http://www.nytimes.com/2010/09/08/us/politics/08obama.html?hp
Obama Will Not Extend Bush-Era Tax Cuts to Wealthy
By JACKIE CALMES
September 7, 2010
WASHINGTON President Obama on Wednesday will rule out 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.
It is not clear that Mr. Obama can prevail given his own diminished popularity,
the tepid economic recovery and the divisions within his party. But by
proposing to extend the rates for the 98 percent of households with income
below $250,000 for couples and $200,000 for individuals and insisting that
federal income tax rates in 2011 go back to their pre-2001 levels for income
above those cutoffs he intends to cast the issue as a choice between
supporting the middle class or giving breaks to the wealthy.
In a speech in Cleveland on Wednesday, Mr. Obama will also make a case for the
package of roughly $180 billion in expanded business tax cuts and
infrastructure spending disclosed by the White House in bits and pieces over
the past few days. He would offset the cost by closing other tax breaks for
multinational corporations, oil and gas companies and others.
While the speech will be centrist in its policy prescriptions other than the
Bush tax cuts, Mr. Obama's language will be partisan as he seeks to sharpen the
contrasts between Republicans' record and efforts by Democrats to create more
jobs, aides said.
White House officials have strenuously avoided labeling the proposal a second
stimulus plan, a phrase that has taken on negative political connotations since
the original roughly $800 billion recovery plan and subsequent additions have
failed to push unemployment down substantially.
But it would provide his party with an agenda for the home stretch of the
midterm campaign though one with a small chance of being enacted quickly or
helping the economy before Election Day if it were.
The two major pieces of the package expanding and making permanent a popular
credit for businesses' research and experimentation expenses, and allowing them
to write off the full value of new equipment purchases through 2011 have
longstanding Republican and corporate support.
The administration calculated that the package had to be attractive to
Republicans and business groups if it has any chance of passage in the short
time Congress will be in session before lawmakers go home to campaign.
Politically, however, the president is, in effect, daring Republicans to oppose
the plan, in that way proving Democrats' contention that they will block even
their own ideas to deny Mr. Obama any victories. And by proposing business tax
breaks that, according to nonpartisan analyses, would do more to stimulate the
economy than extending the Bush tax rates for the wealthy, Mr. Obama hopes to
buttress Democrats' opposition to extending those rates.
With its tilt toward business tax cuts, the package that Mr. Obama is proposing
risks discouraging liberals in his party who want more spending for projects
that provide jobs, especially for a construction industry still staggered by
the collapse of the housing boom.
They are not likely to be satisfied by another of the president's proposals: to
provide $50 billion immediately to build roads, air traffic control systems,
waterways and more, and, for the long term, to create a national infrastructure
bank. That is another bipartisan idea that would leverage federal money with
state, local and private-sector investments to finance projects.
In any case, the administration acknowledges that its blueprint might not pass
before Election Day, or even in the lame-duck Congress afterward.
"This is about long-term economic growth," Robert Gibbs, the White House press
secretary, said on Tuesday. "This isn't about the next 60 days or the next 90
days. This is about how do we get our economy fully back on track, how do we
get the millions that want to work back to work, and how do we repair the
economic damage thats been going on not just over the past two years but over
the past 10 years."
Republicans' early reactions were hostile, especially to Mr. Obama's proposals
to close corporate tax loopholes to offset any costs.
"If the offsets for this new package are other tax increases, then it's a
nonstarter," Senator Charles E. Grassley, a senior Republican of Iowa, said in
a statement.
Douglas Holtz-Eakin, a former director of the Congressional Budget Office and
an adviser to Republicans, predicted in an interview that "nothing is going to
happen between now and the election," except perhaps for passage of a separate
administration package of tax cuts and lending for small businesses. Senate
Republicans had been blocking that legislation.
Nigel Gault, chief economist for IHS/Global Insight, an economics consulting
firm, said he liked both the infrastructure and R&D proposals but "they're not
going to kick-start the economy."
Mr. Gault and other economists questioned why the administration was not
proposing a major payroll tax cut to spur hiring. The White House considered
the idea, officials said, but dismissed it in part because it would reduce
revenues to Social Security and Medicare.
Martin Feldstein, who was economic adviser to President Ronald Reagan, said all
the Bush tax cuts should be extended for two years because even letting those
for the wealthy lapse would be "a blow to a very fragile economy."
To the chagrin of the White House, Mr. Obama's recently departed budget
director, Peter R. Orszag, took the same stance on Wednesday in a column in The
New York Times.
[Non-text portions of this message have been removed]
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