The Wall Street Journal
By: Sarah N. Lynch and Adam Entous
September 7, 2010
WASHINGTON--Republicans and Democrats on Sunday sparred over the potential impact of an Obama administration proposal to provide tax cuts to small businesses, with critics saying it wouldn't be sufficient to turn around the struggling economy.
President Barack Obama has said he favors allowing Bush-era tax cuts for those making $250,000 or more annually to expire at the end of the year. On Friday, administration officials said they were considering using the revenue from these expiring tax cuts to finance about $35 billion of tax cuts for small businesses and workers.
In addition, Mr. Obama plans to ask Congress in the coming week to make a tax credit for business-research expenses permanent, an administration official confirmed on Sunday. The $100 billion proposal would be paid for from revenues generated by ending other corporate tax cuts. The president is expected to announce the plan on Wednesday in a speech on the economy in Cleveland.
Sen. John McCain (R., Ariz.), speaking on "Fox News Sunday," suggested that the new proposals from the White House to spur small businesses wouldn't do the job. "It isn't going to resolve this incredible uncertainty out there that large and small businesses have about their financial future," he said.
'The American people want us to stop spending, so let's just give them some certainty. Let's extend the existing tax cuts, and then let's give some more tax breaks to small businesses and large, and then maybe the American people will have some confidence," Mr. McCain said.
Sen. Lindsey Graham, a South Carolina Republican, argued that extending all expiring tax cuts could help create private-sector jobs. "If you increase taxes now at any level, it's going to make it harder to create jobs," he told NBC's "Meet the Press." "The idea of increasing taxes now makes no sense to most people."
National Small Business Association President Todd McCracken also expressed concerns about letting existing tax cuts for the wealthy expire. "The companies that do pay this tax--and there is a minority of small companies for sure--but the ones that do are the most successful ones, who are most likely to be growing jobs," he told CNN's "State of the Union."
Democrats said their goal--to replace tax cuts for the wealthy with more targeted credits for middle-class earners and small businesses--would provide a bigger boost to the economy.
"The economic argument on this is: Tax cuts on the middle class and small businesses are the dollars that are most likely to be spent and create economic activity," Democratic National Committee Chairman Timothy Kaine told "Fox News Sunday."
He also welcomed the administration proposal to extend the research-and-development tax credit. "The president wants to continue to give businesses that incentive to continue that innovation and research that powers our economy," he said.
The debate over how to address the expiring tax cuts comes as the unemployment rate crept up to 9.6% in August from 9.5% the previous month. At the same time, concern is growing over the government's rising budget deficits. The struggling economy and polls showing growing discontent with Washington have fueled concerns within the Democratic Party that Republicans could take back the House in November's midterm elections.
AFL-CIO President Richard Trumka, appearing on CNN on Sunday, defended the job that the Obama administration has done so far on the economy, saying many of the troubles were inherited from the Bush administration. This is the result of "30 years of failed policy," he said. "When you give the tax cuts to the very rich, they don't buy much. That's what happened ... They didn't give them to the people that need them."
Laura Tyson, Council of Economic Advisors chairman under President Bill Clinton, was asked on CBS's "Face the Nation" Sunday whether tax cuts for the middle class should remain and those for the wealthy be rescinded. She said she felt the Obama team's approach was "the right thing to do and it's the thing to do economically." She said the new revenue could be used for things such as a payroll-tax holiday.
David Plouffe, a Democratic strategist and former Obama campaign manager, told "Meet the Press" that "we're very proud of what we've done" to try to revive economic growth, but "it's going to take some time to dig out."
He acknowledged that Democrats are "going to have a tough election" in November, and that turnout was critical, but added that he believed Democrats could maintain control of both chambers of Congress. "The Republicans need to be on trial here, too," he said.