Orszag on the Tax Cuts

Today, former OMB Director Peter Orszag debuted his new column in the New York Times and he sure made a splash. He tries to thread the needle of propping up the economy in the immediate-term and helping right the budget imbalances in the medium-term by suggesting that the tax cuts should be temporarily extended for all income brackets until 2013 and then allowed to expire. While this is not his ideal plan--he states that extending the tax cuts for only middle-income earners would be--he notes that “getting a deal in Congress, though, may require keeping the high-income tax cuts, too. And that would still be worth it.”

Orszag's opinion has spurred a great deal of discussion. The White House felt it necassary to state that it disagrees with its former budget chief's view. CRFB’s president Maya MacGuineas wrote a response today in Politico to Orszag as part of a lively debate on Politico.com. MacGuineas called Orszag's solution to extend the cuts to 2013 and subsequently let them all expire “clever”. While agreeing with the idea of a temporary extension, she further suggests that the tax cuts be used as a “budget hammer” in order to get broader budget reform through and only made permanent if they are fully offset. MacGuineas also notes that the then impending tax cut expiration should spur serious tax reform that could include replacing the income tax with an energy tax and broadening the tax base through tax expenditure reform.