http://www.nytimes.com/2010/09/08/us/politics/08obama.html?_r=2&partner=rss&emc=rss
Obama Against a Compromise on Extension of Bush Tax Cuts
By JACKIE CALMES
Published: September 7, 2010
WASHINGTON —
President Obama on Wednesday will make clear that he opposes 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 that’s 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 Tuesday in a column in The New York Times.