Bill Clinton is on a roll.
First he criticizes Barack Obama for attacking Mitt Romney’s "sterling" record at Bain Capital. Now he suggests that Congress needs to extend the Bush-era tax cuts, "to avoid doing anything that would contract the economy now." While Clinton might be offering sound, practical advice for Congress and the President, he is doing little to help Obama's reelection chances.
[Related: Bill Clinton Stumps For Barrett In Wisconsin, But Backhands Obama Over Bain Attacks]
When the CBO warned about the "fiscal cliff," it was referring to the following four events, which would result in $500 billion worth of damages, akin to about 3.8% of the GDP: the expiration of the Bush-era tax cuts, the end of the 2% payroll tax holiday, an end to extended unemployment compensation, and widespread spending and budget cuts. But many doubt that this fiscal cliff is a probalby indicator of economic apocalypse. "We do not see the doomsday scenario playing out," says JPMorgan Chase economist Michael Feroli.
Clinton suggested that Congress will only able to deal with long term debt-reduction plans after the imminent lame-duck session, meaning "they will probably have to put everything off until early next year."
If the Bush tax cuts, which the GOP claims encourage investment and create jobs, are not extended for the wealthiest 2%, the Republicans will not agree to slow down spending cuts. But as the Occupy movement gains momentum this summer, it will be hard for the administration to defend the tax cuts, under which, by some measures, the wealthiest 1% of the population will see about one-fourth of the tax savings. The cost of the tax cuts will also additionally burden the deficit, by up to $900 billion in some estimates.
But the partisan disputes are at the heart of the issue, at least now, while President Obama is seeking re-election. Even if Clinton is right about congressional behavior in an election year, his statements only revive negative buzz about the concessions Obama has made since taking office at the beginning of 2009.
In his 2008 campaign, Obama called for a repeal the tax cuts, which were set to expire at the end of 2010. But the repeal never happened. In fact, the tax cuts were extended when Senate Democrats decided to punt the issue, hoping to save the seats of vulnerable candidates up for reelection that year. By the middle of 2011, Obama claimed to be entering a "more combative phase of his presidency," in which he planned to propose a long-term debt-reduction plan that would increase the taxes on the wealthiest taxpayers and corporations.
So why, in a campaign for Obama, would Clinton come out saying the Bush-tax cuts should be extended? In an attempt to provide practical economic advice for Congress and the President, Clinton ended up backing Obama into a corner in which he might have to once again disappoint his base by extending the tax cuts. Thanks, Bill.
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