Greenspan on the Bush Tax Cuts: "Let Them Lapse"

Former Federal Reserve Chairman Alan Greenspan, whose backing of George W. Bush’s 2001 tax cuts was instrumental in persuading Congress to pass them, said lawmakers should allow the reductions to expire at the end of this year in an interview with Judy Woodruff to be aired this weekend.

The story from Bloomberg News:

“They should follow the law and let them lapse,” Greenspan said in an interview on Bloomberg Television’s “Conversations with Judy Woodruff,” citing a need for the tax revenue to reduce the federal budget deficit.

The former U.S. central bank chairman also said the economy is in “a temporary slump” and would emerge with a “sluggish” 3 percent growth rate in the second half of the year. He said banks’ lending will remain constrained because financial markets are pressing them to maintain higher capital levels and predicted the Wall Street regulatory measure the Senate passed yesterday will reduce credit available for low- income consumers.

Greenspan’s comments on taxes, to be broadcast today and over the weekend, place him in the middle of an election-year struggle over extending Bush’s trillions of dollars of tax cuts.

President Barack Obama campaigned for election in 2008 on a promise of extending the Bush tax reductions for families earning up to $250,000 while eliminating the cuts for higher- income Americans, a position also embraced by most congressional Democrats. Republicans have pressed for continuing the cuts for higher-income families, arguing that a weak economy is no time for a tax increase.

House Majority Leader Steny Hoyer, a Maryland Democrat, stoked the debate with comments on June 22 that permanent extension of the middle-class tax cuts may no longer be affordable because of the growing U.S. debt burden.

If by "temporary slump" Greenspan means a decade plus, then I suspect he may be right. The other big economic news of the day comes from Ezra Klein who published a Brookings Institute chart that shows that "adding new jobs at a rate of 200,000 a month would take us 150 months -- or 12.5 years -- to get back to normalcy." Normalcy being a pre-recession level of employment. The bad news is that so far this year only in April did the economy generate 200,000 new jobs.

You can read the full Job Gap report written by Michael Greenstone and Adam Looney here. As of June, employment numbers, the job gap stands at almost 11.3 million jobs.

Nancy Pelosi's Moment of Clarity

"The opportunity calls for us in this country to invest in our children and their health and their education, and all of the -- to reduce the deficit, to reduce the deficit if we had those resources." Speaker of the House Nancy Pelosi

Well, well, well, will wonders never cease? After being in a fog, and not the San Francisco kind, for the past two years, the Speaker of the House has a moment of clarity:

Pelosi told reporters today that she "couldn't be more clear" in opposing some Obama advisers' wish to wait for the tax cuts on the highest income earners to expire in two years, as they are set to do under current law. "Put me down as clearly as you possibly can as one who wants to have those tax cuts for the wealthiest in America repealed," she said.

Pelosi said the income tax cuts to the highest earning Americans -- which were decreased from 39.6 to 35 percent as part of the 2001 Bush tax plan -- have been "the biggest contributor to the budget deficit," which now stands at $1.2 trillion for fiscal year 2009. That deficit figure does not include the impact of the pending stimulus measure, which will cost around $800 billion, nor does it include estimates for supplemental spending bills that will come later this year to finance the wars in Iraq and Afghanistan.

Put me down as well as one who supports rescinding the Bush tax cuts. Now. Economic fairness, fiscal discipline and economic growth are sometimes conflicting goals. But not in this instance, not at this moment. Repealing the Bush tax cuts immediately is not just the fairest policy option but also the most fiscally responsible given the severity of the deficits we confront but also the most efficient in terms of a progressive tax scheme.

There's more...

Bizarro Bush: The next president should Do the Opposite

"If every instinct you have is wrong, then the opposite would have to be right." --Jerry Seinfeld to George Costanza on Seinfeld.

If George W. Bush is the worst president in American history, then all the next president has to do to be successful is The Opposite.

What is the Opposite of Bush? In foreign policy, it would be ending the Iraq War and the policy of pre-emptive warfare. With energy policy, it would be moving away from oil and developing solar, wind, and biodiesel. In civil liberties, it would be ending torture and electronic eavesdropping, and restoring habeas corpus.

But what about the economy, stupid? Bush's major economic policy was The Bush Tax Cuts, which went overwhelmingly to the wealthy in a continuation of the trickle-down economics of President Reagan.

The Opposite of Bush would be Rise Up Economics (www.riseupeconomics.org): tax cuts and tax credits for the poor and middle class, while making the wealthy and big corporations pay their fair share.

There's more...

The promise of a primary for Obama

Here's the line in the sand. Everyone pretty much believes now that Republicans are going to win back the House.  In the Senate, its even possible, but much less likely it seems. There are two issues that, if Obama does not draw his own line with Republicans, that he will lose the Party over.

First, the Bush tax-cuts. The notion that this is going to be something where Democrats can keep them in place for those under $250K, and end it for those above, is a false lie for anyone to pretend a possibility. The Republicans will not let that happen-- its all of them, or nothing.

The question is, with a Republican House, will there be 40 Democrats to filibuster the passage of the complete tax package, in the spring of 2011?  Do the math. Looking at it the other way, are there 13 or so Democrats who the Republicans can count on for cloture?  So, that (the complete Bush Tax Cuts) lands on Obama's desk. Lets ponder whether he would veto it or not.

Second, the Afghanistan quagmire. All it takes is to watch this video to realize the disengunuitity that Obama has performed with his reckless abandoment of his promise of his entire candidacy. There are knaves who would like to pretend that Obamaplayed a straight hand on Afghanistan with Democrats in the leadup to the 2008 election, but those are liars and fools. We are currently amidst Obama's own Friedman Unit, that expires in July 2011.

General Peatrus has played the President like a fiddle with the surge to over 100,000 troops in Afghanistan. The Generals now openly speak of there being no such deadline, and being in Afghanistan until 2020. VP Biden has cowardly backtracked on the deadline he said was set in stone.

That Obama will give us enduring war in Afghanistan beyond July 2011 seems a given. Will it come on the heels of his buckling to the Republican passage of the Bush Tax cut package? 

And when I say lose the Party, I mean explicitly that he will be primaried in 2012, and hopefully, denied the nomination.

Lame Duck Round Up - 90 Second Summaries

With 90 Second Summaries, we aim to cover policy items due to receive close attention in the coming weeks and months that are not being properly explained by most of the press corps. As a result,  over one third of our episodes cover pieces of legislation that are receiving action or are expected to receive action during this lame duck session of Congress. We did not hit every hot topic on the board, but we got to a good number of them. Without further ado, here's a roundup of the bills we covered that you should know about as the lame duck session unfolds:

Unemployment Insurance Extension: The House votes today on a suspension bill to extend unemployment insurance by three months. David Waldman explains:

Now, suspension bills need a 2/3 vote to pass, so that's a pretty high hurdle -- 290 votes, at least 35 of which would have to come from Republicans. So why bring the bill to the floor that way? Suspension bills aren't subject to amendment, nor to the motion to recommit. So although the hurdle is high, it's a straight-up yes-or-no vote on unemployment benefits extension. Click here for more information on the unemployment insurance extension.

The Dream Act: Senate Majority Leader Harry Reid has announced he will bring up the DREAM Act as a standalone bill in the lame duck session. In the past, the Senate has attempted to attach the DREAM Act to larger bills. Click here for information on the DREAM Act. The Expiring Bush Tax Cuts: The deals are still being hammered out on this so the specifics of what legislation will pass are still little fuzzy. By all reasonable expectations, an extension of some sort WILL get passed before the end of the year. Click here for more information about extending the Bush tax cuts. The FDA Food Safety Modernization Act: This bill has been moving its way through the Senate somewhat quicker than most of us expected. Cloture passed yesterday, 74-25, on the motion to proceed to debate (generally a proxy for cloture on the final bill) and the Senate is expected to pass the bill today or tomorrow. The hot topic has been the Tester Amendment, which provides exemptions for small and local farmers from the new regulations. The Tester Amendment will likely pass, but H.R. 2749, the House version of the Food Safety Bill, was passed without a similar provision. The two bills will have to be merged and whether or not the Tester Amendment will survive that step is unclear. If the Tester Amendment is indeed included in the Senate bill, then it is scheduled to be our next 90 Second Summary (that will be Monday). Click here for more information about the FDA Food Safety Modernization Act.

 

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