We all know how Congress feels about the Bush tax cuts from 2001 and 2003 — most Republicans want to extend all of them, temporarily or permanently, and many Democrats want to end the tax cuts for the wealthiest Americans. Without action, the cuts will expire for everyone in December, making this issue perhaps the next big fight on Capitol Hill.
The issue is also making noise outside of Congress as well, as Republicans hope to paint the expiration as a tax increase. Former Republican Sen. Fred Thompson has started a petition to extend the cuts, and former House Speaker Newt Gingrich is advocating their extension too. Those on the right who defend the tax cuts say that letting them expire will inhibit job growth and place an undue burden on Americans in the middle of a recession. Many on the left argue that the tax cuts are one of the main causes of our deficit, and allowing them to expire is important for long-term debt reduction.
So what do the non-politicians think? Here are some of the more prominent opinions:
EXTEND THE TAX CUTS
Ben Bernanke (Chairman, U.S. Federal Reserve)
“In the short term I would believe that we ought to maintain a reasonable degree of fiscal support, stimulus for the economy,” Bernanke told the House Financial Services Committee. “There are many ways to do that. This is one way.”
Martin Feldstein (Professor, Harvard University)
“This is not the time for a tax increase. But unless Congress acts, under current law the existing income tax rates will rise sharply at the beginning of next year. Congress should vote now to extend all of the current tax rates for two years, including the tax rates on dividends, interest and capital gains. Limiting the resulting tax-rate cuts to two years would reduce the projected future fiscal deficits. The sooner Congress acts, the stronger our prospects for continued economic recovery.”
Douglas Holtz-Eakin (President, American Action Forum)
“It has been widely noted that uncertainty over the policy environment itself may contribute to a desire by businesses to hoard cash instead of spending. A temporary extension of the tax laws will merely defer resolving the uncertainty over the tax policy outlook. In the other direction, a permanent extension would set expectations, permit long-range business planning, and support long-term economic growth. Notice that at the same time, there would be immediate economic benefits as businesses step up their spending to match the improved long-run outlook.”
LET THE TAX CUTS EXPIRE
Tim Geithner (Secretary, Department of Treasury)
“We think that’s the responsible thing to do because we need to make sure we can show the world” that America is “willing as a country now to start to make some progress bringing down our long-term deficits…I do not believe it will affect growth.”
Alan Greenspan (Former Chairman, U.S. Federal Reserve)
“I think they should follow the law and let them lapse…Taxes go up.”
“The problem is, unless we start to come to grips with this long-term outlook we’re going to have major problems. I think we misunderstand the momentum of this deficit going forward.”
Paul Krugman (Columnist, New York Times)
“But the real news here is the confirmation that Republicans remain committed to deep voodoo, the claim that cutting taxes actually increases revenues.
“It’s not true, of course. Ronald Reagan said that his tax cuts would reduce deficits, then presided over a near-tripling of federal debt. When Bill Clinton raised taxes on top incomes, conservatives predicted economic disaster; what actually followed was an economic boom and a remarkable swing from budget deficit to surplus. Then the Bush tax cuts came along, helping turn that surplus into a persistent deficit, even before the crash.”