President Obama urged Republicans on Monday accept a one-year agreement to extend the Bush tax cuts for Americans making less than $250,000 a year, suggesting that a broader deal would be easier for both sides to hammer out after the election.
“In many ways the fate of the tax cut for the wealthiest Americans will be decided by the outcome of the election,” Obama said in remarks delivered at the White House. “My opponent will fight to keep them in place, and I will fight to end them. But that argument shouldn’t threaten you. It shouldn’t threaten the 98 percent of Americans who just want to know that their taxes won’t go up next year.”
Obama’s renewed focus on paring down the highest-income portions of the Bush tax cuts advances several White House priorities from a political, economic and negotiating perspective.
The president’s re-election message right now is almost singularly focused on disqualifying Romney in the eyes of voters by portraying him as rich, out of touch and determined to help out fellow millionaires at the expense of average Americans. Obama’s newest announcement puts Romney, who supports a full extension of the Bush tax cuts and additional tax breaks that independent analyses claim would benefit the wealthy, in a tight spot. The Romneys paid about 13.9 percent in taxes in 2010, much lower than many middle-income Americans, and Democrats are eager to use their opponent’s biography as a cudgel against Republicans arguing that the economy will suffer if the rich have to pay more.
Obama hammered at this angle repeatedly in his White House address, arguing that Republican claims that putting more money in the pockets of rich would stimulate the economy had already been tried unsuccessfully under President Bush.
“We were told that it would lead to more jobs and higher incomes for everybody, and the prosperity would start at the top and then trickle down,” Obama said. “And what happened?The wealthy got wealthier, but most Americans struggled.”
Obama said that the additional tax revenue from higher income Americans was especially necessary given the yawning deficits precipitated by the financial crisis.
“It’s not like I like to pay taxes,” Obama said. “I might feel differently if we were still in surplus.”
The White House has long threatened to let all the Bush tax cuts expire if Republicans don’t give in to their demands and permanently eliminate the portions that affect those making over $250,000 a year. But a still-weak economy has piqued concerns that raising tax rates across the board in combination with scheduled spending cuts as part of last year’ debt-ceiling deal could plunge the country into another recession, making Obama’s initial bluff somewhat less credible. This is the so-called “fiscal cliff” Congress will hit at the end of the year.
“It’s the right fiscal policy,” Stan Collender, a former budget aide for both the House and Senate, told TPM. “The last thing you want to do right now is make it any less likely that consumers will spend, and those earning less than $250k per year are far more likely to spend than those earning about $250k.”
By proposing a one-year deal instead of a permanent solution, the White House is acknowledging that tougher long-term decisions may need to be postponed until the economy is in sounder shape.
“As soon as that gets done, we can continue to have a debate about whether it is a good idea to also extend the cuts for the wealthiest Americans,” Obama said. “I’ll have one position, and the other side will have another, and we will have that debate.”
Dean Baker, co-founder of the liberal-leaning Center for Economic and Policy Research, said Obama’s position could be a prelude to a compromise later in the year that could either include extending larger portions of the Bush tax cuts, potentially using scheduled defense cuts opposed by Republican leaders as additional leverage.
“At the end of the day nothing prevents him from turning around and agreeing to a one-year extension on everything, but he can wait for after the election,” Baker told TPM.
Benjy Sarlin is a reporter for Talking Points Memo and co-writes the campaign blog, TPM2012. He previously reported for The Daily Beast/Newsweek as their Washington Correspondent and covered local politics for the New York Sun.