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Obama Draws Line on High-End Bush Tax Cuts

photo: Eva Blue via Flickr

I’m not seeing the words “veto” and “threat” in there, but it appears that the President will at least oppose any extension of the Bush tax cuts for the wealthiest Americans. Those tax breaks are set to expire at the end of the year.

President Obama on Wednesday will make clear that he opposes any compromise that would extend the Bush-era tax cuts for the wealthy beyond this year, officials said, adding a populist twist to an election-season economic package that is otherwise designed to entice support from big businesses and their Republican allies.

Mr. Obama’s opposition to allowing the high-end tax cuts to remain in place for even another year or two would be the signal many Congressional Democrats have been awaiting as they prepare for a showdown with Republicans on the issue and ends speculation that the White House might be open to an extension. Democrats say only the president can rally wavering lawmakers who, amid the party’s weakened poll numbers, feel increasingly vulnerable to Republican attacks if they let the top rates lapse at the end of this year as scheduled.

In a very real way, this is the only policy that matters right now. The recovery package that the White House has trickled out over the past few days just isn’t likely to get enacted, at least not quickly. They may have added Republican-friendly (and probably ineffective) policies into the mix. But the pay-fors in the $180 billion dollar package ($50 billion up front on infrastructure, $100 billion making the R&D tax credit permanent, and a net $30 billion on tax breaks for capital investments) are murky, but what’s come out sound like policies which have already been soundly defeated in Congress, like ending fossil fuel subsidies. Republicans smell blood in the water for the midterms and will mount a united front – which is actually what the Democrats want, because this package is more of a talking point than anything. Already, Chuck Grassley, perhaps the biggest booster of bonus depreciation (allowing businesses to deduct their capital investments right away), has said in a statement that “If the offsets for this new package are other tax increases, then it’s a nonstarter.” He won’t offer any other offsets, mind you, and he’ll demand that the package be paid for. And that’s how it will die.

But the Bush tax cuts are a different animal. [cont’d.] They will expire under current law. And so Senate gridlock actually works in the President’s favor in this case, at least with respect to the high-end tax cuts.

So it’s good that the President isn’t bending, at least not at the outset, and calling to end the tax cuts for those at the top. Ideally he would recycle that money into the economy through paying for the spending in his recovery plan. That becomes part of the campaign agenda, and it sets up a real contrast that a smart strategy could easily exploit.

Mind you, it’s amazing that we have to wait on pins and needles wondering if the Democratic President will support ending tax cuts for the rich – one of the standard promises he made for two years on the campaign trail. Those tax cuts, and I hope Obama mentions this today in Cleveland, did absolutely nothing of value for the economy in their ten-year history, coinciding with wage stagnation and pathetic job growth, the weakest of the postwar era. If they led to anything at all, it’s the mind-boggling inequality and wage stratification, which has turned the middle class into an endangered species and set up an economy that almost can’t succeed. It’s offensive that anyone calling themselves Democrats would think twice about extending these tax breaks, given all the damage they’ve caused.

It’s an election year, and on this issue, President Obama has decided to make a stand. While other elements of this recovery makeover are more puzzling, on this one he’s merely following the promises made in the Presidential campaign.

CommunityThe Bullpen

Obama Draws Line on High-End Bush Tax Cuts

I’m not seeing the words “veto” and “threat” in there, but it appears that the President will at least oppose any extension of the Bush tax cuts for the wealthiest Americans. Those tax breaks are set to expire at the end of the year.

President Obama on Wednesday will make clear that he opposes any compromise that would extend the Bush-era tax cuts for the wealthy beyond this year, officials said, adding a populist twist to an election-season economic package that is otherwise designed to entice support from big businesses and their Republican allies.

Mr. Obama’s opposition to allowing the high-end tax cuts to remain in place for even another year or two would be the signal many Congressional Democrats have been awaiting as they prepare for a showdown with Republicans on the issue and ends speculation that the White House might be open to an extension. Democrats say only the president can rally wavering lawmakers who, amid the party’s weakened poll numbers, feel increasingly vulnerable to Republican attacks if they let the top rates lapse at the end of this year as scheduled.

In a very real way, this is the only policy that matters right now. The recovery package that the White House has trickled out over the past few days just isn’t likely to get enacted, at least not quickly. They may have added Republican-friendly (and probably ineffective) policies into the mix. But the pay-fors in the $180 billion dollar package ($50 billion up front on infrastructure, $100 billion making the R&D tax credit permanent, and a net $30 billion on tax breaks for capital investments) are murky, but what’s come out sound like policies which have already been soundly defeated in Congress, like ending fossil fuel subsidies. Republicans smell blood in the water for the midterms and will mount a united front – which is actually what the Democrats want, because this package is more of a talking point than anything. Already, Chuck Grassley, perhaps the biggest booster of bonus depreciation (allowing businesses to deduct their capital investments right away), has said in a statement that “If the offsets for this new package are other tax increases, then it’s a nonstarter.” He won’t offer any other offsets, mind you, and he’ll demand that the package be paid for. And that’s how it will die.

But the Bush tax cuts are a different animal. They will expire under current law. And so Senate gridlock actually works in the President’s favor in this case, at least with respect to the high-end tax cuts.

So it’s good that the President isn’t bending, at least not at the outset, and calling to end the tax cuts for those at the top. Ideally he would recycle that money into the economy through paying for the spending in his recovery plan. That becomes part of the campaign agenda, and it sets up a real contrast that a smart strategy could easily exploit.

Mind you, it’s amazing that we have to wait on pins and needles wondering if the Democratic President will support ending tax cuts for the rich – one of the standard promises he made for two years on the campaign trail. Those tax cuts, and I hope Obama mentions this today in Cleveland, did absolutely nothing of value for the economy in their ten-year history, coinciding with wage stagnation and pathetic job growth, the weakest of the postwar era. If they led to anything at all, it’s the mind-boggling inequality and wage stratification, which has turned the middle class into an endangered species and set up an economy that almost can’t succeed. It’s offensive that anyone calling themselves Democrats would think twice about extending these tax breaks, given all the damage they’ve caused.

It’s an election year, and on this issue, President Obama has decided to make a stand. While other elements of this recovery makeover are more puzzling, on this one he’s merely following the promises made in the Presidential campaign.

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David Dayen

David Dayen