What will Congress do about the Bush tax cuts?

Jul 30, 2010 — Washington Post

Ezra Klein

Howard Gleckman on the likely end game for the Bush tax cuts:

Unlike most recent congressional debates, the Democrats may have the procedural upper hand this time. With health care, for instance, Republicans would have “won” by blocking congressional action. Gridlock would have preserved the status quo, an outcome favored by about half of voters — and overwhelmingly supported by the GOP base.

But this time, stalemate means the Bush tax cuts expire for everyone. For most households, that will feel like a tax increase — an outcome favored by a handful of budget wonks but very few real people. Democrats believe this will give them the leverage they need to force the GOP to deal. Republicans, by contrast, feel they’d be able to blame the ruling Democrats for failing to tackle the pending tax hike.

My best guess is that, in the end, Congress will extend the Bush tax cuts for all but the highest earners. And it will probably do so for a year or two.

I disagree a bit: At the moment, I'd put my money on a two-year extension of all the tax cuts, including those for the rich. But either way, we're talking about adding $3+ trillion onto the debt, and the Republican position is that we should add even more than that. Meanwhile, we're cutting food stamps to pay for Medicaid.

Graph credit: CBPP