Week In News: Bernanke, Tax Breaks
LAURA SULLIVAN, host: We're back with ALL THINGS CONSIDERED from NPR News. I'm Laura Sullivan.
Representative JEB HENSARLING: How many more people have to suffer? How many more jobs have to be lost? It's simple, Mr. Speaker, no tax increases on nobody.
SULLIVAN: That's Republican Congressman Jeb Hensarling of Texas from this past December, sounding a firm tone on no new taxes. Well, now it seems that tone might not be so firm.
James Fallows of The Atlantic joins us as he does most Saturdays for a look behind the headlines. Hello, Jim.
JAMES FALLOWS: Hello, Laura.
SULLIVAN: Jim, Jeb Hensarling is one of the 12 members of this new supercommittee to carve out $1.5 trillion out of the federal budget. And Republicans seemed united against allowing tax cuts to expire. But now Hensarling says there may be a little wiggle room?
FALLOWS: Yes, two different kinds of taxes in two quite different policies. You'll recall that during the debt ceiling debates of the past year and over the last couple of years, the Republican position has been to let the Bush-era tax cuts go back up. That would be a tax increase, and therefore all of them were against it.
But when it comes to this anti-recessionary measure that was passed last year by the administration and the Congress of reducing the payroll tax withholding by 2 percentage points. That much more income that doesn't go to Social Security withholding but into people's paychecks, that letting that go back up would be just fine.
What's puzzling about this, number one, is not simply the theoretical matter you would think any expiring tax will be the same, but also as a anti-recession tool. The payroll tax withholding, which disproportionately affects poorer people, would seem to have a bigger stimulative effect of giving them more money to spend versus the high-end Bush-era tax cuts. So that's what it is somewhat puzzling about their position.
SULLIVAN: Well, speaking of money, a lot of the country's top economic minds spent the last few days in Wyoming, and Fed Chairman Ben Bernanke talked about playing politics with the federal budget.
FALLOWS: He did. And this was interesting because Fed chairmen are usually famed for the opaqueness of their remarks. And Alan Greenspan once said, if you can understand what I was saying, then I've done something wrong here. But Chairman Bernanke was quite explicit on two political points. One was he said that simply the fact of the fight over the debt ceiling - not its outcome, not what's at stake there - but the fact of such dysfunctional seeming fighting had hurt both the prestige of the U.S. financially and the real economic prospects.
He also, interestingly to me, seemed to take a side on the fundamental economic argument now raging in Washington, which concerns which is the larger threat. Is it long-term budget deficits, or is it short-term recession? And Chairman Bernanke seemed to say that the short-term recessionary prospect was the graver threat to the economy and even to long-term prospects for resolving the budget deficit.
SULLIVAN: And finally, Libya seems to be out of Moammar Gadhafi's control at this point. And President Obama was hammered for his handling of the U.S. involvement there. Does this mean that Obama's been vindicated?
FALLOWS: Well, there is a long way to go in Libya, of course. But what struck me about the apparent now success or success to this stage of the strategy is the following: that no presidential comparison is exactly correct, because there's only been, you know, 40-plus of these in our history and the circumstances are always different. But when Obama was in his glorious earliest stage, some of his greatest fans said he could be another Lincoln with his racial potential and because he came from Illinois. Some of his main detractors now say he'll be another Jimmy Carter, because of the one-term prospect.
Right at this moment, the president he seems to be most resembling is the first George Bush, because the biggest successes for the administration so far have been in fairly gutsy calls in international relations. The call to assassinate Osama bin Laden, the earlier call to shoot Somali pirates, and now this pretty much at Obama's own initiative decision to take United States into Libya. Meanwhile, the economy is having terrible problems, which make political problems for him. This doesn't mean that President Obama is doomed to the first George Bush's political fate. But I'm sure it's an example that the Obama administration is studying.
SULLIVAN: James Fallows is national correspondent with The Atlantic. You can read his blog at jamesfallows.theatlantic.com. Jim, I understand you're off to Australia for a few weeks, so we won't be hearing from you for a while. So have a really wonderful trip.
FALLOWS: Thank you very much.
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