However, as Brian Beutler reports, it’s almost certain to be a pyrrhic victory:
President Obama endorsed the plan many months ago, and continues to support it. But divisions within his party, the White House’s soft push, and the new political reality after the November election have made it highly unlikely that this legislation will become law. It would need to overcome a filibuster in the Senate, and Democrats lack the 60 votes they’d need to do that.
Why did Democrats in Congress think it so important to pass middle-class tax cuts over the opposition of conservative Democrats and Republicans who will not approve any extension of the Bush tax cuts that does not include those for wealthy Americans (those who make over $250,000 a year) and super-wealthy Americans (those who make over $2 million a year)? Because all the tax cuts expire on December 31, and progressive Democrats were determined not to let that happen to middle-class Americans who already have all the financial distress they can handle with the continuing economic crisis.
I thought it might be interesting to take a look at the cost of extending all of the Bush tax cuts. OMBWatch reports on the results of a recent study put out by the Congressional Research Service:
In a report released [at the end of October], the Congressional Research Service (CRS) revised the total cost of permanently extending all of the Bush tax cuts to $5.048 trillion over the next ten years. The revised amount, which is significantly higher than the $2.8 trillion figure CRS reported in September, takes into account the cost of servicing the debt due to lost revenue and indexing the alternative minimum tax (AMT) to inflation.*
The report examines the possible impacts on the economy if Congress extends, or fails to extend, all or some of the Bush tax cuts. CRS presents the options at each extreme of the spectrum of solutions thusly:
Allowing the Bush tax cuts to expire as scheduled will somewhat improve the fiscal condition, but could stifle the economic recovery. At the other extreme, permanently extending all of the Bush tax cuts would not undercut the economic recovery, but would worsen the longer-term fiscal outlook and possibly signal a lack of progress in dealing with the long-term fiscal situation.
Interestingly, CRS finds that if Congress allows “the tax cuts targeted to high income taxpayers to expire as scheduled,” it “could help reduce budget deficits in the short-term without stifling the economic recovery.”
As for the revised total cost of permanently extending the tax cuts, CRS observes that debt service costs alone would amount to roughly $606 billion between now and 2020. Indexing the AMT to inflation, which CRS sees as likely occurring with extension of the tax cuts, makes up the remaining 1.637 trillion.
Here is an Ezra Klein column from mid-September:
More needs to be done to put the numbers involved in extending the Bush tax cuts in context, so consider this: There is no policy that President Obama has passed or proposed that added as much to the deficit as the Republican Party’s $3.9 trillion extension of the Bush tax cuts. In fact, if you put aside Obama’s plan to extend most, but not all, of the Bush tax cuts, there is no policy he has passed or proposed that would do half as much damage to the deficit. There is not even a policy that would do a quarter as much damage to the deficit.
The stimulus bill, at $787 billion, would do about a fifth as much damage. But that’s actually misleading: The stimulus bill was a temporary expense (not to mention a response to an unexpected emergency). Once it’s done, it’s done. An indefinite extension of the Bush tax cuts is, well, indefinite. It will cost $3.9 trillion in the first 10 years. And then it will cost more than that in the second 10 years. Call that number Y. And then it will cost more than Y in the third 10 years. And so on and on into eternity. Comparatively, the stimulus bill is a tiny fraction of that. The bank bailouts, which were passed by George W. Bush and the Democrats in 2006, will end up costing the government only $66 billion. The health-care bill improves the deficit outlook.
Republicans and tea party candidates are both running campaigns based around concern for the deficit. But both, to my knowledge, support the single-largest increase in the deficit that anyone of either party has proposed in memory.
The Pew Economic Group (emphasis mine):
The organization predicts that extending all of the Bush tax cuts would cost $3.3 trillion over 10 years. This figure includes interest payment on the debt.
Under a full extension, the deficit would be 4.1 percent of GDP in 2014 and by the end of the decade would reach 5 percent. Public debt would reach 83.5 percent of GDP by 2020.
If Congress extends all of the tax cuts for just two years, the cost would be $561 billion over the next decade, which includes interest. The deficit would be 2.6 percent of GDP in 2014 and would rise to 3.1 percent by 2020. Public debt would be more than 71 percent of GDP by the end of the decade.
Extending only the middle-class tax cuts — those benefiting individuals making less than $200,000 per year and couples earning less than $250,000 — would cost $2.2 trillion over the next decade, including interest. It would also result in deficits being 3.6 percent of GDP in 2014 and 4.3 percent in 2020. Public debt would be 79 percent of GDP in 2020.
Under a two-year extension of middle-class tax cuts, the cost would be $387 billion, including interest. The deficit would be 2.5 percent of GDP in 2014, and 3.0 percent by the end of the decade. And public debt would reach 71.1 percent of GDP by 2020.
Of course, the bill extending unemployment benefits that House Republicans blocked from a vote week before last would have cost a lot of money, too: $12 billion. When you put that $12 billion in the context of GOP support for a permanent extension of all the Bush tax cuts that would cost $3.3 trillion over the next decade (which, as this Columbia Journalism Review article points out, major news organizations don’t always do), it should become a little more understandable why liberal Democrats in Congress as well as liberals and progressives in general are so little inclined to take Republicans seriously when they say an extension of unemployment benefits, which would give direct relief to millions of Americans who are jobless (like the ones interviewed for this piece in a local Delaware County, Pennsylvania, paper) through no fault of their own is too expensive and must be accompanied by cuts to other essential economic relief or job creation programs — while accusing House Democrats of dealing out “chickencrap” for declining to spend $261 billion (the cost of extending all the tax cuts for just two years), or $3.3 trillion (the cost over 10 years of extending all the tax cuts permanently).
As a final note, this post by Ezra Klein in his WaPo column today sheds some light on John Boehner’s definition of “chickencrap” in relation to tax cut bills (emphasis is mine):
There are 238,781 households in John Boehner’s district. There are 2,824 of them with an income above $200,000. That’s 1.1 percent. And that 1.1 percent is too large, as many of those people make between $200,000 and $250,000, and so every dollar of their income will be eligible for the tax cuts the Democrats are pushing.
So in all likelihood, what separates a tax cut bill that’s “chicken crap” from a tax cut bill that’s great is its treatment of the richest 1 percent of households in Boehner’s district. And $700 billion slapped right onto the deficit. If Republicans win this debate despite the unpopularity of their position and its violent contradiction to their stated concern for the deficit, it’ll be one of the most impressive coups in recent political memory.
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