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White House Acknowledges Some Low Wage Earners Will Have Less Money In Their Pocket Next Year – Today’s Q’s for O’s WH

December 08, 2010 4:07 PM

National Economic Council director Larry Summers and White House senior adviser David Axelrod joined White House press secretary Robert Gibbs at today’s briefing.

As first noted by the New York Times, some low wage earners may be getting the fuzzy end of the lollipop in this tax cut compromise, in the sense that they may have less money in their pocket next year as opposed to this year. That’s because they receive tax credits through the Making Work Pay tax credit, which expires at the end of this year. That tax credit will be replaced by a payroll tax reduction of 2% -- and for some low wage earners, the tax credit is bigger than 2% of their income.

TAPPER: I was wondering if you could comment on the New York Times report today that those at the -- at the lower end of the economic spectrum will actually be the only ones with less money in their pocket as a result of this deal because of the Making Work Pay elimination and the...

SUMMERS: It's a good question. It's a very -- it's a very good question. You -- you have to figure out what comparison you're going to do. It is true that for a $16,000 a year, so that's an all-year minimum wage worker, it is true that the Making Work Pay would have given that -- would have given that worker $400, and the -- this proposal, the pay roll tax holiday, will give $320. That's -- and there is that $80 difference. On the other hand, the proposals, such as the House bill that contained the Making Work Pay, would not have -- would not have included any of the three refundable tax credits that I mentioned, which, cumulatively, for that family, on average are worth several hundred dollars.

Obviously, it depends on how many kids the family has and what the situation is, but on average would work out to about $300 for such a family. One. Two, would not have included the continuation of unemployment insurance benefits, which provide $300 a week in benefits. And, three, takes no account of the extra growth increment that will come from this program. If you raise GDP by 1 percent, that's $2,000 for the average family.

So we, as -- as I've emphasized, this was a compromise. But if you look cumulatively at the elements that were in this compromise, relative to no deal or even relative to the bill that passed through the House, that $16,000 a year family gets much more support from this bill than it would have -- than it would have in its absence. And we believe you have to look at the totality of the program, not just take one provision from it and compare it with one provision in some other bill.

(CROSSTALK)

TAPPER: But, just to be clear, there are those on the lower end of the economic chart who will be -- who will not benefit in 2011 compared to 2010 in this deal, while everyone else on the financial spectrum will.

SUMMERS: No. No. That's not right. That's not right. But you just said -- what you just said is factually -- is -- is wrong.

TAPPER: A single person. No family. Doesn't get a child credit. $16,000 a year.

SUMMERS: Right. That person will get $320. That person will get -- will -- will get $320.

TAPPER: As opposed to $400 this year.

SUMMERS: Right. So there's a person who, if they have -- if they don't benefit from the unemployment insurance, if they don't benefit from the economic growth, if they don't benefit from the EITC or the child care or the American Opportunity Credit, might be $80 behind. There's a far larger number of families, however, who will be hundreds, if not thousands of dollars ahead, because of the refundable tax credits, because of the unemployment insurance and because of the growth.

--Jake Tapper

December 8, 2010
in Current Affairs, David Axelrod, Jake Tapper, Political Punch, President Obama, Today's Qs for Obama's WH, Weblogs, White House, White House Press Briefing
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Coburn Attacks Unpaid For Middle-Class Tax Cuts, Ignoring Unpaid For Bush Cuts For The Wealthy

Appearing on conservative radio host Laura Ingraham’s show yesterday, Sen. Tom Coburn (R-OK) criticized the recently-announced White House tax cut deal with congressional Republicans for increasing the deficit. The deal extends the Bush tax cuts for the rich, which Democrats opposed, in exchange for continuing unemployment benefits and President Obama’s middle-class tax cuts, which Republicans opposed. Coburn attacked “spending” money on unemployment benefits and middle-class tax cuts, while ignoring the massive increase in the deficit caused by extending the Bush tax cuts for the wealthiest two percent of Americans:

INGRAHAM: What do we know, as we speak now, about this so-called compromise on extending the Bush tax code, the Bush tax cuts?

COBURN: Well, what we know, from what I understand, is we’re going to borrow another $110 billion from our kids for Make Work Pay and for unemployment benefits. Which, we ought to cut the government. The problem is spending. And what it seems like the agreement is is extension of two year extension of the tax cuts, one year for the Make Work Pay, and one year for the unemployment benefits, all of it borrowed against our kids.

Listen here:

Coburn packs a lot of misinformation in his short comment. First, it’s unclear where he gets the $110 billion figure from, since that doesn’t reflect the cost of any piece of the deal. Second, Making Work Pay (not Make Work Pay, as Coburn called it) is not included in the White House/GOP deal. Making Work Pay is a middle-class tax break created by Obama’s economic stimulus package, which helped 95 percent of working families, but will expire in January. Instead of that program, there will be a two percent reduction in employee payroll taxes for one year under the deal.

Third, Coburn seems to call both unemployment benefits and Making Work Pay “spending,” when in fact Making Work Pay — and its replacement in the new deal — are clearly tax cuts, not spending. If Coburn is suggesting that tax cuts will deprive the government of revenue, and thus are like spending, he is correct. Most Republicans have rejected the irrefutable logic that cutting taxes decreases government revenue, but if Coburn is going to subscribe to it, then he should also be concerned about extending the Bush tax cuts for the wealthy, which will add another $120 billion to deficit, while helping far fewer people.

Thus, it seems that Coburn is fine with increasing the deficit when it goes towards paying for tax cuts for the wealthy, but not for tax cuts for the middle class, or when it goes to pay for desperately needed unemployment benefits for the jobless. His stance reflects that of Rep. Jim Jordan (R-OH), who said he didn’t know if he would “be willing” to extend the Obama cuts for the middle class, even if tax cuts for the rich are extended. Meanwhile, Rep. Michele Bachmann (R-MN) suggested she will not support the deal because it includes “massive spending” on unemployment.

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Wednesday, December 8, 2010

Making Money Work

White House Acknowledges Some Low Wage Earners Will Have Less Money In Their Pocket Next Year – Today’s Q’s for O’s WH

Coburn Attacks Unpaid For Middle-Class Tax Cuts, Ignoring Unpaid For Bush Cuts For The Wealthy

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