Democrats divided over whether to pay for extension of Bush-era tax cuts

House Democrats are divided over whether an extension of the Bush tax cuts should be offset with other spending cuts.

Under the rules adopted by the House, a two-year extension of tax cuts benefiting the middle class do not have to be offset.

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But some liberal Democrats think it would be hypocritical for the party not to offset the cost of the tax extensions, or the cost of the Afghanistan war, when offsets are required for legislation liberals consider more urgent.

“If we want to extend unemployment past November, we have to find offsets. If we want to do a jobs bill to save jobs, we have to have an offset,” said Rep. Raul Grijalva (D-Ariz.), co-chair of the Congressional Progressive Caucus.

“But if we’re going to fund a war and if we’re going to continue these tax cuts, that’s not considered the same priority that we put on the jobless,” he said. “That’s hypocrisy.”

But the price tag gives Democrats in both camps pause.

“We’re talking about $411 billion just for offsetting for the next two year,” said Rep. Earl Blumenauer (D-Ore.), a member of the tax-writing House Ways and Means Committee.

Others expect the price to be over $300 billion. All of it will be applied to the already-ballooning deficit at a time when constituents are demanding fiscal responsibility.

Speaker Nancy Pelosi (D-Calif.) told reporters on Thursday that work would begin on them “pretty soon.”

Under pay-as-you-go rules, the Bush tax cuts for the middle-class, along with the alternative minimum tax “patch” that shields them from the levy, as well as the 2009 estate tax can be extended for two years without offsets.

There is precedent for not abiding by paygo rules. The House on more than occasion has offset the cost to extend relief from the alternative minimum tax for the middle-class. And the Senate recently paid to extend the so-called “doc fix” even though offsets were not required.

Rep. Allen Boyd (D-Fla.), a senior member of the fiscally conservative Blue Dog group that fought to protect the tax breaks from offsets, would support paying for at least part of their cost.

“It’s always a better deal if you can find the offsets,” he said, adding that the real problem with paying for the tax breaks lies in the Senate.

“If they will send us a paid-for bill we have proven that we can pass it in this House,” he said. “We did it back then [on the AMT] and we can do it again.”

Ways and Means member John Larson (D-Conn.) said the primary argument against offsetting the tax breaks' cost is House Democrats don’t want to make a hard vote that will most likely be reversed in the Senate.

“There isn’t a day that goes by that members in the House don’t say, ‘why are we doing this if the Senate isn’t going to take any action,” he said, adding, “We’re still waiting to see if they move on the 314 bills that we have sent over there.”

Still, House Democrats who support extending these tax breaks would like more done to offset their cost.

“I’d like to offset as much as possible,” Rep. John Tanner (D-Tenn.) told The Hill.

Tanner is a senior member on both the Ways and Means Committee and the Blue Dog Coalition. He worries that the amount of revenue flowing into the government is not enough to cover its responsibilities. He also hopes that President Obama’s debt commission will serve as a wake up call to the public that Congress can no longer be fiscally irresponsible.

“The commission is the only hope to explain to the American people that the structural imbalance between revenue and expenditures has got to be addressed,” he said, “One has to realize that a revenue stream that’s less than 16 percent of GDP is not sufficient to do the things that the federal government has to do. It’s just not sufficient.”

Tanner would support paying to extend the middle-class Bush tax cuts.

“I would be for it,” he said. “To offset it, pay for it, how ever you want to say it.”

Ways and Means members have talked about paying for pieces of the tax package. But those discussions have not gotten very far.

“There’s no great steamroller taking place in any particular direction,” said Rep. Danny Davis (D-Ill.), who sits on the tax-writing committee. “But nobody wants to increase the deficit.”

Some think it will be impossible to pay for the costs of the tax extension.

“This is not going to be offset,” Blumenauer admitted. “There is no way that we can offset all of that.”

Former Ways and Means Chairman Charles Rangel (D-N.Y.) agreed with Blumenauer’s assessment, saying the need to decrease the deficit pales in comparison to the political pressure lawmakers feel to oppose anything that negatively affects their district, like the tax increases or spending cuts needed to cover the cost of the tax cuts.

“I’m only speaking for myself and I cannot tell you how other members feel, but if you’re talking about offsets than whose ox is being gored?” he said. “The most patriotic [lawmaker] will tell you that they want to cut back – but not in their district!”