By Jay Heflin - 09/30/10 03:19 PM EDT
Republicans controlled Congress and the White House in 2001, the year the tax cuts were enacted into law and slated to expire in ten years.
The provisions were expected to cost about $1.3 trillion over the 10-year period. Making them permanent would have been more expensive.
The Brookings Institution in 2004 estimated permanent tax cuts would have cost $1.8 trillion over 10 years and would have been more expensive in the out years.
"Over the long run, making the tax cuts permanent would have cost as much as repairing the shortfalls in the Social Security and Medicare Hospital Insurance trust fund," it stated. "Thus, to the extent that Social Security and Medicare are considered major long-term fiscal problems, making the tax cuts permanent should be seen as creating a fiscal problem of equivalent magnitude."
Brookings contended that making the tax cuts permanent would hurt economic growth. The argument included all of the tax cuts — ones benefiting the middle class as well as the rich.
Since the tax cuts were enacted, the country has experienced anemic job growth — even before the economic crisis began. Several economists even refer to the post-2001 economy as a "jobless recovery."
Still, Axelrod supports Obama's plan to extend the Bush tax cuts for the middle class.
"Seems like a no brainer, right?" he states, adding, "Middle-class Americans saw their incomes shrink during the last decade, and have borne the brunt of the recession. They need the relief, and America needs a strong, thriving middle class. Because the middle class families are most likely to spend this money quickly, these tax cuts give our economy a much needed shot in the arm."
Economists on both sides of the argument seem to agree that folks who make less money tend to spend their salaries instead of saving them.
But is anyone spending?
A new Gallup poll shows consumer spending has dropped for everyone.
Its Sept. 29 poll found consumer spending has dropped to a $56 daily average during the last two weeks ending Sept. 26, down from $64 and $61 two weeks prior.
The current drop not only marks the lowest spending level so far for 2010, but is also below Sept. 2009 spending levels.
The findings suggest extra cash from extending any of the tax breaks might not be spent until the economy improves.
"It may be that today's unusually high economic uncertainty has put Americans in a wait-and-see mode," Gallup states. "Consumers and small business owners may simply be pulling back until the economic landscaped is clearer."
Axelrod notes that under Obama's plan, "the tax cuts would be permanently extended on incomes up to $250,000, which includes 98 percent of American taxpayers."
"This is fair, just and crucial for our economy," he added, "That's why President Obama is fighting to extend the tax breaks [for] middle-class Americans."
Extending the tax cuts has become such a political hot potato that Democratic leaders have postponed making a decision on the matter until after the election.