Dems tax-cut stance a reversal

Democrats' insistence on maintaining lower U.S. tax rates for 98 percent of taxpayers is a reversal of their initial stance on the rates, experts said. With the Jan. 1 deadline approaching, R. Glenn Hubbard, dean of the Columbia Business School who designed the tax cuts enacted during the administration of George. W. Bush, told The Washington Post he finds it "deeply ironic" Democrats want to preserve the lower tax rates for the first $250,000 of income. He noted Democrats strongly opposed enactment of the cuts when they first were proposed a decade ago. The tax cuts, which have been extended several times, are set to expire and coincide with across-the-board spending cuts imposed by the Budget Control Act of 2011, pushing the economy over the so-called "fiscal cliff" economists say could throw the country back into recession. Though efforts to avoid the cliff so far have fizzled -- the latest last week's "Plan B" offered by House Speaker John Boehner, R-Ohio, but rejected by his caucus -- investors still are hopeful a deal can be reached, Julia Coronado, chief North American economist at BNP Paribas, told The New York Times, noting markets have been "incredibly complacent." "The longer this goes on, the more nervous I get about first-quarter growth. If negotiations were to linger into March, then the first quarter could be much weaker," said Dean Maki, chief U.S. economist for Barclays Capital. Maki told the Times it's likely no agreement will be reached before the Jan. 1 deadline although something is possible after that. Steven Elmendorf, chief of staff to former House Minority Leader Richard A. Gephardt, D-Mo., said economic conditions have changed and that's why Democrats want to preserve the tax cuts in part. "The world changes, and the economy is where it is," he told the Post. "With people's economic status, we should not be raising taxes on people earning under $250,000." "The reason there's been this movement toward broad consensus on renewing the tax cut for working- and middle-class families is that will give us a sharper progressivity in the tax system that is very much desired by Democrats and progressives who've seen an income distribution more and more distorted toward the wealthy," said Betsey Stevenson, former chief economist in President Obama's Labor Department and a professor at the University of Michigan.