On Bush Tax Cuts, an Impending Battle Between Congress and Administration
The administration’s push to let the Bush tax cuts for the wealthiest Americans expire faces opposition from Republicans in Congress -- and some Democrats.
Jul 31, 202027.8K Shares1M Views
Treasury Secretary Timothy Geithner (epa/ZUMApress.com)
This weekend, Treasury Secretary Timothy Geithner appeared on two Sunday news programs to make the case for the expiry of the Bush tax cuts on the wealthiest earners and to argue for a strong recovery. The backdrop for the appearances is the looming fight over how to extend the 2001 and 2003 tax cuts. If Congress takes no action, taxes will rise for all income brackets.
[Economy1] The Obama administration hopes to extend the tax cuts for everyone making less than $125,000 a year, or $250,000 a year for couples. Some congressional Democrats want to keep lower taxes for all Americans until the recovery takes better hold. Most Republicans want to make the tax cuts entirely permanent. That sets the stage for a serious fight, during the run-up to the midterms, between the two parties and possibly among Democrats as well.
On This Week, Geithner called the Obama plan the “responsible thing to do, because we need to make sure we can show the world that [we are] willing as a country now to start to make some progress bringing down our long-term deficits.” He also said that “letting those tax cuts that only go to 2 percent to 3 percent of Americans, the highest earning Americans in the country, expire” would not “have a negative effect on growth.”
That argument is designed to combat the Republican line that tax increases would cut GDP growth and jobs. In advance of November’s midterm elections, campaigning for which will begin in earnest after the August congressional recess, Republicans have prepared a talking-points campaignfocusing on the “Democrat tax hike.”
But Democrats are not embracing the tax increases wholesale, and several Democrats support extending them for at least another year or two. Kent Conrad (D-N.D.), a deficit hawk and the head of the Senate Budget Committee, is arguing for extending all cuts. “In a perfect world, I would not be cutting spending or raising taxes for the next 18 months to two years,” he toldreporters. “This downturn is still very much with us unfortunately.”
But the Obama administration is also heralding the economic turnaround more loudly than congressional Democrats. In a separate appearance on Meet The Pressthis weekend, Geithner said that “the most likely thing is, you see an economy that gradually strengthens over the next year or two. You see job growth start to come back again.”
Other economic figures do not agree. Testifying before Congress last week, Ben Bernanke, chairman of the Federal Reserve, describeda weaker economy and argued for retaining tax cuts as a form of stimulus. “In the short term I would believe that we ought to maintain a reasonable degree of fiscal support, stimulus for the economy,” he said. “In the longer term, I think we need to be taking steps to reassure the American people and the markets that our fiscal situation is going to be well controlled.”
The Republican congressional leadership has argued that tax cuts do not need to be offset, because they are stimulative, a point contended by conservative and liberal economists.
Dexter Cooke
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Dexter Cooke is an economist, marketing strategist, and orthopedic surgeon with over 20 years of experience crafting compelling narratives that resonate worldwide.
He holds a Journalism degree from Columbia University, an Economics background from Yale University, and a medical degree with a postdoctoral fellowship in orthopedic medicine from the Medical University of South Carolina.
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