The Need For Permanent Tax Cuts
Journalists can watch the same thing and report different versions of what happened. Consider coverage of Federal Reserve chairman Alan Greenspan’s November 12th congressional testimony. Edmund Andrews of the New York Times reported that Greenspan "weighed in today in favor of President Bush's campaign to make last year's tax cuts permanent, lending a powerful voice to a high priority of the new Republican Congress."
But the Washington Post reported that Greenspan "splashed cold water on President Bush's argument for a quick vote to make last year's tax cut permanent, telling the congressional Joint Economic Committee that voting now to extend the tax cuts in 2011 would have no short-term positive effect on the economy."
The Times said that Greenspan's "support for making the tax cuts permanent is likely to make it even more difficult for those lawmakers, mostly Democrats, who argue that the planned tax cuts should be postponed or scaled back because the government is already facing years of big deficits." But the Post interpreted his remarks as a setback for Republicans, saying, "Bush and congressional Republicans have argued that making the tax cut permanent would help the economy by giving individual taxpayers and businesses certainty that the tax code would not revert to its higher 2001 rates in 2011. The White House showed no sign of retreating from that position yesterday."
As if that’s not confusing enough, the Washington Times reported a somewhat different version. Patrice Hill said Greenspan "urged Congress to re-establish controls over deficit spending before considering further tax cuts to stimulate the economy. While he endorsed extending the current tax cuts and unemployment benefits enacted last year, Mr. Greenspan said more stimulus legislation probably is not needed because the Fed's big interest-rate cuts should suffice to pull the economy out of its current ‘soft patch.’" Barbara Hagenbaugh of USA Today took a similar tack, saying that Greenspan told Congress that more tax stimulus — a top priority for President Bush — "might not be needed."
It’s true that Greenspan can sometimes be confusing in his comments, but Hagenbough got it right in reporting his view on making the tax cuts permanent. She reported Greenspan "said making the tax cuts permanent now would not boost the economy, as some Republican lawmakers say, because everyone is acting under the assumption that the cuts are here to stay anyway." That could be viewed as throwing cold water on Bush’s plan to make them permanent were it not for the fact that Greenspan went on to say that businesses and individuals are acting on the assumption that they ARE permanent.
The critical point in his testimony, noted by Investor’s Business Daily, was :" Because I believe that the markets presume that the tax cuts are permanent, and that as a consequence making them permanent would have no stimulative effect, it is also the case that if you were to rescind them, the markets would adjust negatively . . . and I am not in favor of doing that." So that means they should be permanent.
Reed Irvine can be reached at email@example.com