Chris Queen

“Let’s See What Sticks”: Orszag Calls For Tax Cuts (Sort Of), Obama Wants To Spend, Spend, Spend

Posted on September 8 2010 12:00 pm
Chris Queen hails from Covington, GA. Check out his blog, Random Thoughts From The Revolution, and follow him on Twitter.

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President Obama’s former director of the Office of Management and Budget, Peter Orszag, has reared his head again, this time writing his first column for the New York Times. In his September 7 column, Orszag appears to take a surprising position, at least for an economist on the Left, as he argues in favor of extending the Bush tax cuts for two years.

Contrasting Orszag’s ideas in his column with President Obama’s proposal yesterday for another $50 billion spending program, complete with a federally run “infrastructure bank,” it’s clear that the Obama administration and its satellites are still clueless on how to fix the economy. They are engaged in a continual game of “see what sticks” when it comes to righting the failing American economy.

Orszag argues for an extension of the Bush tax cuts – albeit a temporary one, until 2013, when they would run out permanently. On the surface, Orszag’s argument seems to make a little sense:

[N]o one wants to make an already stagnating jobs market worse over the next year or two, which is exactly what would happen if the cuts expire as planned.

Higher taxes now would crimp consumer spending, further depressing the already inadequate demand for what firms are capable of producing at full tilt.

Orszag goes on to state that extending the tax cuts permanently would raise the budget deficit by $3 trillion dollars over the next decade and that the deficit will most likely account for 4 to 5 percent of GDP by 2015. Instead of advocating cuts in spending (except, he hints, for defense spending) he notes that “additional revenue…will be necessary to reduce the deficit to sustainable levels.”

But don’t worry; Orszag has a solution:

One possibility would be to establish a new source of revenue, perhaps through revenue-increasing tax reform, and possibly including a modest value-added tax (that is, a V.A.T. of 5 percent to 6 percent). This approach has many potential benefits, including the opportunity to improve our tax code by cutting back on loopholes and shifting toward a consumption-based tax system.

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