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With Pressure on All Sides, White House Defends Tax Cut “Framework”

Senior Administration officials tried to cast their deal on the Bush tax cuts in a positive light, even as forces on the left and right were mobilizing against it. The deal is so shaky that the White House officials and the President would only call it a “framework.” Several Democrats and Republicans in the House and Senate are already either simply opposed, or dedicated to mobilizing for defeat of the package, and the Senate Majority leader delivered a terse one-line statement only agreeing to discuss it with his colleagues. The biggest news here is that this deal isn’t done.

Just to outline this framework: under the deal, the Bush tax cuts for all rate levels would be extended for two years. The estate tax, in a monstrous deal, will be lowered from 2009 levels, with a $5 million dollar exemption and a 35% rate, for two years as well. And, the deal adds what is now an annual patch to the alternative minimum class so it doesn’t hit people in the middle class. In exchange, extended unemployment benefits between 26 and 99 weeks will be continued for 13 months, to the end of December 2011 (costing around $65 billion). A trio of tax cuts from the stimulus – the advanced Earned Income Tax Credit, the child tax credit, and the tuition tax credit known as the “American Opportunity Tax Credit,” would be extended, I believe for a year, at a cost of $40 billion. A new tax cut, an employee-side payroll tax cut of 2% (out of the 6.2% that employees pay), would be in place in 2011, at a cost of $120 billion dollars. A senior administration official responded to my question by saying that would be paid for out of general revenue through a credit, and so would not impact Social Security and Medicare finances in any way. And, there are an array of business tax credits in the deal, including two that the President noted in September – bonus depreciation allowing businesses to write off at 100% the cost of new investments, and the R&D tax credit. Senior officials punted when asked if assurances for votes on other agenda items, like new START and repealing Don’t Ask Don’t Tell, were included in the deal.

Together, this gets you to close to $300 billion dollars in 2011-2012 stimulus, albeit focused about 80% on the tax side of things. A lot of the measures are anti-contractionary and not necessarily stimulative, as they extend current policy into 2011 (and for some policies, 2012). All of this is unpaid for.


The senior officials I heard going over this deal acknowledged there were parts to like and dislike, but said they got a much stronger plan on economic and job growth than they ever expected. They said they would have stopped the tax cuts for the wealthiest if they could, but they didn’t have the votes. They object to that policy as well as the regressive adjustment for the estate tax, and vowed to keep up the fight against those policies over the next two years. “These are fights we will live to fight another day.” But they said they have staved off a middle-class tax increase, fixed the AMT, got important refundable tax credits from the stimulus for millions of families, and targeted tax cuts to workers making under $106,000 (recipients of the payroll tax cut) and business investment. The typical family, said one official, would see $2,000 in tax relief from the extension of the tax rates, and another $1,500 from the payroll tax cut.

This is an acknowledgement that the economy is still fragile, and that stimulus must be prioritized over economic growth. Last week at this time, however, we had the President announcing a federal worker pay freeze and speaking about the importance of reining in the federal budget deficit. How can those completely muddled policies be reconciled? Furthermore, how can we be convinced that this “stimulus” will stand, and not be cancelled out by a contractionary budget in 2011 that slashes spending? After all, the President praised the Catfood Commission report, and the chairs of the two Budget Committees ever voted for it or found it not savage enough in its cuts.

I put the question directly to these senior officials. And they promptly didn’t answer it. They said that the point of the agreement is to have a big impact on families and tax relief, and that the White House wouldn’t allow those policies not to be implemented or take effect. Furthermore, freezing federal pay was a tough choice, and the President was forthright on what he didn’t like about this deal.

That’s not the point I was making (and I didn’t have the chance to follow up). The point is that the President has been emphasizing the budget for over a year. Now he just made a deal to put another $300 billion on the credit card (actually more than that, as a baseline above current law), and somehow we think that Republicans won’t use the other looming fights – over the debt limit, over funding the government in 2011 – to cut spending and basically undermine this plan significantly? The President’s message is unclear on this point, alternately prioritizing the budget deficit and then the need for stimulus.

This is why I thought that letting tax rates expire, ultimately, may end up a better deal than slashing spending significantly. And a lot of Democrats in and out of government agree. Bernie Sanders said he’d do everything in his power to block the bill. Jerry Nadler said Bill Clinton would have called the Republican bluff and let the tax cuts expire. Big donors actually shut down the White House switchboard in opposition to this deal. A Daily Kos poll has 74% of respondents against it. Rep. Peter Welch (D-VT) is circulating a letter to colleagues opposing the tax cuts for the wealthy, on a variety of grounds.

We oppose acceding to Republican demands to extend the Bush tax cuts to millionaires and billionaires for two reasons.

First, it is fiscally irresponsible. Adding $700 billion to our national debt, as this proposal would do, handcuffs our ability to offer a balanced plan to achieve fiscal stability without a punishing effect on our current commitments, including Social Security and Medicare.

Second, it is grossly unfair. This proposal will hurt, not help, the majority of Americans in the middle class and those working hard to get there. Even as Republicans seek to add $700 billion to our national debt, they oppose extending unemployment benefits to workers and resist COLA increases to seniors.

Without a doubt, the very same people who support this addition to our debt will oppose raising the debt ceiling to pay for it.

We support extending tax cuts in full to 98 percent of American taxpayers, as the President initially proposed. He should not back down. Nor should we.

Republicans are also not sold on this “framework.” Michele Bachmann told Sean Hannity she would have problems voting for it. Sen. George Voinovich (R-OH) will oppose any extension whatsoever.

Here’s the sum total of what Jim Manley, spokesman for Harry Reid, gave in response to the plan:

“Now that the President has outlined his proposal, Senator Reid plans on discussing it with his caucus tomorrow.”


Senior officials stressed this deal wasn’t done and could change. They said lots of this deal would not have happened if they didn’t extend the tax cuts, and that while there are aspects to the deal the President vigorously opposes, what they’re getting on the other side is a good deal, especially the UI extension. This aligns with the statement the President made.

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David Dayen

David Dayen