by Donald Lambro
A surprising report from the Congressional Budget Office gives new support to permanently extending the tax cuts enacted under President George W. Bush—dealing a major blow to President Obama’s plans to raise taxes at the end of this year.
In a significant story that receive scant attention from the national news media, CBO Director Douglas Elmendorf says that keeping the Bush tax cuts that affect upper-income taxpayers, small businesses and investors will give the weakened economy a “considerable” economic boost over the next several years and create jobs that will drive down unemployment.
Elmendorf’s conclusions were part of a CBO analysis released recently on the government’s record-breaking trillion-dollar deficits.
“Under that … scenario [keeping the tax cuts at their present levels], economic growth would be stronger next year; unemployment would be lower next year,” Elmendorf said.
CBO’s analysis gives the Republicans new ammunition for its midterm election agenda that calls for extending the Bush tax cuts—a position that has virtually full support within the business community, among major economists, and even a growing number of congressional Democrats, who have been hearing from beleaguered small businesses during the August recess.
Economic growth fell to 2.4% in the second quarter and some economists are projecting that the true rate of growth will be closer to the 1% range when the Commerce Department issues its revised estimate in the coming weeks.
CBO strongly reinforced this more bearish outlook.
“In addition, under current law, both the waning of fiscal stimulus and the scheduled increases in taxes will temporarily subtract from [economic] growth, especially in 2011,” CBO warned Congress.
In another sign of the Obama stimulus plan’s economic impotence, CBO is forecasting a mediocre 2% economic rate of growth in 2011, far from the more robust 3%-plus growth rate needed to make a dent in the unemployment rate.
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