Here's a report from The Hill about conservative Democrats pushing to extend the Bush tax cuts, which has been the biggest contributor to the national deficit.
Reps. Michael McMahon (D-N.Y.) and Bobby Bright (D-Ala.) circulated a letter to members of Congress on Friday asking for the extension for the tax cuts set to expire this year.
"I'm sure we will get support from others," said McMahon on CNBC.
The proposal is also likely to pick up support from Republican-leaning business groups. Both Bright and McMahon hail from districts that Sen. John McCain (R-Ariz.) carried during the 2008 presidential elections and both face uphill reelection battles this fall.
Bright and McMahon asked their colleagues to sign a letter to the president articulating the plan. That would put them in opposition to President Barack Obama, who wants to let tax cuts for upper-income earners expire and keep in place others that target middle and lower-income earners.
Susie Madrak at Crooks and Liars has a good article about the disastrous financial effects of the Bush tax cuts, which further widened the divide between the rich and the middle class. She cites the Citizens For Tax Justice's report which points out that:
And yet, many of the lawmakers who argue that the health care reform legislation is "too costly" are the same lawmakers who supported the Bush tax cuts.
Their own voting record demonstrates that health care reform is not a matter of costs, but a matter of priorities.
It’s difficult to see how the Bush tax cuts could provide us with two and a half times the benefits of health care reform. In 2010, when all the Bush tax cuts are finally phased in, a staggering 52.5 percent of the benefits will go to the richest 5 percent of taxpayers.
President Bush and his supporters argued that these high-income tax cuts would benefit everybody because they would unleash investment that would spark widespread economic prosperity. There seems to be no evidence of this, particularly given the collapse of the economy at the end of the Bush years. The tax legislation enacted under President George W. Bush from 2001 through 2006 will cost $2.48 trillion over the 2001-2010 period.
This includes the revenue loss of $2.11 trillion that results directly from the Bush tax cuts as well as the $379 billion in additional interest payments on the national debt that we must make since the tax cuts were deficit-financed.
Michael Ettlinger at the Center for American Progress explains the situation that Democrats find themselves in with the possibility of extending or letting the Bush tax cuts expire:
Policymakers are damned if they do and damned if they don’t. If they let the tax cuts expire they’ll be blamed for raising taxes. If they extend the tax cuts, the deficit picture suddenly looks worse because, on paper, we’ve been counting on the money from the tax cuts expiring to keep the deficit down. The choice of either looking like tax raisers or deficit raisers is no fun at all.
President Obama during the campaign last year offered a middle ground. He proposed extending the tax cuts on those with less than $250,000 of income and letting most of them expire on those with income greater than that. This way he keeps taxes constant on the middle class, raises them on the well-to-do, and the deficit picture doesn’t look as bad as if all the tax cuts were extended.
If the tax cuts expire, the funds from that could be used to create jobs and domestic spending as Ettlinger suggests:
There’s also another option that would be better for the economy. We could let the Bush tax cuts on those making over $250,000 expire and use the funds for other job creation measures that are likely to be more effective than tax cuts.
We could, for example, use them to help state and local governments avoid laying off teachers, firefighters, and other public service workers because of the enormous shortfalls they’re facing. There are a host of ideas for how the money could be spent better for job creation than leaving the Bush tax cuts alone. With these ideas, we aren’t dependent on how the recipients of tax cuts spend their largess for the economic boost we hope for. With these ideas, the funding goes directly into the economy in the way we most need it.
Conservative Democrats like Rep. Bobby Bright and Rep. Michael McMahon have their priorities wrong. It doesn't surprise me that they're wrong-headed on this, given that both of them voted against the House health care bill when it was up for a vote in November. And there's already noise from the White House about doing a temporary extension of the Bush tax cuts by way of Peter Orzsag:
With most Bush tax cuts scheduled to expire at the end of this year, some officials, including Mr. Obama’s budget director, Peter R. Orszag, suggested that instead of permanently extending the cuts for all but the richest Americans — as the president has long promised — Mr. Obama could instead propose to extend them a year or two, arguing that further action would await the recommendations of a bipartisan budget commission that leading Senate Democrats want to create.
Extending the Bush tax cuts for another year or two would further increase the budget deficit, and that isn't what we need in a recession---we need the lost revenue from the wealthy to help pay for job creation and invest back in the middle class.
It's time to do it.
UPDATE: Here's more from Geither and others in the WH administration--they might let the Bush tax cuts expire:
Obama reiterated this commitment as President, saying "we need to end the tax breaks for the wealthiest 2 percent of Americans, so that folks like me are paying the same rates that the wealthiest 2 percent of Americans paid when Bill Clinton was President." And last week, Treasury Secretary Tim Geithner swatted away reports that the administration was thinking about reversing course and extending all of the Bush tax cuts. "That’s not something we’ve contemplated," Geithner said.
When asked if the administration would "go along if Congress took such a step," Geithner replied, "I don’t think that would be good policy for the country, and I don’t think it’s a necessary thing to do." Well, it seems like Geithner and the administration need to start convincing House Democrats that extending the cuts isn’t necessary: