Obama set against Bush tax cuts

Workers scan the listings on a job board in Las Vegas. The nation's economic recovery has been slowed by high unemployment rates.
Workers scan the listings on a job board in Las Vegas. The nation's economic recovery has been slowed by high unemployment rates. (Julie Jacobson)

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By Lori Montgomery
Washington Post Staff Writer
Wednesday, September 8, 2010

President Obama will argue personally Wednesday against extending the Bush-era income tax cuts for the nation's wealthiest families even for a year or two, White House officials said Tuesday - a message aimed at wavering Democrats who have been swayed by arguments that the economy is too weak to raise anyone's taxes.

In a speech scheduled for delivery Wednesday afternoon in Cleveland, Obama will restate his long-held position that the nation cannot afford to extend tax cuts for the wealthiest 2 percent of families, White House officials said.

The officials added that Obama would not threaten to veto any compromise which extends the upper-bracket cuts, a position that has gained ground in recent weeks among moderates in both the House and Senate. But congressional sources said they were told to expect the president to try to stiffen Democratic spines in expectation of a showdown over income tax rates before the November midterm elections.

"President Obama will make a strong case for permanently extending tax cuts for the middle class. But the president will make clear that he opposes the Republican plan to extend tax cuts for the top 2 percent, which would add $700 billion to the deficits over the next decade," said White House spokeswoman Jennifer Psaki.

Enacted in 2001 and 2003, the tax cuts were written to expire this year. Republicans want to extend them all, but Obama has long argued that the cuts should be extended only on family income under $250,000 a year. He will restate that point Wednesday, resisting calls to raise the income threshold to $1 million, congressional sources said.

In addition to restating his position on the tax cuts, Obama plans Wednesday to officially unveil more than $180 billion in fresh spending and business tax breaks - aimed at boosting both the nation's economic recovery and the political prospects of congressional Democrats facing the wrath of recession-weary voters in November.

But it's not clear whether the provisions - which White House spokesman Robert Gibbs insisted Tuesday do not amount to another stimulus package - can accomplish either goal.

Economists, business groups and tax lobbyists said they are not enthusiastic about the job-creating potential of expanding an existing tax credit for domestic research and permitting firms to write off 100 percent of spending on new plants and equipment in 2011.

"I think they're helpful on the margin to the recovery. But they're not a game-changer," said Mark Zandi, chief economist at Moody's Analytics and a key architect of Obama's first stimulus package. Coupled with Obama's plan to boost spending on transportation, Zandi said, the tax breaks "a year from now might create tens of thousands of jobs" - a drop in the bucket compared with the 7.6 million jobs lost during the recession that began in December 2007.

Politically, the provisions could be equally ineffective, some Democrats said. Because the details are sketchy, vulnerable Democrats may find it difficult to campaign on them. Meanwhile, some Democrats questioned whether voters would be able to distinguish between the new proposals - which the White House vows will not increase the nation's soaring budget deficit - and last year's $814 billion stimulus package, which voters tend to think increased deficits without improving the economy.

"It depends on how it's spun," said Pennsylvania Gov. Edward G. Rendell (D), whose state is a critical bellwether this year, with a governor's race, a high-profile Senate race and a dozen competitive House races that will help determine whether Democrats retain control of Congress.

"The president has to attempt to attack this problem and attack it now," Rendell said. "Is this a little too sophisticated for the voters to get? I'm not sure. But it's better than nothing."


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