President Obama's senior economic advisor made clear Sunday that any idea of renewing the Bush tax cuts, set to expire in 2010, is a dead issue.
Lawrence H. Summers, a former Treasury secretary and head of the White House's National Economic Council, made clear to “Meet the Press” host David Gregory that Obama is committed to allowing the tax cuts to die.
Summers also left open the possibility that the administration may revoke the tax cuts early, an idea pushed by House Speaker Nancy Pelosi.
But he emphasized that the Obama administration is dead against extending the tax cuts, an idea favored by Republicans.
Asked if he was open to extending the cuts to 2013, Summers responded, "First, it's a bad idea because we simply can't afford it. The president's inherited a trillion-dollar deficit, and a deficit with a baseline that is terrible as far as the eye can see."
During the presidential campaign last year, Obama had pledged he would rescind the Bush tax cuts early and redirect the new revenues to tax cuts for lower and middle class wage earners. But in September, Obama indicated he might delay rescinding the tax cuts if he faced a severe recession. At the time he also insisted he would allow the tax cuts to expire no later than 2010.
The Heritage Foundation has warned that if the Bush tax cuts are allowed to expire, "taxes will rise dramatically for most taxpayers" with tax rates rising "substantially in each tax bracket, some by 450 basis points."
For example, top wage earners currently in the 35 percent tax bracket will see their tax rate increase to over 39 percent -- an increase of more than 10 percent in extra taxes they will have to pay.
Last year, the Bush White House claimed that allowing the tax cuts to expire would mean a family of four would have an additional tax burden of $1,900 annually. They also claimed 43 million families with children would see an increase of taxes over $2,000.
Summers' exchange with NBC's David Gregory follows:
MR. GREGORY: Let's talk about tax cuts. About a third of his package is made up of tax cuts. Republicans want more. Specifically there's a question about the Bush tax cuts which, of course, expire next year. Does the president want to actually repeal those tax cuts this calendar year?
DR. SUMMERS: I don't think there's any question they have to be repealed. The country can't afford them for the long run.
MR. GREGORY: So repeal them this year? Because they expire next year.
DR. SUMMERS: What the timing -- what the -- they expire, expire at the end of next year, and they have to be allowed to expire. What the timing will be, that's something that's going to have to get worked out.
MR. GREGORY: Because the House speaker says do it this year.
DR. SUMMERS: That's something that's going to have to get worked out through the legislative process.
MR. GREGORY: All right.
DR. SUMMERS: There's no question that the president's been very emphatic about this, as he was very emphatic during his campaign, that they can't be part of...
MR. GREGORY: OK, but timing is important.
DR. SUMMERS: They can't be, they can't be part of the long-run budget picture.
MR. GREGORY: Well, understood. But...
DR. SUMMERS: And it's a timing--it's something that's going to be--that's something that's going to be worked out in the course of the...
MR. GREGORY: But what's his position, repeal them this year?
DR. SUMMERS: ...in the course of the legislative, legislative process. The president has made clear they--that the question of timing is one we're going to have to reach as we see how the economy unfolds...
MR. GREGORY: Yeah.
DR. SUMMERS: ...as Congress reaches its judgments. But they're not going to be with us for long.
MR. GREGORY: Why not? Why not? Conservatives make the argument, why would you want to raise taxes--if you repeal those tax cuts, taxes do go up on upper-income Americans, primarily. Why would you want to raise taxes right now? Why not put that expiration date off into, say, 2013? Why is that a bad idea?
DR. SUMMERS: Put the expiration date off into...
MR. GREGORY: 2013.
DR. SUMMERS: ...2013? First, it's a bad idea because we simply can't afford it. The president's inherited a trillion-dollar deficit, and a deficit with a baseline that is terrible as far as the eye can see. We've got to spend money now while we have a recession, while we've got this serious economic crisis, but as soon as the economy recovers we are going to have to find ways of getting the government's finances under some kind of control. Second, we have to focus on, frankly, the parts of the economy that need help. If you look at what's happened over the last 10 years, the incomes of middle-income families have barely or kept up with inflation, or in many, many cases fallen behind inflation. The people who are the beneficiaries, the small minority, a little over 1 percent of the population that are the beneficiaries of those tax cuts have actually seen their incomes rise much more, much more rapidly. And so I think it's a pretty clear question of priority as to where the, where the assistance needs to be channeled.
MR. GREGORY: But you say...
DR. SUMMERS: But understand this, the president has vowed that there will be tax cuts for more than 95 percent of Americans, for all working families with incomes below $250,000. They will see their taxes cut, they will not see tax increases.
MR. GREGORY: Well, let me just press you on this point. You say we can't afford to let those Bush tax cuts expire later, but we can afford to, to spend up to $700 billion for the tax cut that you like?
DR. SUMMERS: We can--we--it's a good question. We certainly can afford to do what is necessary now to stimulate this economy, to put money--frankly, when you put money into the hands of middle-class families, history and experience suggest that they spend a substantial part of it, pushing the economy forward. When you put money into the hands of those with very high incomes, only a much smaller fraction of it is spent and so you derive much less benefit in terms of pushing the economy, in terms of pushing the economy forward.
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