Should Barack Obama win re-election this fall, he’ll almost immediately face one of the biggest issues of his second term: the looming expiration of the Bush tax cuts. George W. Bush originally passed the tax breaks in two quick bursts — slashing income taxes in 2001, and lowering taxes on investment income in 2003. Then, just before these cuts were set to expire on January 1, 2011, Obama struck a deal with congressional Republicans to extend them for two more years. […]
In the fall of 2009, Obama’s chief congressional lobbyist, Phil Schiliro, touted a clever idea for dealing with the tax cuts: introduce a bill that would extend the middle-class cuts for two years while allowing the upper-income portions to expire. After two years, the middle-class cuts would also expire unless Congress paid for them with off-setting savings or tax increases.
By November 2009, Orszag had become so fond of the idea that he insisted on presenting it to the president in the Oval Office. Orszag’s fellow wonks were cool to the plan, having heard him and Schiliro sing its praises repeatedly. But the administration’s chief wonk — Barack Obama — was intrigued. He asked a series of encouraging questions about how the proposal would work. According to two sources in the room, he was taken with both the political merits — that is, putting Republicans on the defensive — and the policy rationale of lopping trillions off the deficit. He gave no indication that he was troubled by the plan’s most explosive feature: that it would likely break a central campaign promise — not raising taxes on the middle class — one Republicans would surely wrap around his neck with populist glee.
It’s not entirely clear why the Schiliro plan never went further. But the sense of alarm that broke out among the non-economists who attended the Oval Office conclave surely didn’t help. Vice President Joe Biden, for one, was so concerned about violating the 2008 tax pledge that he called one senior official right after the meeting to confess his anxieties. (A White House spokesperson confirmed the meeting but insisted that the president has never seriously considered phasing out the middle-class tax cuts.)Continue reading on www.thedailybeast.com