I got up this morning an listened to all the news networks and I was about to send off a nasty email to Peter Orszag. After all the headlines I hear was that “Orszag breaks with the President to support temporary extension of Bush’s tax cuts”. the budget busting tax cuts to mostly the wealthy. I decided to read the entire New York Times op-ed he wrote an after reading it it was evident that most of the media was misinforming by omission. The reality is that his article is pragmatic in our political reality.
- Democrats want a bill that will keep the tax cuts for the middle class and let the tax cuts for the wealthy expire. Republicans will not allow cloture on such a bill. While politically Democrats could win by attacking the Republicans for not supporting tax cuts for the middle class which such a bill, history is prologue, their timidity and lack of spine to aggressively politic makes this a non-starter.
- If then the tax cuts expire, the middle class will have a percentage of their disposable income collected in taxes and with no large stimulative infrastructure project ready to take up the slack, the economy would in fact suffer and the blame then placed on the party, the Democrats resisting the extension of tax cuts.
His article is clear. Why it is being reported from an amateur stance, I must wonder if there is some other mission being extended by some in the media.
Contributing Columnist One Nation, Two Deficits
By PETER ORSZAG
Published: September 6, 2010
The nation faces a nasty dual deficit problem: a painful jobs deficit in the near term and an unsustainable budget deficit over the medium and long term. This month, the Senate will be debating an issue with significant implications for both — what to do about the Bush-era tax cuts scheduled to expire at the end of the year.
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.
A benign bond market, however, is a luxury we won’t enjoy forever if we fail to tackle our long-term fiscal problem. What’s more, losing the confidence of the bond market could prove painful, since it is widely known that our fiscal trajectory is unsustainable and market sentiment may therefore shift quickly and unpredictably. In any case, as the economy recovers, the dominant problem will move from depressed demand to excessive budget deficits.
Despite a dire fiscal outlook, many progressives want to make the tax cuts permanent for all but the very highest earners. Many conservatives are even worse: they’d make the tax cuts permanent for the likes of Warren Buffett, even though he’d prefer they didn’t. Making all the tax cuts permanent would expand the deficit by more than $3 trillion over the next decade.
Contributing Columnist – One Nation, Two Deficits – Op-Ed – NYTimes.com