JONATHAN COHN SEPTEMBER 7, 2010
Republicans, as you know, want to extend all of the Bush tax cuts, including those that benefit only wealthy Americans. And they want to do so permanently, adding another $600 to $700 billion in debt over the next ten years.
Does Peter Orszag, the former Budget Director and well-known fiscal conservative, now support them?
Um, no. But the first of his New York Times columns seems to have created that impression, based on what I heard from Tuesday's White House press briefing and what I read at the Weekly Standard's blog. So let’s clear this up, with help from a fairly reliable source.
In the column, Orszag noted the short-term need to bolster growth and the long-term need to reduce federal debt. Then he proposed a deal:
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.
I think the message is pretty clear.
If it were merely a matter of economics, Orszag is saying, then it would make sense to extend only those tax cuts that benefit lower- and middle-income workers--and to do so temporarily, letting even those cuts lapse once the economy is stronger. But the politics of that position are tricky, in part because Republicans are determined to keep tax cuts for the rich. Given that political constraint, Orszag thinks it would be worth giving Republicans an extension of those tax cuts, too, as long as the Republicans agree to keep all of the tax cuts temporary.
It’s fair to ask whether such a deal could hold. My colleague Jonathan Chait thinks it couldn't and I'm inclined to agree. It’s also fair to ask whether, as a very recently departed member of the administration, Orszag should be making strategic proposals at odds with the White House bargaining position--which, as Sam Stein notes at Huffington Post, is to oppose any extension of tax cuts for the wealthy, even as a hold-your-nose kind of compromise. (On Wednesday, according to the New York Times, Obama will make that position explicit.)
But put that aside and focus on what Orszag is saying about economics. Several questioners at today’s White House briefing suggested Orszag now favors extending the tax cuts for the wealthy, as a matter of principle. Mary Katherine Ham, writing at the Standard's blog, implied the same thing, saying that Orszag "echoes Republican concerns" about letting the tax cuts expire.
I don't see that, but, just to make sure, I decided to ask Orszag directly. Here’s what he told me, via email:
Allowing the upper-income tax cuts to expire at the end of the year would have only minimal adverse effects on the economy. It would be better to allow them to lapse now while temporarily extending the middle-class tax cuts (since allowing those to expire now would impose much more significant damage on the economy). The upper-income tax cuts should be extended temporarily only if that's the price that must be paid legislatively for winning on the more fundamental issue--not making any of the tax cuts permanent, because we can't afford them over the medium term.
That seems pretty unambiguous to me. But, then, so did the op-ed.