Congressional Budget Office has noted that most Bush tax cut dollars go to higher-income households, and these top earners don’t spend as much of their income as lower earners. The CBO, in fact, examined 11 potential stimulus policies over the summer, and an extension of all of the Bush tax cuts ties for lowest bang for the buck. Fact.
As for the myth that failing to extend the tax cuts for the wealthiest 2 percent will be a small business job killer, consider the nonpartisan fact that fewer than 2 percent of tax returns reporting small-business income are filed by taxpayers in the top two income brackets. Anyone who tells you this will kill small business is lying or misinformed.
Well-respected tax guru David Cay Johnston asks the important question: “How much more evidence do we need that we made terrible and costly mistakes in 2001 and 2003?”
Here’s some of the analysis he put together: “So how did the tax cuts work out? My analysis of the new data, with all figures in 2008 dollars: Total income was $2.74 trillion less during the eight Bush years than if incomes had stayed at 2000 levels. That much additional income would have more than made up for the lack of demand that keeps us mired in the Great Recession. That would mean no need for a stimulus…Average incomes fell. Average taxpayer income was down $3,512, or 5.7 percent, in 2008 compared with 2000, President Bush’s own benchmark year for his promises of prosperity through tax cuts. Had incomes stayed at 2000 levels, the average taxpayer would have earned almost $21,000 more over those eight years. That’s almost $50 per week.
“Just measuring the second through seventh years we find that total income was still nearly $2 trillion lower than if 2000 level income continued. Stacking the deck in President George W. Bush’s favor does not change the awful performance or even soften it much. The tax cuts cost $1.8 trillion in the first eight years, according to an analysis by the Tax Policy Center, whose reliability the last administration went out of its way to praise. Those cuts were heavily weighted toward the people candidate George W. Bush famously called “haves and the have-mores . . . some people call you the elite. I call you my base.”
He’s right. How much more evidence do we need?