–Fate of ’01 and ’03 Tax Cuts To Dominate Fall Debate In Congress
–Hill Dems, GOP Dig In Over Taxes, Show Little Interest in Compromise
–But Some See Merit In Two Year Extension Floated By Ex OMB Chief

By John Shaw

WASHINGTON (MNI) – Over the last several months, the debate about
what to do with the expiring Bush tax cuts has heated up, and the
leaders of both parties have taken hard-line stances on what Congress
should do.

President Obama and congressional Democratic leaders have
repeatedly said that only those tax cuts for individuals making up to
$200,000 and couples earning up to $250,000 should be extended.

They have added that extending tax cuts for the most wealthy would
be fiscally irresponsible and economically unnecessary.

Obama is expected to make this point again Wednesday afternoon when
he gives a speech in Cleveland that will also tout a new proposal for
business tax cuts.

Congressional Republicans have argued that extending all of the
Bush era tax cuts, including those for the top income group, is
necessary given the sluggish state of the American economy.

House Minority Leader John Boehner made this point in Cleveland
several weeks ago and has repeated this argument this week in response
to Obama’s new fiscal proposals.

Bill Frenzel, a former Republican congressman who is now a guest
scholar at the Brookings Institution, says an agreement on taxes between
Democrats and Republicans is easily achievable — if the two parties
want one.

“Some agreements are very hard and very complex to put together,
with all sorts of moving parts. That is not the case here. The president
and congressional leaders could together an agreement in no time — if
they wanted one,” he said.

Frenzel said the most obvious and achievable accord would be along
the lines sketched out by former White House chief of staff Peter Orszag
in an essay Tuesday in the New York Times.

Orszag suggested the president and Congress should agree to extend
all the Bush tax cuts for two years — and then let all of them expire
in 2013.

“Why does this combination make sense?,” Orszag writes. “The answer
is that over the medium term, the tax cuts are simply not affordable.
Yet no 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.”

Frenzel acknowledges that the recent rhetoric of Democrats and
Republicans offers no indication that either side is poised — or even
wants — to reach an agreement. At least yet.

But he believes it is in the interest of both parties to reach a

“I just don’t see how a stalemate over taxes is helpful to the
President or the Speaker or the Senate Majority Leader — or even the
Republican leadership. The economy is weak and needs stability,
especially regarding taxes. Why not a get a deal that is there for the
taking?,” Frenzel asks.

** Market News International Washington Bureau: (202) 371-2121 **

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