President Obama once again pivoted his policy today with an East Room announcement that his administration will seek to extend the Bush era tax cuts for incomes less than $250,000. He called for Congress to pass a bill extending the cuts to middle class earners immediately, and address top earner cuts at a later date. It is just the first announcement in what many believe will be a contentious battle this month over taxes.
“I believe that an economy can be grown on a strong and growing middle class,” said President Obama today in his address.
“Moreover we’ve tried it their way, it didn’t work,” referring to tax cuts to the wealthy designed to create a better environment for job and economic growth.
Instead, the President claimed tax cuts to the wealthy are a major driver of the deficit. The President continued his explanation by citing the current tax cuts are less likely to contribute growth, and have done nothing to help grow jobs or contribute to the economy in a way that benefits “98% of Americans”.
“I might feel differently if we were still in surplus,” he continued.
Given the current economic outlook, the President called for a return to Clinton-era tax levels, back to an era he said, where jobs were created and America had a budget surplus. He juxtaposed this with some common criticisms of Bush-era economics related to the recession. More so, he defended his administration’s record on middle class taxes.
“Since I’ve been in office, I’ve cut taxes for the typical middle class family by $3,600.”
Democrats have previously called for an extension of the tax cuts for earners below $1 million, a plan supported by Minority Leader Nancy Pelosi and Sen. Chuck Schumer. Going forward in an election year, Democrats will be closely watched as to whether they rally behind the President’s message and this issue in their districts.
Congress is expected to take action later this month on the Bush tax cuts, which are scheduled to expire on January 1st. The President has previously threatened to veto any attempt to extend the tax cuts in full.
“I think it’s going to have a decent impact on the economy. There are tax cuts that have never quite honestly worked in creating jobs. They’ve run up our debts and deficits, and millionaires and billionaires aren’t a tax cut away from lots of jobs in this economy,” said Robert Gibbs, an Obama economic adviser appearing on Monday on MSNBC’s Morning Joe.
One year extension of the Bush tax cuts would cost approximately $150 billion, according to the New York Times. Economists have estimated a lack of action and full expiration of the cuts would impact the economy negatively, with a loss of up to 1% of economic growth.
“Let’s not hold the American people hostage over another battle over taxes,” said President Obama.”So today my message to Congress is: pass a bill extending tax cuts for the middle class. Pass it tomorrow, I’ll sign it tomorrow.”
Despite his calls for cooperation, his newly announced policy is not expected to win many Republican allies.