Orszag: Extend all Bush tax cuts two years

posted at 2:20 pm on September 7, 2010 by Ed Morrissey

Peter Orszag kicks off his post-White House career as a New York Times columnist by opposing his former boss on tax policy.  Barack Obama has spoken in favor of making the middle-class portion of the tax cuts permanent, but opposes extending the tax cuts for the higher earners.  Orszag wants them all extended two years, noting that raising taxes on anyone in a period of low consumer demand is asking for trouble.  However, Orszag argues against making any of them permanent, offering a false argument about the deficit:

In the face of the dueling deficits, 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.

Why does this combination make sense? The answer is that over the medium term, the tax cuts are simply not affordable. Yet no one wants to make an already stagnating jobs market worse over the next year or two, which is exactly what would happen if the cuts expire as planned.

Higher taxes now would crimp consumer spending, further depressing the already inadequate demand for what firms are capable of producing at full tilt. And since financial markets don’t seem at the moment to view the budget deficit as a problem — take a look at the remarkably low 10-year Treasury bond yield — there is little reason not to extend the tax cuts temporarily.

Why not make them all permanent — as would have been done in 2001 and 2003, had Democrats not threatened to filibuster them unless sunset provisions were included?  Orszag says it would explode the deficit:

Both approaches lock us into a budget scenario out of which there are few politically plausible routes of escape. Although hardly anyone wants to admit it, we’re not going to solve our budget problem over the next decade unless revenue is part of the equation.

Let’s look at the facts. The projected deficit for 2015 is 4 percent to 5 percent of G.D.P., depending on whose assumptions you use. A sustainable level is more like 3 percent or lower. So we need deficit reduction of 1 percent to 2 percent of G.D.P., or about $200 billion to $400 billion a year by 2015. These figures are uncertain, but they’re the best we have (and they may well turn out to be too optimistic).

Bruce McQuain at QandO throws the flag on the fallacy:

Anyone – what hasn’t been calculated in all of this?   That’s right, cut spending by that amount over the next decade.  That’s 300 billion a year.

At this point, it would be helpful to recall how much spending Democrats have added to the annual federal budget since taking control of Congress: over a trillion dollars.  The final budget from the Republican-controlled Congress, FY2007, spent $2.77 trillion and had a deficit of just under $200 billion, even with the war included.  The last budget from Democrats came in at over $3.8 trillion, with a $1.3 trillion deficit.  That’s a 38% increase in just three years.

Are we to believe that Congress can’t find $400 billion in annual spending to trim out of the massive expansion committed by Democrats?  After all, those same Bush tax cuts were in place for several years by FY2007, and the annual deficit didn’t rise above $500 billion in any one year.  The massive explosion in deficits didn’t come from a sudden revenue shock as much as it did from massive increases in federal spending, regulation, and expansion.

Undoubtedly, this will mean tough choices for legislators.  Rep. Paul Ryan’s roadmap on the budget acknowledges that it will take entitlement reform and reduction and an end to favored government programs.  But not only can it be done, even without some of those choices it was being done until Democrats took control of the checkbook.

Before taking more out of our pockets, Washington should start living within its already-monumental means.


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From the comedy team who brought you “We will pull our troops out of Afghanistan in six months”.

Vashta.Nerada on September 7, 2010 at 2:23 PM

Make the tax cuts permanent…

Reduce Federal spending to pre-Obama levels…

Khun Joe on September 7, 2010 at 2:24 PM

There are Zero reasons not to make the Bush tax cuts permanent. This chowder head is talking about eliminating the tax cuts because the government can’t cut spending in any significant way, I call BS.

Johnnyreb on September 7, 2010 at 2:25 PM

“Monumental means”

More vacations, trips, entertaining, big parties. Life is good for the masters.

Schadenfreude on September 7, 2010 at 2:25 PM

Cut Petey some slack, Ed. I hear KoolAid withdrawals are tough.

Knucklehead on September 7, 2010 at 2:26 PM

So every 2 years, this will hang over our heads? I love government.

lorien1973 on September 7, 2010 at 2:26 PM

I suppose the ‘thinking’ behind this is that small business owners will be stupid enough to base permanent hiring decisions on a temporary tax situation.

Vashta.Nerada on September 7, 2010 at 2:27 PM

Related misnomer: Government Report: Every American Adds $30,000 a Year to Deficit

Mervis Winter on September 7, 2010 at 2:27 PM

Payback. Somebody no likey Baracky.

txmomof6 on September 7, 2010 at 2:27 PM

It’s a fallacy anyway. Gross tax receipts don’t go down dollar for dollar when there’s a tax cut. In fact, tax receipts often go UP.

hawksruleva on September 7, 2010 at 2:28 PM

We don’t have a spending problem, we have a tax problem.

/s

WitchDoctor on September 7, 2010 at 2:28 PM

The final budget from the Republican-controlled Congress, FY2007, spent $2.77 trillion and had a deficit of just under $200 billion, even with the war included. The last budget from Democrats came in at over $3.8 trillion, with a $1.3 trillion deficit. That’s a 38% increase in just three years.

This is what the GOP had better take away from the November elections. Cut spending, or we will replace you with someone who will.

Vashta.Nerada on September 7, 2010 at 2:29 PM

There are Zero reasons not to make the Bush tax cuts permanent. This chowder head is talking about eliminating the tax cuts because the government can’t cut spending in any significant way, I call BS.

Johnnyreb on September 7, 2010 at 2:25 PM

One could argue that the tax code needs to be simplified and overhauled anyway. If I was a legislator, I’d try to tie that in to the sunset provision.

hawksruleva on September 7, 2010 at 2:29 PM

Being that it’s all about regime uncertainty, all tax changes shouldn’t take effect for two years and last at least five. That way, people could make rational decisions about their future and effectively plan.

The whole idea of “let’s advertise that we’re going to do something one way for 10 years, then decide that we might change it three months before it happens” is more of a problem than whatever the tax rates are.

cthulhu on September 7, 2010 at 2:30 PM

Two measley years that are written with a sunset are worthless. Won’t do a thing to assure business that the Dem/Obama age of uncertainty is over.

Part of the ’08 slide was spendaholic Dems taking over Congress in ’07 and business knowing taxes were going to skyrocket. The Dems began spending in earnest in 2007. They had a head start on Obama, and all that spending is still being charged to Bush.

marybel on September 7, 2010 at 2:30 PM

I’m willing to put up with a higher deficit to get a large reduction in tax burden across the board, because it isn’t their damn money. They act like not raising taxes costs them money they are entitled to have.

IT IS NOT YOUR DAMN MONEY.

Raising taxes will make the deficit worse, because they revenue they project to raise will not be there, due to the tax payers minimizing their exposure, and the economy slowing down and further reducing revenue to the Treasury.

Cutting tax rates across the board, for income in all brackets, capital gains, dividends, ect. even lower than the Bush43 rates we have now will stimulate economic growth.
Making them permanent will provide certainty to the people, further stimulating the economy.

This will create more taxpayers at the lower rate, increasing total revenue to the Treasury.

It isn’t about revenue, it’s about Social Justice through the IRS.
They want to punish the successful regardless if it hurts the economy or not.
Those damn filthy rich people have had it too good for too long, and it’s about time somebody knocked the crap out of them so they will suffer for a change.
That is what it’s about.
Economic growth be damned.
Fairness.
Social Justice.
Redistribution of wealth.

We are screwed if we don’t get rid of these people and restore the Reaganomics model of supply side policy.

That is the bottom line.

Brian1972 on September 7, 2010 at 2:32 PM

It’s a fallacy anyway. Gross tax receipts don’t go down dollar for dollar when there’s a tax cut. In fact, tax receipts often go UP.

hawksruleva on September 7, 2010 at 2:28 PM

Exactly! And gross tax receipts never add up to what the government projects when they raise taxes. CT just had a wake up call from when they raised the cigarette tax last July another $1.00 a pack, it is now $3.00 a pack here. The latest tax report came out, and lo and behold, cigarette taxes did not come close to what was projected. Seems with increased taxes some people actually modify their behavior and refuse to give the tax man more money.

Johnnyreb on September 7, 2010 at 2:32 PM

Orszag/Romer 2012…

mjbrooks3 on September 7, 2010 at 2:33 PM

Make them permanent for cripes sake

cmsinaz on September 7, 2010 at 2:34 PM

I can’t wait for the tell all books. Eagerly anticipating the one detailing how Michelle treats the hired help.

a capella on September 7, 2010 at 2:34 PM

Did anyone see the comments on that WSJ article? The Journal was swamped with libs, apparently.

hawksruleva on September 7, 2010 at 2:36 PM

It must really irk the Democrats to have to call them the “Bush Tax Cuts” instead of getting to take credit for this themselves.

heh

Lily on September 7, 2010 at 2:37 PM

At this point, it would be helpful to recall how much spending Democrats have added to the annual federal budget since taking control of Congress: over a trillion dollars.

That’s simply not true. You’re including stimulus spending int the face of a massive recession- spending that’s not intended to be permanent but merely intended to keep the economy from imploding. The deficit doubled during the Bush years. It’s not Obama who’s responsible for our current deep recession / depression or the massive federal debt.

bayam on September 7, 2010 at 2:38 PM

What they tell you now means nothing. They’ll say anything now to save their careers and hold onto power.

They are leopards telling you they are now zebras. They are the Party of Change and once they get past Nov 2, they’ll change back to the leopards they are.

Dusty on September 7, 2010 at 2:41 PM

O.T. Mayor Daley has just announced he won’t run for reelection.

Tommy_G on September 7, 2010 at 2:42 PM

O.T. Mayor Daley has just announced he won’t run for reelection.

Tommy_G on September 7, 2010 at 2:42 PM

Mr. Hairdo must have spilled the beans on him during the recent unpleasentness.

Johnnyreb on September 7, 2010 at 2:44 PM

Wow, someone in the Obama Administration does have a brain…oh, wait, he isn’t in the West Wing any more. Too bad.

neoavatara on September 7, 2010 at 2:45 PM

Make us all pay the percentage Rangel and Geithner paid?
Fairness!

dhunter on September 7, 2010 at 2:46 PM

So every 2 years, this will hang over our heads? I love government.

lorien1973 on September 7, 2010

Yup! I think the economy started tanking because the cuts weren’t getting extended as soon as the Pelosi regime took over. And NObody thought either McCain or BO would extend them. Those tax cuts include low rates for Capital Gains and no Death Tax (in 2010) – both major drivers for small business.

If we keep the every two years scenario there will always be uncertainty – that kills business!

JonPrichard on September 7, 2010 at 2:47 PM

So every 2 years, this will hang over our heads? I love government.

lorien1973 on September 7, 2010

No, so it will hang over a GOP President, a GOP House and possibly a GOP Senate.

barnone on September 7, 2010 at 2:50 PM

It’s not Obama who’s responsible for our current deep recession / depression or the massive federal debt.

bayam on September 7, 2010 at 2:38 PM

Yes, this is Obama’s deficit.

$1.4 trillion this year.
Bush did exactly zero dollars of that.

Through the Bush years, the deficit came down toward the end of his term, until the financial collapse and the emergency spending at the end.

At the beginning, you had 9-11-01, huge spending required in a national security emergency, plus cleaning up the aftermath and repairing the infrastructure.

The cost of the Iraq War over the entire Bush Presidency was less than Obama’s stimulus bill of $900 billion.

Katrina, the most expensive natural disaster in American history, along with the rest of the 2005 hurricane season, the most active in modern times for landfalls on the USA.

A lot happened during those years, but Obama has exceeded all of that spending in two years, without the emergencies.

Obama is the King of Debt. No spinning out of it.

Brian1972 on September 7, 2010 at 2:51 PM

extend the tax cuts for two years and then end them altogether. Ideally only the middle-class tax cuts would be continued for now.

This is stupid, and he knows it. He’s simply setting the stage for the democrats to show how “uncompromising” republicans are and how they only want taxcuts for the rich.

Giving tax cuts to the middle class is stupid when a large number of them are unemployed and would benefit greatly from some actual business growth. Instead, he recommneds raising the taxrate for businesses to 40%. Oh yeah, that’ll do wonders for the middle class.

You can’t argue with these people. They think your money, a businesses money is their money. They think they need to control every aspect of your life and that you’re stupid. The mere fact that he argues for higher taxes for business and keeping the tax cut for two years proves that. Only leftist drones believe that.

These people are evil. I don’t know what else can describe them. They must be crushed, and everytime they rear their little heads they must be ridiculed and crushed again.

darwin on September 7, 2010 at 2:52 PM

At this stage of the game, I think the only thing that will fix the economy is for Obama to quit and find another job.

saiga on September 7, 2010 at 2:54 PM

Make the tax cuts permanent…
Reduce Federal spending to pre-Obama levels…. Pre-Roosevelt levels
Khun Joe on September 7, 2010 at 2:24 PM

As in Teddy Roosvelt

turfmann on September 7, 2010 at 2:55 PM

That’s simply not true. You’re including stimulus spending int the face of a massive recession- spending that’s not intended to be permanent but merely intended to keep the economy from imploding. The deficit doubled during the Bush years. It’s not Obama who’s responsible for our current deep recession / depression or the massive federal debt.

bayam on September 7, 2010 at 2:38 PM

Obama voted against stricter oversight and regulation of Fannie Mae, without who, the housing bubble never would have happened.

Secondly, democrats have had Congress since 2006. During that time they ignored every warning about the impending housing bust … they intentionally lied and misled.

If anyone is responsible it’s Obama and the democrats.

darwin on September 7, 2010 at 2:56 PM

The deficit doubled during the Bush years. It’s not Obama who’s responsible for our current deep recession / depression or the massive federal debt.
bayam on September 7, 2010 at 2:38 PM

Are you sure you mean deficit? The last deficit Bush had with a Republican congress (2007) was $161 billion. Our deficit for July 2010 was $165 billion.

joejm65 on September 7, 2010 at 3:01 PM

Extend the Bush tax cuts, temporarily. Just in time for the 2012 general election, where the ads will blare “GOP about to raise taxes!”

Ergo, if the cuts are extended, they should rightfully be re-named the “Obama tax cuts”.

BobMbx on September 7, 2010 at 3:01 PM

The deficit doubled during the Bush years. It’s not Obama who’s responsible for our current deep recession / depression or the massive federal debt.
bayam on September 7, 2010 at 2:38 PM

Obama’s first deficit was 5x the largest Bush deficit. His second deficit is even larger.

Bayam can’t read or doesn’t understand numbers very well.

BobMbx on September 7, 2010 at 3:03 PM

I love the idea of extending the tax cuts for two more years. Then, it becomes a front-and-center issue for the 2012 Presidential campaign. Bambi would either have to run on keeping taxes as is and extending the tax cuts for an extended period of time, or he’d have to campaign on eliminating the tax breaks. “If you elect me, I’d do away with those tax cuts!!!!”. Bring it on…

joejm65 on September 7, 2010 at 3:04 PM

Reduce Federal spending to House of Burgesses levels. pre-Obama levels…. Pre-Roosevelt levelsKhun Joe on September 7, 2010 at 2:24 PM

BobMbx on September 7, 2010 at 3:04 PM

Extend the Bush tax cuts, temporarily. Just in time for the 2012 general election, where the ads will blare “GOP about to raise taxes!”
BobMbx on September 7, 2010 at 3:01 PM

Who says the GOP would want to do away with the tax cuts? That makes no sense…

joejm65 on September 7, 2010 at 3:05 PM

If anyone is responsible it’s Obama and the democrats.
darwin on September 7, 2010 at 2:56 PM

You and your so called “responsibility” garbage. Whatever. Demorats were under the thrall of Dubya since 2000, he MADE them take over control of Congress in 2006 and begin a wave of spending on stupid and wasteful liberal ideas.

Bishop on September 7, 2010 at 3:10 PM

I am so sick of these idiots who simply say .20 x $1000 = $200 and .17 x $1000 = $170, so lowering taxes costs the govt money. Anyone who has ever paid the slightest attention to the economy knows that lowering taxes will grow and spread the economy leading to higher overall tax revenue.

The record for the most gross tax revenue were 2004 and 2005 when the Bush Tax cuts were in full effect. We also saw a jump in tax revenue when Reagan came in and lowered taxes. Also, we saw a drop in revenue with Obama and Carter with increased taxes.

jeffn21 on September 7, 2010 at 3:11 PM

So every 2 years, this will hang over our heads? I love government.

lorien1973 on September 7, 2010 at 2:26 PM

No man’s life liberty or property is safe so long as the legislature is in session.

JohnGalt23 on September 7, 2010 at 3:16 PM

You and your so called “responsibility” garbage. Whatever. Demorats were under the thrall of Dubya since 2000, he MADE them take over control of Congress in 2006 and begin a wave of spending on stupid and wasteful liberal ideas.

Bishop on September 7, 2010 at 3:10 PM

I had no idea Bush was so … powerful. *shudder*

darwin on September 7, 2010 at 3:18 PM

Tell me again why anyone is listening to this twit?

mojo on September 7, 2010 at 3:18 PM

Actually, this is a sneak attack by the RNC. This would make the tax cut expiration (aka tax increases) an issue in the next election as well as this one.

sabbahillel on September 7, 2010 at 3:18 PM

Peter Orszag is a baby daddy with a wig that wouldn’t be any more obvious unless it had a chin strap….There’s the MSM that slob knobs for the WH, then there’s the MSM that slob knobs for the WH and wipes their chin afterwards….PO is in the second category.

ted c on September 7, 2010 at 3:21 PM

ted c on September 7, 2010 at 3:21 PM

I left with wondering who would sleep with Peter?..:)

Dire Straits on September 7, 2010 at 3:24 PM

Make the tax cuts permanent and cut back the spending.

dogsoldier on September 7, 2010 at 3:24 PM

Extend the Bush tax cuts, temporarily. Just in time for the 2012 general election, where the ads will blare “GOP about to raise taxes!”
BobMbx on September 7, 2010 at 3:01 PM

Who says the GOP would want to do away with the tax cuts? That makes no sense…

joejm65 on September 7, 2010 at 3:05 PM

Let me be clear:

Extend the Bush tax cuts, temporarily? That would move the expiration just in time for the 2012 general election, where the ads will blare “GOP about to raise taxes!” This is a strategic move for the DNC, which is countered simply be re-naming the tax cuts to the “Obama Tax Cuts”.

Better?

BobMbx on September 7, 2010 at 3:26 PM

Permanent or bust! Oh, that’s right.

Permanent or bust, again.

ncjetsfan on September 7, 2010 at 3:28 PM

The answer is that over the medium term, the tax cuts are simply not affordable.

Cut. Spending. Now. You can start with selling Fannie and Freddie and eliminating the Dept of Education.

Then they are affordable.

PattyJ on September 7, 2010 at 3:43 PM

“…over the medium term, the tax cuts are simply not affordable.”

I love when people try and convince me that my money actually belongs to the government, who were kindly enough to let me use some of it. Temporarily. But now they need it back.

I don’t think so. NEXT!

mojo on September 7, 2010 at 4:54 PM

Let us at least be honest when we think those that make more money should be taxed more. Let us go with our weapons and knock on their doors and demand the money simply because they make more. When they day let us raid their banks and steal their jewelry and cash./

Why we think that their money is ours is truly something.

CWforFreedom on September 7, 2010 at 7:39 PM

day= die

CWforFreedom on September 7, 2010 at 7:39 PM