A senior White House economics aide reaffirmed the Obama administration’s stand in favor of extending Bush era tax cuts to all but the wealthiest Americans, despite growing concerns among some Democrats that a tax hike on the wealthy might hurt the recovery.
The aide, Jason Furman, said it would be a mistake to grant continued tax relief to the top two percent of earners, adding that such a move — even temporarily — might be a “foot in the door” to extending the cuts permanently.
Furman, addressing a gathering of the progressive Center for American Progress on Tuesday, spelled out President Obama’s views in the contentious debate over extending the Bush administration’s 2001 and 2003 income tax cuts, which are set to expire in December. Republicans favor extending the tax cuts to all income groups, including the wealthiest, while Obama campaigned on a pledge to extend the cuts to all but single people earning $200,000 or more a year or families with incomes of $250,000 or higher.
“The economy is in a place where it obviously continues to need help,” said Furman, deputy director of the White House National Economic Council. “To provide relief to lower and moderate income families is one of the most economically efficient things you can do because they are the ones that are most likely to spend it.”
But a string of dismal economic indicators coupled with election-year anxiety has prompted some congressional Democrats to press party leaders to consider extending the full array of tax cuts, at least through next year.
Furman warned that even a one-year extension would signal to financial markets that Congress would let the cuts remain indefinitely. Though the Congressional Budget Office estimated recently that extending the tax cuts for the rich would cost the government about $35 billion over ten years, Furman insisted that the cost would be closer to $700 billion.
In his speech, Furman also defended the $814 billion 2009 stimulus law that has been attacked by Republicans and some Democrats. Furman said the measure expanded the reach of the Earned Income Tax Credit and the Child Tax Credit — segments of the tax code that reduce the tax bill of workers with low wages and workers with families.
“There’s an old adage in social policy that a program for the poor is a poor program, and it’s going to be unsustainable and wind up getting chipped-away, but [these credits] have defied political logic and been very effective as public policy,” Furman said.