Time for an Obama Gut-Check on Taxes

Time for an Obama Gut-Check on Taxes

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President Obama must decide this fall whether to confront not just congressional Republicans but a growing number of Democrats on a key matter of public policy – President George W. Bush’s tax cuts for those at the top.

His decision will have enormous implications  for fiscal policy, with hundreds of billions of dollars in potential deficit savings at stake. It will also have a profound impact on Obama’s future relations with Capitol Hill.

For Obama, however, the issue is even bigger.  Here’s the question (a version of which every president eventually faces):

Will Obama draw a line in the sand that he will not cross, making clear what he supports and what he does not in this crucial election year, regardless of the consequences?

The nation’s leading newspapers  (New York Times, Washington Post, and Wall Street Journal) in the last two days have focused mostly on the debate brewing in Congress. Republican lawmakers  uniformly favor permanently extending all of President Bush’s tax cuts from 2001 and 2003, which are due to expire at the end of 2010, while many Democrats would let the tax cuts expire for the wealthiest Americans.

Obama’s decision-making has received less attention. But, he has the power to bend the issue to his liking, depending on how he plays his cards.

Obama’s  policy is clear: he has proposed extending the tax cuts for those making up to $250,000 a year and letting them expire for the 2 percent of taxpayers above that level. Treasury Secretary Timothy Geithner, Obama’s lead spokesperson on the issue, has reiterated that stance in recent days.

But the economic recovery remains weak and a growing number of moderate Democrats, such as Senate Budget Committee Chairman Kent Conrad, say that, this fall, they want to extend all of the Bush tax cuts at least temporarily, avoiding a tax increase on anyone that, they believe, would threaten the economy.

Liberals, however, fear that if this Congress extends all of the tax cuts for, say, a year or two this fall as part of a bipartisan deal to avoid a Republican filibuster, they won’t be able to stop the next Congress, which will probably have many more Republicans in it, from making them all permanent.

With far more than the 40 votes needed to block legislation in the Senate, Republicans in the next Congress will insist that a bill to make tax cuts permanent for everyone up to $250,000, as the White House and most Democrats will push, be extended to make all of the tax cuts permanent.

Lawrence Haas
is former senior White House official and award-winning journalist, writes widely on foreign and domestic affairs. His articles have appeared in The New York Times, USA Today, Los Angeles Times, Baltimore Sun, Miami Herald, San Diego Union-Tribune