President Obama to Call for Deal on Tax Cuts, Argue that Impact on Economy for Tax Increases on Wealthy Will Be Minimal
President Obama will today call upon Congress to work with him on preserving the lower tax rates first pushed by President Bush for those Americans who earn under $200,000 a year, but he will state his belief that voters were clear in re-electing him that they support a "balanced approach" to deficit reduction - meaning that the lower tax rates for higher wage earners should expire.
The president, aides tell ABC News, will argue that the tax cuts for the middle class are something everyone agrees on, so there's no reason for them to be linked to tax cuts for wealthier Americans, about which there's more disagreement. This will be the president "setting the table" for negotiations with Congress, one White House official told ABC News, just as House Speaker John Boehner, R-Ohio, did yesterday when he expressed his determination to stop any de facto tax increase on higher wage earners.
A report issued yesterday by the non-partisan Congressional Budget Office warned about the consequences to the U.S. economy if no deal was struck and the Bush tax cuts expired in addition to all the other issues related to the so-called "fiscal cliff" - including the expiration of a payroll tax cut, indexing the alternative minimum tax for inflation, continuing emergency unemployment benefits, and spending cuts forced on the budget because of the failure of the poorly-titled "Super-Committee" to come up with $1.2 trillion in deficit reduction.
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The CBO predicted that should no deal be struck, "real (inflation-adjusted) gross domestic product (GDP) will drop by 0.5 percent in 2013? causing "employment to decline and the unemployment rate to rise to 9.1 percent in the fourth quarter of 2013."
The president will note that the CBO report states that most of the impact of the tax cuts relates to those wage-earners who make less than $200,000 a year. Extending all the Bush-initiated lower rates would boost GDP by 1.4% and help create 1.8 million jobs, the CBO report states, while allowing their expiration for those higher wage earners while maintaining the lower rates for those making $200,000 a year and less would boost GDP by 1.3% and generate 1.6 million jobs. The .1% in GDP growth and 200,000-job difference is already being described by progressive pundits as "minimal."
White House officials insist that they're confident that a deal will be struck. One top Obama adviser, however, told ABC News that if the House GOP refuses to cut a deal with the president that includes some tax increases on the wealthy, the tax cuts will expire. One scenario the official discussed included the president barn-storming the country, telling the public that Democrats will put forward a bill to restore middle class tax cuts as soon as Congress convenes, and calling on them to pressure Republican congressional leaders to stop holding those tax cuts hostage in exchange for tax cuts for wealthier Americans.
-Jake Tapper