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Dem Leader Endorses Extending Bush Tax Cuts, Again

August 30, 2011 - by Donny Shaw

On jobs, Congress is probably not going to do anything. On deficits, however, expect Congress to act.

It’s an unfortunate situation. Without congressional action on jobs, the unemployment rate is expected to stay around 9% — or even get worse — until 2014 or so. But on deficits, if Congres doesn’t act the problem will basically take care of itself. As the CBO explained recently, under current law, annual deficits are on track to shrink from where they are today (8% of GDP) to about 1% of GDP by 2015. That’s because Congress’ of the past created policies with expiration dates and controls that were designed to prevent them from being perpetual drains on the budget. For example, the 2003 Bush tax cuts were passed under special rules that make it easier for the majority party to overcome minority opposition for controversial legislation, but, in exchange, require the legislation to expire after 10 years. Other examples include the Alternative Minimum Tax and the formula the government uses to reimburse doctors under Medicare, both of which are “patched” by Congress year after year so that they don’t end up raising taxes too much or reducing doctor pay.

The problem, however, is that doing nothing and letting these sunsets and budget controls do their job is that it would mean more of the burden would get shifted to people and interests groups with money and political influence. For that reason, Congress is not likely to keep their hands off.

Check out Rep. Steny Hoyer [D, MD-5] today, for example:

House Democratic Whip Steny Hoyer (Md.) said he doesn’t believe Democrats need to raise income taxes on individuals as part of a comprehensive budget proposal, breaking with President Obama and other congressional leaders who have argued for the return of Clinton-era rates for the richest Americans.

“We don’t want to raise taxes, and we don’t have to raise taxes,” Hoyer said on Las Vegas station KSNV’s “Face to Face” program. [link]

That’s the #2 House Democrat, the one whose job it is to whip the caucus in line on the party position, coming out in support of once again extending the Bush tax cuts. And, really, it’s not clear that Hoyer is in fact “breaking” with the rest of Democratic leadership. When the 2001 Bush tax cuts were set to expire, the Democratic leadership brokered a deal with congressional Republicans to extend them. They did that even though the Republicans were in the minority in both chambers of Congress.

In their explanation for why they downgraded the country’s credit rating, Standard and Poors’ base scenario assumes that the Bush tax cuts will be extended once again. Extending these tax cuts is the most significant factor affecting deficits in the coming years, assuming Congress follows the spending restrictions set forth in the debt ceiling bill. They also said that if Congress surprised them and allowed the tax cuts to expire on schedule, that would be enough to justify them upgrading their rating to “stable.”

According to the CBO, extending them means that deficits would still be at 4% of GDP in 2021, while letting them expire would mean deficits would be at 1%.


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  • eth111 08/31/2011 7:52am

    Allowing the Bush tax cuts to expire means allowing them to expire across the board. That means that the tax rates for all brackets go up. That means that the 10% bracket gets rolled up into the 15% bracket and that the income brackets that pay the large majority of taxes (the 25% and 28% brackets with individual incomes of $35K to $175K) will see their taxes rise to 27.5% and 30.5%. If everyone is willing to accept the reality of the expiration statements, then we can start having a real discussion.
    Bottom line is that Fedzilla spends way too much. It has been shown that it is currently consuming (the government is a consumer, not a producer) 25% of the GDP while receiving, apparently, 17% (there’s the 8% of GDP deficit number). The Federal government needs to reduce its spending to 15% of previous year’s GDP and use the other 2% to start paying down the debt. That means a cut of government of 40%. The reduction in government agencies and reg’s will provide jobs and boost the GDP.

  • Comm_reply
    nancym 08/31/2011 9:30am

    So that would mean that someone who has a job at $35K who had absolutely no deductions or tax credits would have to pay an extra $53 per month in order to get the country’s financial house in order and restore our country’s credit rating and prevent further cuts to vitally important programs to protect those seniors, disabled, and the 20 million unemployed who would do anything to get a job that paid even half that salary.

    So is this going to become a class war between those who have been pushed off the financial security cliff these past few years and those who have been lucky enough to hold on to a job? I’m in school right now, will be finished in January. But I for one, assuming I will be employed at $35K or higher, would gladly sacrifice the cost of a couple of Big Mac and a Coke meals per week (or the Starbucks equivalents) in order to save my country from ruin. Anyone else?

    People need to get some perspective, including Steny Hoyer.

  • Comm_reply
    Melmoth 09/01/2011 12:52am

    Hey nancym,

    I’ve been out of college a long time, and am currently making less than $35k/yr working part-time (quasi-permanent and part-time). I interpret Steny’s remarks as a signal that the Obama administration has no intention to try to jam a large, comprehensive jobs bill onto Congress. And, also a sign that it has no intention of letting the Executive branch go rogue via jumbo coin seigniorage, force the Fed to fulfill the “full employment” element of its mandate, or anything that smacks of positivist action. So, Steny knows that none of that is going to happen. Steny also knows that the Republican party has no intention of floating a substantive job creation bill (other than an repackaged tax-cutting scheme in re trickle down). He’s just holding this out as a baby carrot, so that the Dem talking point will be that they are trying to ease the strain on the most hard-hit workers.

  • Comm_reply
    nancym 09/01/2011 6:08pm

    I understand what you’re saying, Melmoth, and the political standoff, but my problem with that is after a while these kind of “baby carrot” efforts that try to appease the unappeasable lead to a kind of self-fulfilling prophecy – no one talks about real jobs programs and then they become discouraged to talk about them, then they hide from their constituents, and then become afraid to talk about them, and so on, until what’s real in DC bears no resemblance to what’s real in Detroit.

    Then all the fuss turns to – not jobs – but what amounts to really just a drop in the bucket for most of the middle class. In light of the massive damage that will come from continuing this “compromise” (hah!) that gives more money and power to those who will continue NOT to create jobs, the pitiful savings are a red herring, especially when put up against the overall effect of job insecurity, rising prices, lack of services, etc., that marks the toll these trickle-down policies have on all our lives.

  • Comm_reply
    nancym 09/01/2011 6:08pm

    DC can only nickle and dime the American worker for so long before some sparks start to fly somewhere. Steny Hoyer is very accomplished in the nitty-gritty of politics, but he needs to think bigger right now. Times like these demand broader leadership than offering a quarter trade for a nickle in return.

  • Comm_reply
    sashabables 09/27/2011 2:34am

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  • rupertm1975 09/14/2011 4:00am

    ‎435 Congressman is way too many. Nothing positive can get done with that unweildy number. We need to downsize the number to 365. I realize it will dilute our representation, but it will also have the affect of making it more difficult for extremists on both sides from getting elected. Oh, and the give the remaining Congressman 20% pay raises. Pass it On.

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