Earlier this month, Sen. Evan Bayh (D-IN) said that he agreed with Rep. Eric Cantor’s (R-VA) assertion that all of the Bush tax cuts should be extended, even those for the richest two percent of Americans. The Obama administration has proposed retaining the cuts for the lower- and middle-class while allowing those for the rich to expire on schedule at the end of the year.
Yesterday, Sen. Kent Conrad (D-ND), the chairman of the Senate Budget Committee, called for a temporary extension of all the cuts, including those for the wealthy, adding that “he thinks waiving so-called pay-go rules to extend the upper income rates should be considered”:
“Pay-go is not just a line in the sand,” he said. “There is a reason that you have a pay-go waiver, which requires 60 votes.”
Today, Conrad clarified that he is by no means endorsing the Republican line on a deficit-financed permanent extension of all the Bush tax cuts, saying that “the Republicans’ proposal to me is a formula for the decline of the United States.” His position is that the tax cuts for the rich should only be extended for 18-24 months, “until the recovery is on more solid ground.”
While Conrad’s position is far more nuanced than that of the Republicans, extending the Bush tax cuts is still one of the least stimulative steps that policymakers can take to boost the economy, generating just 29 cents of economic activity for every dollar spent (since the benefits overwhelmingly go to the wealthy, who are far more likely to save a dollar received than is someone from the lower- or middle-class). Extending all of the cuts for two years would cost $558 billion, including debt service costs, according to the Pew Fiscal Analysis Initiative.
Today, when asked if Democratic leaders are willing to consider extending all of the Bush tax cuts, Speaker of the House Nancy Pelosi (D-CA) said, “No. Our position has been that we support middle-income tax cuts.” Treasury Secretary Timothy Geithner also reiterated the administration’s position today:
Mr. Geithner said there is “still some uncertainty about how strong the recovery is going to be,” which may be impacting spending decisions by businesses and individuals. But he discounted that as a reason to extend the Bush-era tax cuts for top earners, saying most private forecasts show moderate economic growth and increasing public confidence in the recovery.
Yesterday, Sen. Ben Nelson (D-NE) “said through a spokesman that he also supported extending all the expiring tax cuts for now, adding that he wanted to offset the impact on federal deficits as much as possible.”