Recently a few House Democrats have publicly come out in support of extending President George W. Bush's tax cuts for families making over $250,000 for two or more years. These Democrats are of the view that with the nation expected to continue in a severe recession for the next 18-to-24 months, according to respected economists, and that the tax cuts should not expire, because wealthy families would tighten their belts and not put as much of their fortune toward disposable income. Politically, many also fear being labeled as tax-raisers in the months before the contentious midterm elections.
The idea has gained traction within the Democratic Caucus over recent days, Gerry Connolly, a vulnerable freshman House Democrat from Virginia, told The Hill newspaper, "I think the recovery is sufficiently fragile that we ought to leave tax rates where they are."
In her weekly press conference on Capitol Hill today, though, House Speaker Nancy Pelosi (D-CA) all but closed the door on the idea. Pelosi said passionately, "Our position has been that we support middle income tax cuts, the tax cuts at the high end have increased the deficit enormously, and they have not created jobs over the last eight years of the Bush administration. Think of the inconsistency of what the Republicans have said about these tax cuts, they insisted that the unemployment benefits be paid for, but the tax cuts for the wealthiest in the country should not -- $34 billion for unemployment insurance benefits which create jobs, $700 billion dollars for the wealthiest Americans that don't want to pay for it, and they do not create jobs. I think we have a clear distinction here -- if we want to lower taxes for the middle class and reduce the deficit and create jobs, extending the tax cuts at the high end are not conducive to reaching those goals."
The New York Times on July 16 noted, "The economic recovery has been helped in large part by the spending of the most affluent. Now, even the rich appear to be tightening their belts."
Mark Zandi of Moody's said, “One of the reasons that the recovery has lost momentum is that high-end consumers have become more jittery and more cautious."
More: "[T]he Top 5 percent in income earners -- those households earning $210,000 or more -- account for about one-third of consumer outlays, including spending on goods and services, interest payments on consumer debt and cash gifts, according to an analysis of Federal Reserve data by Moody’s Analytics. That means the purchasing decisions of the rich have an outsize effect on economic data. According to Gallup, spending by upper-income consumers -- defined as those earning $90,000 or more -- surged to an average of $145 a day in May, up 33 percent from a year earlier. Then in June, that daily average slid to $119."
It'll be interesting to see how this story develops after the August recess, if rank-and-file members, back from town halls, report to the House Democratic Leadership that letting the tax cuts expire could be politically damaging, perhaps there could be a change in Democratic policy.