Extend the full Bush tax cuts for two years and then kill them forever, former budget director Peter Orszag writes, fresh from his job as budget director for the first two years of the Obama administration. As for his former employer, the White House has consistently said it will seek to extend the bill for the bottom 98 percent but let taxes rise on families making more than $250,000. So ... awkward?
Orszag has a nice frame for thinking about the tax cuts. It's a balancing act of fixing the jobs deficit today and
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lowering the budget deficit tomorrow, he writes. But the most important point about this-ed isn't about his argument, it's the guy disagrees with it. That would be President Obama, the erstwhile boss.
In a sit-down with moderate liberal bloggers a few weeks ago, Treasury said the administration wasn't about to change its position on the Bush tax cuts just because some Democrats seem nervous about raising taxes in the budding recovery. The White House will seek higher taxes on the top two percent, the official told me, no questions asked, period, full stop.
That makes this op-ed ammunition for the folks seeking to extend the Bush tax cuts this fall. Republicans can -- and probably will -- turn the old TNR quip ("even the liberal New Republic thinks...") on the White House: Even your former budget director thinks raising taxes in 2011 will "crimp consumer spending, further depressing the already inadequate demand for what firms are capable of producing at full tilt."
For what it's worth, I'm with Orszag -- I think. The two-year cost of extending the Bush tax cuts is only about $70-$90 billion more than the administration's plan. That's real money, but it's not game changing deficit reduction. It's about one percent of our 10-year debt projection.
On the other hand, the Treasury has a compelling point when it says, If we can start to reduce the deficit by $90 billion over the next two years, why shouldn't we? Tax extenders have a kind of self-reinforcing gravity to them. The longer you allow them to live, the harder it is to kill them. From the vantage point of 2010, extending the full tax cut for only two years feels like saving money -- up to $350 billion a year by 2020. But in 2012, it will feel more like an albatross around Democrats' necks as they struggle both to dole out election-year goodies to voters and to fulfill their old promise to throw a $3 trillion tax increase on those same voters.