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Peter Orszag clarifies "rift" with Obama admin over Bush tax cuts

Yesterday, former White House budget director Peter Orszag made big news by appearing to break with the Obama administration over the Bush tax cuts in an Op ed for The New York Times. Orszag argued that we should "extend the tax cuts for two years and then end them altogether," a claim that was widely interpreted as being at odds with Obama's desire to end them now.

But in a quick interview with me just now, Orszag clarified his position in a way that suggests talk of a rift may be overblown.

Orszag's Op ed yesterday was big news because it was assumed that foes of ending the tax cuts for the rich could point to his stance -- and to Orszag's deficit hawkishness -- to buttress their own position.

But Orszag told me that a key point had gotten lost: He only favors temporarily extending the tax cuts for the rich reluctantly, and only if it's the sole way of obtaining a deal that would end them altogether.

"The point I was trying to make is that we can't afford the tax cuts over the medium term, and they shouldn't be made permanent -- but the middle class tax cuts should not expire today," Orszag told me.

"If the price to be paid for that a temporary extension of the upper income tax cuts, my view is that we should reluctantly accept that," Orszag continued. "I would prefer that that not be the price that is paid."

This is, to be sure, slightly at odds with Obama's position -- but less so than yesterday's coverage suggested. In his speech today, Obama will come out against a compromise, insisting that we let the tax cuts for the rich expire right now. Orszag, by contrast, is willing to support a compromise if it's the only way to obtain a deal on ending the tax cuts.

But, in truth, there's not too much daylight between the two positions. In the real world, the White House can't come out for a compromise right now, because it needs to stake out a tough negotiating position. Orszag, by contrast, isn't constrained by that imperative. In reality, his position is largely in line with that of the administration -- both want to end the tax cuts for the rich, though there's a bit of disagreement over how to get there.

UPDATE, 1:02 p.m.: To be clear, there's still a policy difference here, at least in public: Obama won't support a compromise extending the Bush tax cuts for the rich for two years, while Orzag does support it. The clarification is a matter of nuance: Orszag wants it clearer that he only supports a compromise extending the tax cuts for the rich if it's absolutely necessary; his stance can't be used as ammo by foes of letting them expire. He hinted at that in yesterday's Op ed, but it got lost in the "rift rift rift" coverage.

By Greg Sargent  |  September 8, 2010; 12:35 PM ET
Categories:  economy  
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Next: The coming war among Dems


Although I must admit that I have not yet had an opportunity to read the op-ed, it appears from the coverage and this report that it did not very clearly articulate Orszag's position.

He's a pretty smart guy so I have to wonder how could he allow that happen?

Posted by: cmccauley60 | September 8, 2010 12:52 PM | Report abuse

Did Orzag say, in the OpEd that his support was for extending the tax cuts should be part of an overall legislative "pot sweetener"? I read the piece but don't recall it, though I am a shallow reader. Is Orzag "extending" his remarks or pointing out language in the OpEd that was missed?

Posted by: TrollMcWingnut | September 8, 2010 1:25 PM | Report abuse

Let the game of "Chicken" begin!

Posted by: sbj3 | September 8, 2010 1:28 PM | Report abuse

There was a good post and roundabout yesterday on Balloon Juice about this that started with a complaint about a Jake Tapper Twitter post that suggested this was about the "conflict." John Cole called Tapper's BS and Tapper tried to reassure everyone that he would get to the "substance" and not just follow this horse-race style. We'll see.

This post does the kind of work that Important TV Journos are supposed to be doing, so thanks Greg.

It's clear that Orszag only wants to extend cuts to the very rich as a compromise.

But isn't there still another difference? Doesn't Orszag want to end the rest of the tax cuts in two years while Obama favors keeping them?

Please clarify.

Posted by: BGinCHI | September 8, 2010 1:28 PM | Report abuse

Compromise or not, it's important that the Democrats not lose public opinion on ending the tax cuts for the wealthy. That's where Democrats have been the weakest, letting their message get sounded over by the Republican's noise of hysteria.

With the two best communicators of this generation, Obama and Bill Clinton, that just shouldn't be happening. Almost two years later, Republicans still lack public leadership other than crazy Beck and inept Palin. That's their obvious weakness that needs to be exploited.

Posted by: Beeliever | September 8, 2010 1:40 PM | Report abuse

I say let the Bush tax cuts for the rich EXPIRE this year NOT next year.

Posted by: maritza1 | September 8, 2010 1:43 PM | Report abuse

I'm still in awe that a large % of the population is fighting tooth and nail for like 3% of the populations pay.

The millionaires must be laughing their behinds off at their surfs.

Posted by: mikefromArlington | September 8, 2010 1:43 PM | Report abuse

Actually, it's a far bigger rift, Greg. Orszag wants all the Bush tax cuts to expire. Obama doesn't; he wants to keep them all but the ones on the top 2%. That's a $3 trillion dollar difference over the next ten years.

Posted by: dday212 | September 8, 2010 1:43 PM | Report abuse

If Obama lets the even the middle class tax cuts expire because he wants to play chicken with the GOP then he will go the way of Bush I.

Posted by: sbj3 | September 8, 2010 1:47 PM | Report abuse

SBJ Not sure I understand your post. Could you clarify please? Are you suggesting that if Obama holds firm to his position of ending the cuts for the top 2% the R's would respond by torpedoing ALL of the tax cuts in a fit of pique?

If that's your you really think the R's can pull the wool over everybody's eyes...I mean do the R's really want to be seen as the Party that nixed middle class tax cuts because they couldn't get the cuts for their wealthiest friends..the top 2% of earners in our country?

Posted by: rukidding7 | September 8, 2010 1:57 PM | Report abuse

In 2 years Obama will be running for reelection. Either the Bush tax cuts will still be in effect, they won't or only the middle class ones will. Either the tax code will have been amended with the new marginal rates but without a sunset, or at least some of the current rates will be extended for some defined term of years.

If there is a stalemate, then the tax code reverts to what it was before the Bush tax cuts. There has to be some kind of affirmative action by the Congress to extend ANYTHING. Hence the game of chicken.

Do the GOP and conservadems want to see the top marginal rates, cap gains rates, dividend tax rates and estate tax all revert? Do their patrons dislike this enough to give them orders to cut a deal of some sort? Do the Dems fear being blamed for the expiration of significant middle class and lower class breaks enough to want to cut a deal?

If so, what goes and for how long? There are a great many moving parts here when you figure in all the various rate changes and expiration of credits. And then figure in the proposed changes to Social Security. It would be a huge change for the top 5-10% to have both the SS wage cap lifted significantly AND have the marginal rates go up. But the revenue hit is also too extreme to extend all the tax cuts, especially the top rates.

It would be fairest if the very rich get hit though the estate tax and maybe a millionaires' bracket to soften the blow on the upper middle and lower upper classes, especially if there are both marginal increases and increases in the SS tax. The interplay with the deficit commission will be interesting as well.

Posted by: Mimikatz | September 8, 2010 2:00 PM | Report abuse

And let's all not forget that this is the way the GOP designed the tax cuts back in 2001 and 2003, and they did so in order to be able to jam them through by reconciliation because they didn't have the votes back then to make them permanent. If they didn't have the votes then, with a near majority and a budget surplus and a populart GOP President, it is hard to see how they have the votes now.

Posted by: Mimikatz | September 8, 2010 2:05 PM | Report abuse


Could you help explain the WaPo's chart I'm linking here. It compares the R and D tax plans and how the cuts line up...

My question Greg is does the graph mean what I think...for example according to the WaPo somebody earning one million dollars a year gets a $103,835 tax cut from the R's...I assume that's what the extension would provide...however the graph also shows that same group of million dollar earners would still get some tax relief..$6,349 from the D' effect that means EVERYBODY still gets a cut but the millionaires' cut is far less than everybody that correct?

Greg or anybody feel free to help me here.

BTW If you haven't seen the WaPo chart, this graphic is incredibly visual and I wish very media outlet in the country would run with's certainly something the Dems should be pushing HARD!

Posted by: rukidding7 | September 8, 2010 2:05 PM | Report abuse

Ok, reread it and Orzag did say it was part of a larger deal. Does Barry want to increase taxes on the middle class in two years like Orzag does? Or does Barry want to make those tax cuts permanent? Be interesting to hear White Houses opinion on if middle class tax cuts should be extended permanently.

Posted by: TrollMcWingnut | September 8, 2010 2:05 PM | Report abuse

@ruk: "Are you suggesting that if Obama holds firm to his position of ending the cuts for the top 2% the R's would respond by torpedoing ALL of the tax cuts in a fit of pique?"

Not quite. The House would pass such a bill, but the Senate would probably not thanks to a filibuster that would be joined by several Dems.

At that point, it would be the Senate leadership that refused to put forward a bill that extended all of the cuts.


Yes - they will have sufficient cover. Obama HAS to keep his promise.

"Do the R's really want to be seen as the Party that nixed middle class tax cuts."

I think they will blame the Dems for not extending all of the cuts and they will have plenty of cover - as Greg has lately been pointing out.

It will be an interesting game of chicken and, unfortunately, you and I might suffer for it. You'll blame the GOP, but in this economic environment, I think many will blame the party in power.

Posted by: sbj3 | September 8, 2010 2:05 PM | Report abuse

"Orszag told me that a key point had gotten lost: He only favors temporarily extending the tax cuts for the rich reluctantly, and only if it's the sole way of obtaining a deal that would end them altogether."

That's just the kind of brilliant stratergizing -- negotiating with phantoms -- that got the Democrats into this mess in the first place. For god's sake: Can't the Democrats just say that the SuperRich should pay more in taxes since the highest marginal rates are at historically low levels and we have a major national deficit? Really. How hard is that to sell!?

Posted by: wbgonne | September 8, 2010 2:10 PM | Report abuse

All, get ready for the coming war among Dems:

Posted by: Greg Sargent | September 8, 2010 2:21 PM | Report abuse

When one has trouble with a jilted girlfriend one wants support from one's friends.

Seems like this whole incident is all about that.

In addition - ISN'T SUCH NUANCE to be expected from someone who ends up with an angry jilted girlfriend ????

The whole thing makes sense........


Posted by: SaveTheRainforest | September 8, 2010 2:24 PM | Report abuse

@mimikatz and SBJ Yes interesting scenarios all...mimikatz you had a line in your post that terrifies my corporatist fearing heart..."Do their patrons dislike this enough to give them orders to cut a deal of some sort?"

Yes mimikatz that is the REAL question. How many Dems have sold out..much as they did in HCR to the wealthy and powerful special interests.

BTW Lest anybody shed too many crocodile tears for the wealthy some facts please...

"More than half of the total benefit from the Bush tax cuts this year alone will accrue solely to the richest 5 percent of Americans while the middle 20 percent of Americans will reap only 7 percent of the benefit."

The American middle class is on the verge of extinction. The gap is widening between the have's and the have not's. Look at the following disturbing statistics from the Business Insider.

- 83 percent of all U.S. stocks are in the hands of 1 percent of the people.
- 61 percent of Americans "always or usually" live paycheck to paycheck.
- 66 percent of the income growth between 2001 and 2007 went to the top 1% of all Americans.
- For the first time in U.S. history, banks own a greater share of residential housing net worth in the United States than all individual Americans put together.
- In 1950, the ratio of the average executive's paycheck to the average worker's paycheck was about 30 to 1. Since the year 2000, that ratio has exploded to between 300 to 500 to one.
- The top 1 percent of U.S. households own nearly twice as much of America's corporate wealth as they did just 15 years ago.

I post these FACTS simply for you to consider. I am not advocating socialism or any RADICAL redistribution of wealth in our country. Politics usually operate like a's simply time that the pendulum swung back to the disappearing middle class. There were plenty of wealthy people in the 1950's under an R Presidident Ike with 90% marginal rates. No less than Warren Buffet laughs at the idea investors will stop investing at higher rates..his point.."We actually worked harder".
BTW before Scott or Q.B. jump me again...I am not advocating socialism...nor am I even advocating a return to 90% marginal rates...but a 3% bump is not really going to hurt anybody.

Posted by: rukidding7 | September 8, 2010 2:29 PM | Report abuse

Huh? There is daylight. The key difference is that Orszag supports ending the tax cuts for the middle class in 2 years while Obama wants them to be permanent (or at least longer than 2 years). Orszag has a point -- the middle class cuts are the majority of the cuts (and people making $100k can afford to pay slightly higher rates) but raising the rates is a non-starter politically. I was suprised you didn't ask Orszag to comment on this key difference with the admin.

Posted by: wswest | September 8, 2010 2:31 PM | Report abuse

In late July, at a White House meeting with the congressional leadership of both parties, President Obama reminded Boehner that it was a Republican idea for Bush's tax rates to expire. Boehner replied that he didn't "structure" the policy he voted for, eventually leading meeting participants to laugh at him.

The entire post is very illuminating. That the American people cannot see that the GOP is a disingenuous group without any real grasp on policy is beyond me.

Posted by: cmccauley60 | September 8, 2010 2:41 PM | Report abuse

I think if Bush had had any concept that he was taking us into a 10 year war in Iraq (financed with borrowed money) even he would have recognied that the tax cuts for the wealthy would be fiscal suicide. Bush foolishly thought we would be greeted as liberators and combat in Iraq would last a few months at most. Bush was devastatingly wrong and his taxcuts for the wealthy were ill-timed to say the least. Now we have no resources to pull ourselves out of the deep recession that Wall Street brought down on us.

Posted by: Beeliever | September 8, 2010 2:45 PM | Report abuse

@ruk: "the American middle class is on the verge of extinction. The gap is widening between the have's and the have not's."

If the American middle class was on the verge of extinction, there would be no Wal-Mart. There wouldn't be 50 auto dealerships in Memphis. This whole "end of the middle class" thing is an obsession over a statistical artifact, not about what's actually happening on the ground. You want to argue raising taxes on the rich, the super-rich, I'm not closing the door. But if you're going argue that the rich becoming much richer much faster than the middle class--who is still, on the whole, becoming richer--means the extinction of the middle class is just not accurate.

"61 percent of Americans 'always or usually' live paycheck to paycheck."

This has always been the case. It is human nature that our expenditures rise to meet our income, and a little more besides. Anyone who was able to make a living earning 20k out of college yet managed to find it hard to make ends meet 15 years later when they were making 50k (and that's a lot of people) has had that experience. 61% of folks living paycheck to paycheck is evidence of the middle class.

I will also note that most folks with savings will still characterize themselves as living "paycheck to paycheck"--keeping certain savings near sacrosanct is why they managed to accumulate a little money in savings or retirement plans in the first place.

"- For the first time in U.S. history, banks own a greater share of residential housing net worth in the United States than all individual Americans put together."

Which is an inevitable part of the push for more affordable housing and more home ownership. Also, we have a culture (my generation, generation X, seems afflicted with this) that wants to turn over houses and cars in very small timespans. No one ever even approaches paying off a mortgage these days--when my dad payed on his for 30 years, living in the same little house, until he payed it off. I'd actually like to do that same thing, but I'm married with children, so I lose the "live here until we pay it off" vote.

"In 1950, the ratio of the average executive's paycheck to the average worker's paycheck was about 30 to 1. Since the year 2000, that ratio has exploded to between 300 to 500 to one."

I tend to agree these are unhealthy signs, but they don't mean the end of the middle class, which is as robust as ever. The thing that most threatens the middle class is the ability to get themselves into debt at the drop of a hat, and our recent financial troubles suggests that people are pulling back from some of those free-spending habits. A natural adjustment.

"but a 3% bump is not really going to hurt anybody."

I agree.

Posted by: Kevin_Willis | September 8, 2010 2:50 PM | Report abuse


I certainly accept your points about behavior having something to do with all of this...but again...let's go back to your father paying off his 30 year mortgage and not flipping or treating his home as an ATM.
True...but your father didn't face bankruptcy because of health care. It's a fact that the middle class is struggling with health care costs...the leading cause of bankruptcy.
Your college education cost a fraction of what it does today. My parents who were far from wealthy could actually..with me working and helping out...afford to pay my college tuition and room and board. Now that necessitates massive borrowing for most middle class people.

Your point about all the car dealerships in Memphis is interesting...perhaps Tennessee has missed the economic downturn.
Here in Florida the main street in St. Petersburg has more than few shuttered dealerships as does Tampa.

Perhaps here in Florida my view is skewed because it's more like a depression here than a recession. The Tampa Bay Bucs have been sold out with a long waiting list for season tickets...until two years they are lucky to draw a half full stadium.
Blackouts btw are going to take place in 11 NFL cities this because the NFL is no longer popular...or because disposable income is shrinking for the middle class.

Let me be clear. I'm not trying to engage in class warfare. That's a losing proposition anyway..history shows the wealthy always win that battle...perhaps except for Marie Antoinette..:-). At some point we are going to get tired of eating cake. The middle class is not going to disappear overnight...but the trends are clear...the rich are getting richer and they are using their power to game the system.
The two stats that bother me most...
66 percent of the income growth between 2001 and 2007 went to the top 1% of all Americans.
The top 1 percent of U.S. households own nearly twice as much of America's corporate wealth as they did just 15 years ago.
Again I'm not some raving radical's just time for the pendulum to swing back for a correction in our course.

There are two rationales. The first is basically a moral or ethical position. A lot of people think it is morally bad for there to be wide gaps, wide disparities in well being in a society.

If that is not convincing to a person, the second reason is that inequality is actually harmful to the well-being of a society. There is now a lot of evidence, based on cross-national comparisons of inequality and economic growth, that more unequal societies actually have lower rates of economic growth. The divisiveness that comes out of large disparities in income and wealth, is actually reflected in poorer economic performance of a country."

Posted by: rukidding7 | September 8, 2010 3:10 PM | Report abuse

For those who bothered to read Orszag's original column, today's version (described here) is indeed exactly what he was saying. If you can't stand to read a whole big column, shame on you, but here's a tip: just go to it and search for the word "Ideally". Following that word, "Ideally," the column says that ideally only the middle-class tax cuts would be extended, not those for people with high incomes. But, the writer would settle for having to extend the upper income tax cut if necessary.

That being said, when I read it, I wondered about the role of the NYT editor here. If I saw this wording, I'd advise the writer to underline the point a bit more -- either say it strongly or don't say it -- rather than sketching it in a bit lightly with that one "Ideally" comment. So, I think an editor should have helped out a first-time columnist (though experienced writer) with that suggestion.

The alternative is that Orszag DID say it more clearly and an editor encouraged him to strip out some qualifying phrases to make it seem like more of a rift. A faux controversy would certainly make it far more saleable/clickable as a piece of writing, so I can imagine an editor having that instinct.

All of the above regarding his work with an editor or two is simply speculation as to how the piece got out there in the somewhat weak form it did -- but I will say it's speculation that leapt to mind yesterday the instant I read it. It reads like it got worked over a little too long by too many hands.

Posted by: fairfaxvoter1 | September 8, 2010 3:16 PM | Report abuse

ruk, you socialist!

Posted by: quarterback1 | September 8, 2010 3:39 PM | Report abuse

Continuing the tax breaks for the wealthiest 2% is a foolhardy policy. We can't afford adding $70 billion to the federal deficit to further enrich the rich. There is no factual evidence to suggest that these tax cuts create jobs -- if there were then we wouldn't have had such a decline in the number of jobs the past few years.

The vast majority of small business owners (where new jobs tend to arise) earn less than $250,000 a year. The beneficiaries of the Bush tax cut are the executives of the businesses that destroyed the economy. Extending this tax cut won't create any new jobs. It will just enable the richest amongst us to continue to pay federal income taxes at an unfairly low rate. Our economic system and nation enable them to make a whole lot more money than 98% of the population -- and they should be paying back much more in federal income taxes to pay for the benefits they enjoy that 98% of the population does not enjoy.

Posted by: dl49 | September 8, 2010 3:48 PM | Report abuse

"ruk, you socialist!"

Thanks Q.B. Does that also make me a communist in your book or am I more like Bernie Sanders of Vermont? :-)

Posted by: rukidding7 | September 8, 2010 4:06 PM | Report abuse

Marx said socialism is the precursor to communism, so does it really matter? :-)

Posted by: quarterback1 | September 8, 2010 4:12 PM | Report abuse

"The vast majority of small business owners (where new jobs tend to arise) earn less than $250,000 a year."

Myth. A large percentage of "small" businesses that actually create jobs -- not just every tom, dick or harry who runs an ebay hobby business -- will be hit.

Posted by: quarterback1 | September 8, 2010 4:15 PM | Report abuse

Q.B. Have you ever owned a small business?

I have and still do....small business like big corps are corporations..they declare all manner of wife and I rarely pay a penny in income tax on our business because it rarely makes money..on paper at least. Like you and the other working folks we pay on our income and any dividends we might declare.

Perhaps you need to read Robert kiyoski's "Rich Dad Poor Dad" series. The fundamental tip is to incorporate. If you don't have a corporation Q.B. you should consider creating one...just one of the ways the wealthy preserve their wealth.

I know hard to believe a socialist...soon to be communist would engage in such a thing as a corporation. :-)

Posted by: rukidding7 | September 8, 2010 5:09 PM | Report abuse

Lol, a tax-avoiding socialist, no less.

My firm is an llp, which is the organizational form for lawyers in many states. Most states (maybe all) don't allow lawyers to incorporate as ordinary corporations. We are large enough that we have a staff of people (seems like armies of them at times) who handle the finances and taxes. I am treated as self-employed for my personal taxes, but it is an incredibly complex, cumbersome, and expensive system, and we (and I personally) get clobbered with taxes. As you might know, the government jacks up the self-employed for 110% of last year's taxes as estimated payments, whether or not we are making as much. There are many lawyers (and others) who actually have to borrow money to pay estimated taxes and then try to dig out of the hole.

By the time all the taxes, capital assessments, and other deductions come off the top, it's frightening sometimes how little is left. And believe me it is not for want of having lots of expertise invested in how to keep the taxes down.

Rich Dad Poor Dad -- yes, I have read it! And a couple of his others, although it has been some years. Rich Dad's definition of assets and investments is actually what was behind a question I posed a few days ago about how some of my liberal friends define these things. Everything the government spends now is said to be an investment. I've never been able to think of my house as an "asset" since reading it.

Posted by: quarterback1 | September 8, 2010 5:51 PM | Report abuse

The real difference between Orszag and the Obama Admin is not the two-year extension for all, including the rich, but Orszag's desire to end them for all, after that two years, rather than extending them for the 98% that Obama wants to have them. Everytime a GOPer tries to use what Orszag says, the Dems must point this out and use it as an opportunity to note that Dems intend to continue the tax cuts for the 98% Obama promised to continue them for. For those who think that ending the tax cuts for the upper 2% is somehow anti-stimulative over the next couple years, I suggest that they be used to pay for the real stimulus that the GOP says we cannot afford. A one-year payroll tax holiday on the employee share costs some $335B and could be paid for out of the $700B to be raised over the next ten years from the end of the Bush tax cuts for the 2% ( the trust fund can be paid $33.5B per year out of that money). Part of the rest could be used to fund necessary and stimulative infrastructure expenditures and the rest could become a down payment on the long-term deficit problem by, for example, being paid over to the Medicare trust fund. The effect would be more stimulus, and less debt accumulation, than if the tax cuts for that 2% are extended.
For those who, like Orszag, want to end the Bush tax cuts for all because of the long-term deficit problem, that is simply not going to happen politically. A solution to the long-term deficit problem will have to be found without increasing middle class income taxes because the current economic situation of the middle class will not find them accepting such an increase. In my view, the solution is getting discretionary spending (defense and domestic) under control to the satisfaction of those middle class taxpayers, then leaving that portion of the long-term deficit which arises from entitlements, mostly medicare, to a combination of controlling medicare costs to the extent possible (in part through systems already established through the health care acts) and then, to the extent that the funds necessary to pay for this do not exist from medicare trust fund revenues and the individual and corporate tax revenues available for payment of the Part B premium subsidy that comes from the general fund, to make up those funds, not from income taxes, but from a VAT specifically dedicated to paying for medicare benefits, which would, I believe, be much more acceptable to middle class taxpayers than increasing their income taxes would be.

Posted by: gregspolitics | September 8, 2010 11:48 PM | Report abuse

If the dirty greedy rich people want to fight the little guy for the tax cut , then let the dirty greedy rich people get drafted to fight their own wars. After all they got a lot more to defend. Id give up my tax cut to see the dirty greedy rich boys duck some IEDs for a change.

Posted by: jimbobkalina | September 9, 2010 12:42 AM | Report abuse

Orszag may be a brilliant economist, but he doesn't know diddly about politics. If those are his best negotiating tactics, I'd love the chance to sell him a used car...

Posted by: kwagner99 | September 9, 2010 8:19 AM | Report abuse

Sheesh. Anybody who actually read Orszag's article could see immediately that there was no real rift on the top tax bracket question--they both would like to see them expire this year if possible.

(The funny thing is, there actually is a rift on the question of the *middle-class* tax cuts. Obama wants to make them permanent while Orszag thinks they should expire. Funny how the fake rift that supports Republican talking points gets oodles of media play, while the real rift that offers no such support is ignored. Ah, that rascally liberal media.)

Posted by: Dausuul | September 9, 2010 11:32 AM | Report abuse

Subject: Wishful Thinking, Deficits and Entitlements

I am always suspect when a writer tells us that he did not say what he did say.

Mr. Orszag told us in his recent NYT column that “Medicare, Medicaid and Social Security will account for almost half of spending by 2015.” He combines that with a temporary extension of the Bush tax cuts of 2001 and 2003 until 2012 simply results in two more years of additional unfunded deficits of $310 Billion a year and moves the discussion to the 2012 election, when expiration would be a virtual impossibility.

Mr. Orszag conveniently neglected to mention that the Social Security outlays are matched by incoming Social Security payroll taxes and that full benefits can be met with until 2037 with the payroll taxes and the $2.5 Trillion Dollars of U.S. Treasury securities in the Social Security Trust Fund. At that point, payments would be automatically reduced approximately 22% - 25%. Of course, increasing the Social Security wage base of $106K/year would eliminate ever running out of sufficient funding.

Medicare outlays are partially offset by Medicare payroll taxes. Again, they never seem to account for the incoming revenue stream.

Medicaid was originally created by Congress as a welfare program with 50% - 90% coming from the Federal government and the rest coming from the states. Congress gave it to Health and Human Services because of its historically low 3% cost of administration rather than set up a new federal agency. What a surprise, most of the states getting a 90% Federal Medicaid reimbursement tend to vote Republican, and complain about the cost of government.

From the day it was passed, selected Members of Congress and the media lump Medicaid with Medicare and Social Security and use the combined programs as a “whipping boy” to tell us “entitlements” are destroying the fiscal integrity of the U.S. government, without mentioning that Medicaid has nothing to do with Medicare or Social Security.

They also neglect to mention that Medicare and Social Security are funded by employer and employee payroll taxes, or that they would reduce or eliminate the payroll taxes as they eliminate Medicare and Social Security via means testing and extending the age of eligibility.

In short, they love the payroll taxes; they just don’t want to use them used for Medicare and Social Security.

We live in a quixotic world. The Republicans hate Social Security which runs a surplus; i.e. it collects more than it pays out; while demanding the unfunded extension of the Bush tax cuts of 2001 and 2003 which will increase the deficit approximately $3.1 Trillion Dollars for the next ten years.

The Republicans, conservatives, and tea party are no more interested in fiscal prudence than Willy Sutton; they simply want to rob the Social Security and Medicare trust funds because that’s where the money is (to once more pay for tax cuts they want, but do not want to pay for).

Posted by: ThoseWhoServe | September 9, 2010 8:56 PM | Report abuse

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