In our segment today on Europe's ballooning fiscal crisis and the impact it could have on the recovering U.S. economy, we didn't get to talk about a proposal that doesn't appear to be winning over many fans: House Democratic Leader Nancy Pelosi's call for Congress to permanently extend the middle income tax cuts. And by middle class she means those making up to a $1 million.
In a letter to Speaker John Boehner, Pelosi writes, "We must ask the very wealthiest Americans to pay their fair share. Democrats believe that tax cuts for those earning over a million dollars a year should expire and that we should use the resulting revenues to pay down the deficit."
The problem with the proposal, however, is that it may go too far for President Obama, who supports keeping the lower tax rates for only those making less than $250,000. But it may not go far enough for Speaker Boehner, whose office says he “has already announced that the House will act to stop the tax hike on every American taxpayer."
In a scathing editorial today, the Washington Post called Pelosi's move a "risky pander," pointing out that her proposal would cost the government several hundred million dollars in revenue over the next decade. The editorial board goes on to write:
"The Democratic leader’s position offers the political benefit of letting Democrats argue that the GOP opposed curtailing tax cuts even for millionaires. The risk of this particular pander, however, is that $1 million becomes the new, high bar; tax cuts below that level remain off-limits. Do Democrats really want their new slogan to be: 'Almost as irresponsible as the Republicans?'
Pelosi may also be attempting to put the wheels in motion for an eventual compromise. If an agreement isn't struck by the end of the year, tax rates will jump and the country could find itself in "taxmageddon." Budget watchdogs say this, combined with deep automatic spending cuts, could sink the economy back into recession.