Hoyer: Middle-class tax cuts may be on chopping block

McClatchy NewspapersJune 22, 2010 

WASHINGTON — House Majority Leader Steny Hoyer tiptoed into dangerous political territory Tuesday, suggesting that to cut the government's record budget deficits dramatically, popular middle-class tax reductions set to expire at year's end could be extended only temporarily.

Hoyer, a Maryland Democrat, also suggested that future Social Security benefits may have to be trimmed to contain the national debt. Those calls from the House of Representatives' second-ranking Democrat, at a Washington budget conference, were seen as an important political step as well as a legislative trial balloon.

Congressional Democrats are being pulled in two different fiscal directions. Most Bush administration tax cuts expire at the end of this year, and extending them would be popular before November's congressional elections. Voters also are signaling, however, that they want to curb federal deficits and the national debt, both of which exploded over the past decade, especially since the recession of the past few years.

Democrats in Congress are divided over how to proceed, a mission that's complicated by an increasingly popular Republican drumbeat, as GOP candidates say that the looming deficits are hurting the economic recovery, government spending should be cut and expiring tax reductions extended.

Hoyer expressed a willingness to get tough with the budget and a desire to work with Republicans.

"As the House and Senate debate what to do with the expiring Bush tax cuts in the coming weeks," Hoyer said, "we need to have a serious discussion about their implications for our fiscal outlook, including whether we can afford to permanently extend them before we have a real plan for long-term deficit reduction."

Hoyer added, however, that as long as the economy is struggling to recover, "I don't think this is the time to increase taxes" on middle-class people. Congress is expected to let tax reductions for the wealthy expire at year's end.

Hoyer also discussed ways to curb future government spending, saying, "We could and should consider a higher retirement age or one pegged to life span, more progressive Social Security and Medicare benefits, and a stronger safety net for the Americans who need it most."

He gave no further details. The age when Social Security recipients can receive full benefits varies depending on the year of birth. For those born from 1943 to 1954, for instance, the age to qualify for full benefits is 66. It increases gradually for those born starting in 1955. For people born in 1960 or later, the age is 67.

Budget experts consider slowing the growth of "entitlements," led by Social Security and Medicare, crucial to reducing future deficits and the national debt. The nonpartisan Congressional Budget Office projects that debt held by the public will rise from 53 percent of the nation's gross domestic product in 2009 to 90 percent by 2020. It was 40 percent in 2008.

"Normally, deficits seem somewhat kind of abstract, and austerity measures hurt. But people may be so concerned about the deficit that Representative Hoyer wants to signal a serious intention to do something about it," said Andrew Taylor, the chairman of the political science department at North Carolina State University in Raleigh.

President Barack Obama has supported making the Bush-era tax breaks permanent for individuals who earn less than $200,000 a year and joint filers who make less than $250,000. Permanently extending those tax cuts would cost an estimated $2.15 trillion over the next decade, however, when the nation faces $9.76 trillion in deficits, according to the CBO.

A bipartisan commission appointed by Obama and Congress is studying ways to reduce the debt. It must report to Obama by Dec. 1, and its recommendations must be approved by 14 of its 18 members. It could outline a path forward, but only Congress and the president could enact it.

While Hoyer's proposals are the type that budget experts say the commission should consider, the political stakes quickly became clear Tuesday.

Despite his calls for bipartisanship, the GOP's congressional campaign committee put out a statement while Hoyer was still speaking, declaring "Hoyer to Middle Class Families: Tax Breaks Won't Last Much Longer."

On the Senate floor, Republican leader Mitch McConnell of Kentucky said, "The House majority leader in a speech today warns that in order to do anything about the debt crisis ... President Obama will have no choice but to break his campaign pledge of no new taxes for millions of American families."

Democrats were largely silent about the notion.

House Speaker Nancy Pelosi, D-Calif., didn't comment, and a top Democratic aide, who asked not to be named lest it endanger his job, said Hoyer's tax proposal was likely to "meet with resistance from many in the Democratic caucus."

Hoyer tried to thread a political needle by urging his audience to separate long- and short-term deficit issues.

"Overreacting to short-term deficits, while we're still feeling the effects of recession, will send our economy back into a tailspin, put even more Americans out of work and increase the very deficits we are trying to reduce," he argued.

The long-term deficit, though, is another matter.

"Unfortunately, we can blame our long-term deficit on policies that are almost universally popular. We're lying to ourselves and our children if we say we can maintain our current levels of entitlement spending, defense spending and taxation without bankrupting our country," Hoyer said.

ON THE WEB

Social Security retirement age calculator

Rep. Hoyer's speech

Congressional Budget Office analysis of President Obama's 2011 budget

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