Former President Bill Clinton said Congress may have to temporarily extend all expiring tax cuts and spending into early 2013 to give lawmakers time to reach a deal on deficit reduction.
Clinton’s stance contrasts with that of President Barack Obama, who has said tax breaks for high earners should expire as scheduled at the end of 2012. Republicans in Congress seized on the statements to urge extensions of all the tax cuts.
Matt McKenna, Clinton’s spokesman, later issued a statement that sought to minimize any differences with Obama.
Clinton “does not believe the tax cuts for the wealthiest Americans should be extended again,” McKenna said yesterday. The former president “simply said that he doubted that a long- term agreement on spending cuts and revenues would be reached until after the election.”
White House press secretary Jay Carney referred reporters to McKenna’s statement today and said “there’s no daylight” between the president and Clinton on the issue.
Clinton, who appeared with Obama at fundraising events in New York June 4, said in an interview broadcast yesterday on CNBC that Congress “will probably have to put everything off until early next year” because of Republican demands that the tax cuts for the wealthy be made permanent. Doing so would be “an error,” he said.
“What I think we need to do is to find some way to avoid the fiscal cliff, to avoid doing anything that would contract the economy now and then deal with what’s necessary in the long- term debt reduction plan as soon as they can, which presumably will be after the election,” Clinton said.
Ben S. Bernanke, the Federal Reserve chairman, has warned of a “fiscal cliff” at the end of the year because tax cuts on wages, capital gains, dividends and estates are scheduled to lapse. At the same time, automatic spending cuts are scheduled to start in 2013. The Congressional Budget Office has warned that the combined effect might push the economy into recession.
Senator Mitch McConnell of Kentucky, the Senate Republican leader, joined House Speaker John Boehner today in calling for extending all of the tax cuts.
“It’s pretty obvious that the economy needs the certainty of the extension of the current tax rates for at least a year,” McConnell told reporters and urged support for an overhaul of the tax code.
The Republican-led House is planning to vote on a one-year extension in July, and lawmakers are considering a fast-track procedure for a tax overhaul.
Obama, who agreed at the end of 2010 to extend the expiring tax cuts for two years, said in April 2011 that he opposed further extensions of tax cuts for high earners.
“We can’t afford it,” he said. “And I refuse to renew them again.”
Delaying the expiration of the tax cuts by even a few months would probably require Congress to act first on raising the U.S. debt ceiling. Democrats in Congress such as Representatives Ron Kind of Wisconsin and John Yarmuth of Kentucky have said they have more leverage on the tax issue and would rather address that first.
Senator Orrin Hatch of Utah said in a statement that Obama should “put campaigning aside” and follow Clinton’s advice.
“Bill Clinton and I disagree on many things, but when it comes to stopping this massive tax hike on Jan. 1, we agree,” said Hatch, the top Republican on the Senate Finance Committee. “It’s my sincere hope that President Clinton’s call for action will spur this president to finally lead and prevent the largest tax increase in history, a tax increase that would devastate our already weak economy.”
Republicans also pointed to comments made today by Larry Summers, who was Treasury Secretary in Clinton’s administration and a White House economic adviser to Obama.
“We’ve got to make sure that we don’t take the gasoline out of the tank at the end of this year,” Summers said on MSNBC today when asked about Clinton’s comments and what Obama should do. “That’s got to be the top priority. We’ve got to make sure that we keep providing energy to the economy.”
Summers didn’t take a specific position on a short-term extension of the tax cuts. On Twitter, Dan Pfeiffer, the White House communications director, said Summers agrees with Obama.
In a separate interview on Bloomberg Television, Summers said the U.S. should borrow more money now because of historically low interest rates.
“There’s a huge opportunity for the government to take advantage of those low rates, to make investments that actually will pay off for the budget over the long term,” he said.
In a separate interview on the PBS Newshour program, Clinton said Republican presidential candidate Mitt Romney should move cautiously in acting against China on trade if he’s elected. Romney, the former governor of Massachusetts, has vowed he’ll declare China a currency manipulator upon taking office.
“He’s going to have to think about it, because he’s going to have to look at how much of our debt the Chinese hold and how dependent the world is on seeing their continued success,” Clinton said on PBS. “It wouldn’t necessarily be good for America if there were a total collapse of the Chinese economy. That would cause a lot of trouble.”
China, the world’s second-largest economy, held $1.17 trillion in Treasuries in March, making it the biggest foreign U.S. creditor.
Clinton sought to explain comments he made in a May 31 CNN interview that undercut an Obama campaign ad that criticizes Romney’s record as a private-equity executive at Bain Capital LLC.
“I didn’t have any idea, when I was giving that answer, that I was wading into some controversy in the campaign, because I haven’t seen the ads,” he said. “But it’s much more relevant to look at what he did as governor and what he proposes to do as president.”
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