Fox has dutifully adopted claims by GOP Reps. John Boehner and Kevin McCarthy that failing to immediately vote to extend Bush-era tax cuts injects “uncertainty” into the economy that hinders hiring, a claim which both Boehner and McCarthy made on Fox News Sunday. However, economists agree that tax cuts -- especially those for the wealthiest Americans -- are poor stimulus.
Boehner and McCarthy tell Wallace: Waiting on extending tax cuts inject “uncertainty” into economy
McCarthy: “The number one reason out there why jobs aren't being created: Uncertainty.” On the September 26 edition of Fox News Sunday, McCarthy told host Chris Wallace: “The number one reason out there why jobs are not being created: Uncertainty. They don't know what's going to happen with the taxes; they don't know what's going to happen from regulation. This [Pledge to America] could reign it all in.” He later added that “the Democrats have failed to lead on [tax cuts]. They're going to want to leave the House without dealing with it. That uncertainty itself is keeping capital on the sidelines and stopping jobs from being created in America.”
Boehner: Pelosi should “end the uncertainty” by promising a debate on “extend[ing] all of the current tax rates.” Following McCarthy's remarks, Boehner asserted: “If we leave here this week and adjourn for the election without preventing these taxes increases on the American people, it will be the most irresponsible thing that I have seen.” He added that “the speaker ought to promise a fair and open debate on making sure that we extend all of the current tax rates, end the uncertainty, and getting our economy going again.”
Fox dutifully picks up GOP spin and runs with it
Wallace grills Hoyer on delaying tax cut debate: “Is that any way to add certainty and confidence to the economy?” Minutes after his interview with Boehner and McCarthy, Wallace asked House Majority Leader Steny Hoyer: “Isn't a serious failure by Democrats in both the House and the Senate that you haven't told the American people what's going to happen to their taxes on income, on dividends, on capital gains, on inheritance, and it's coming up now just three months away. Is that any way to add certainty and confidence to the economy during tough times?”
Doocy: “The uncertainty is just killing people.” On the September 27 edition of Fox & Friends, co-host Steve Doocy asserted: “So as you go into the voting booth, come the first Tuesday in November, Americans -- according to what we've heard so far -- will not know what sort of taxes -- or tax hike they're going to face next year, and that's one of the problems. People say the uncertainty is just killing people. Why can't we know what we're going to pay in taxes next year?”
Carlson: Uncertainty is “the big buzz word here.” Following Doocy's comments, co-host Gretchen Carlson added that “people across America should be really, really upset about this. Steve touched on the big buzzword here, and that is uncertainty. That means that businesses are not going to continue to hire, or start hiring, they're not going to continue to lend to small business -- I mean, everyone is living in this cloud of unknown, including even people who work in payroll departments.”
Perino: Democrats “haven't heeded the advice” that businesses “desperately want certainty” on tax cuts. Later during Fox & Friends, Fox News contributor Dana Perino stated that she was “surprised” that the Democrats have not yet voted on whether to extend the tax cuts because they “haven't heeded the advice from the economic community and businesses saying we desperately want certainty. And even if they had voted on it and not extended all the tax cuts, at least then businesses would know.”
Obama, congressional Dems want to extend tax cuts for all but wealthiest Americans
Obama's proposed FY 2011 budget calls for only allowing the tax cuts that affect families earning more than $250,000 a year to expire. From the proposal:
In addition to closing loopholes that allow wealthy investment managers to not pay income taxes on their earnings and ending subsidies for big oil, gas, and coal companies, the Budget eliminates the Bush tax cuts for those making more than $250,000 a year and devotes those resources instead to reducing the deficit. Our Nation could not afford these tax cuts when they passed, and it cannot afford them now.
Reid spokesman confirmed to Reuters: Dems "believe we must permanently extend tax cuts for the middle-class ... and we will." In a September 24 Reuters article, Reid confirmed through a spokesman that congressional Democrats will push to extend tax cuts for the middle class:
“Democrats believe we must permanently extend tax cuts for the middle-class before they expire at the end of the year, and we will,” Jim Manley, a spokesman for Senate Majority Leader Reid said in an email. “Unfortunately, to this point we have received no cooperation from Republicans to do so.”
Extending tax cuts “does not create much incentive ... to hire more workers”
CBO: Extending tax cuts “does not create much incentive ... to hire more workers.” Congressional Budget Office (CBO) director Douglas Elmendorf stated in February written testimony that "[d]eferring the scheduled increases in tax rates in 2011 would help some businesses" but that “increasing the after-tax income of businesses typically does not create much incentive for them to hire more workers in order to produce more, because production depends principally on their ability to sell their products.”
Economists: Extending the tax cuts that benefit only the wealthy is poor stimulus. Howard Gleckman of the Tax Policy Center wrote that “higher income households are more likely to bank the cash than spend it. As a result, tax cuts for these high-earners will do relatively little to boost the economy in the short run.” CBO has also stated that as stimulus, allowing only the top tax cuts to expire “would be more cost-effective” than extending all of the cuts “because the higher-income households that would be excluded would probably save a larger fraction of their increase in after-tax income.” Nobel Prize-winning economist Paul Krugman also said of extending the tax cuts for the wealthy: "[I]t's hard to think of a less cost-effective way to help the economy."
CBO scored "[d]eferring the scheduled increases in tax rates" as the lowest-scoring policy proposal to stimulate economy. In a January 14 report on “Policies for Increasing Economic Growth and Employment in 2010 and 2011,” CBO stated:
[P]olicies that would temporarily increase the after-tax income of people with relatively high income, such as an across-the-board reduction in income taxes or an increase in the exemption amount for the AMT, would have smaller effects [than other options] because such tax cuts would probably not affect the recipients' spending significantly.
The report further stated that “a permanent extension [of the Bush tax cuts] would entail large revenue losses after the recovery is over.”
According to a table in the report, CBO estimated that reducing income taxes in 2011 would have the least stimulative effect of the policy options considered.