This morning, Peter Orzag, until recently Director of the White House Office of Management and Budget, stepped into his new role as a contributing columnist for the New York Times.
This month, the Senate will be debating an issue with significant implications for both — what to do about the Bush-era tax cuts scheduled to expire at the end of the year. ... the best approach is a compromise: extend the tax cuts for two years and then end them altogether. Ideally only the middle-class tax cuts would be continued for now. Getting a deal in Congress, though, may require keeping the high-income tax cuts, too. And that would still be worth it.
Orzag's a good economist, with a track record of pragmatic predictions about the implications of economic policy. His column correctly shows how a long term extension of the Bush cuts -- even in a more limited form -- would seriously handcuff the budget. It's an important point, and one that needs to be understood.
However, there's a reason that I'm glad Orzag is the former budget director, and that point is also clear in this column.
While Orzag admits that the extension of the tax cuts for everyone is not sustainable -- "simply not affordable" over the medium term -- it's also clear that the extension of the tax cuts for the top income brackets would have little to no stimulative effect. Not extending the tax cuts to this group would have the beneficial effect of offsetting some of the deficit while not affecting the recovery (in fact, keeping the level of tax low on high income individuals seems to be clearly connected to lower wages in the middle class and a growing income disparity).
But Orzag can't make it through a sentence without offering up a "compromise" of giving away billions -- dollars that will have to be made up -- to buy the approval of Republicans. Implicit in this compromise are the two big mistakes that have been repeated over the last two years: 1) the assumption that there is a compromise position that will make the Republicans happy, and 2) a failure to believe that Democrats can create a compelling narrative.
In this case, Democrats have a perfect opportunity to stand in front of the American people eight weeks before the election and say "we want to give the middle and working classes a tax break." What are Republicans going to say? No. They're going to say no. Because "no" is the bet they've made, the only position they've staked out.
And really, how much better could things be? Going into an election with your "small government" opponent offering mealy-mouthed reasons for not supporting a tax cut is pretty much the best "September surprise" you could want. On the other hand, going to the GOP with an offer of more billions for billionaires in exchange for working class tax cuts is not just a compromise: it's an admission that middle class tax cuts are not an issue that the Democrats feel like they can use effectively.
Honestly, if you can't make offering tax cuts to 95% of the public work for you -- not just economically, but as a powerful, political stick with which you can slam your unthinking opposition -- you really should be a "former" official. After all, the Republicans are a stationary target, camped solidly in the middle of Swamp Hell No. If you can't hit them while they're standing still, when are you going to hit them?