(The Root) — With the two-year extension of the Bush-era tax cuts scheduled to expire at the end of this year, like clockwork the partisan debate over extending them again is upon us.
The last time President Obama dealt with this issue, back in late 2010, he agreed to extend the tax cuts for all income groups as part of a deal with Republican lawmakers that also extended his payroll-tax cut and unemployment insurance. Since then, however, the president has vowed never again to renew the Bush tax cuts for the wealthy — despite House Republican plans to vote later this month on extending them for everyone.
On Monday the president urged Congress to extend the tax cuts for people making less than $250,000 a year. As for those making more than $250,000, he said that the two sides can keep having that debate but in the meantime should move on the part they agree on.
"Most people agree that we should not raise taxes on middle-class families or small businesses — not when so many folks are just trying to get by; not when so many folks are still digging themselves out of this Great Recession that we had," Obama said on Monday of his call to extend for another year tax cuts for the 98 percent of Americans who make less than $250,000. "Let's agree to do what we agree on. That's what compromise is all about. Let's not hold the vast majority of Americans and our entire economy hostage while we debate the merits of another tax cut for the wealthy."
Did Cutting Taxes for the Wealthy Work?
In his remarks, President Obama anticipated the response from Republicans who argue that continuing to cut taxes for the wealthiest Americans will trickle down to the middle class by allowing them to create more jobs and unleash economic growth.
"I think they're wrong," he said. "I believe our prosperity has always come from an economy that's built on a strong and growing middle class — one that can afford to buy the products that our businesses sell; a middle class that can own homes and send their kids to college and save enough to retire on."
Obama also made the case that the Bush tax cuts, which have been in effect for 11 years now, have led not to the economic growth that Republicans envision but instead to a much weaker economy:
At the beginning of the last decade, Congress passed trillions of dollars in tax cuts that benefited the wealthiest Americans more than anybody else. And we were told that it would lead to more jobs and higher incomes for everybody, and that prosperity would start at the top but then trickle down.
And what happened? The wealthy got wealthier, but most Americans struggled. Instead of creating more jobs, we had the slowest job growth in half a century. Instead of widespread prosperity, the typical family saw its income fall. And in just a few years, we went from record surpluses under Bill Clinton to record deficits that we are now still struggling to pay off today.
So we don't need more top-down economics. We've tried that theory.
Will Anything Happen Before November?
Ethan Pollack, senior policy director at the Economic Policy Institute, said that despite the president's call, it's doubtful that congressional action will happen anytime soon. "Extending the tax cuts for the middle class and not for high-income people would basically be Congress acceding to President Obama's proposal," Pollack told The Root.
Furthermore, Obama framing the issue as something that both sides can agree on doesn't quite hold up because tax cuts for higher-income Americans are automatically scheduled to expire. If the Republicans agreed to extend cuts for the middle class only, they would have no leverage to get what they want. "The only reason why Congress would extend middle-class tax cuts is if all of the tax cuts were extended, and the only way that would happen is if the Democrats cave," said Pollack.
While Obama has caved on renewing tax cuts for the wealthy once before, Pollack argues that the president has more incentives to stand his ground this time. "There was a lot more pressure at the end of 2010 when the Democrats had just lost the recent election," he said, adding that the president was also dealing with how to extend the payroll-tax holiday and unemployment insurance at the same time. "At this point he has less pressure pushing him in the other direction, so I expect a different outcome."
In the absence of congressional action, however, pivoting the campaign discussion to tax fairness at least gives the president a message that's popular with voters. "Voters overwhelmingly support extending the middle-class tax cuts and not extending them for high-income individuals," said Pollack. "So he's on the right side of the debate, at least when it comes to the polls."
Cynthia Gordy is The Root's senior political correspondent.