Democrats and Republicans will never agree on fiscal policy, but the misinformation surrounding the extension of the Bush tax cuts has escalated to epic proportions.
Nancy Pelosi decided to score points by stealing credit from the GOP, referring to the Bush tax rates as the “Obama Middle Class Tax Cut,” a ridiculous moniker, given that the reduced rates are already in effect, and have nothing to do with Barack Obama or the Democratic Party:
As the debate heats up over the Obama Middle Class Tax Cut, Congressional Republicans are playing fast and loose with the facts. They will do or say anything to protect the richest 2 percent of Americans from returning to the tax rates of the 1990s, including raising taxes on 98 percent of Americans – after a decade proved their deficit-busting giveaways did nothing to grow the American economy. 
New testimony from Congressional Budget Office Director Douglas Elmendorf will be cited ad nauseam over the coming weeks. Mr. Elmendorf’s statement depicts a much more complex scenario than midterm election candidates can convey during stump speeches, and most will never read the document, anyway. This does not excuse drawing false or misleading conclusions from this testimony for political gain, as in this excerpt from a White House Blog post that fails to draw the distinction between short and long-term projections:
We simply can’t afford to give the wealthiest Americans these big tax cuts that would add to our deficit and, according to the non-partisan Congressional Budget Office, be just about the least effective way to grow our economy and help create jobs. 
What the CBO document really says is that raising taxes and cutting back on economic stimulus in the short-term will hold back our recovery:
In addition, the scheduled increases in taxes and the waning of fiscal policy measures that supported the economy earlier in this recovery will hold down spending, especially in 2011. The weak demand for goods and services resulting from those various factors is the primary constraint on economic recovery. 
If we let the tax rates expire across the board, we will remove $250 billion in personal income from the economy in 2011 , a bad move when what we need to do is give money back so taxpayers can consume.
The economy in 2010 is a completely different beast from what we should expect in the years to come, and Mr. Elmendorf draws that distinction between necessary short-term fixes, and long term fiscal policy. Most importantly, even if we fail to extend the tax cuts for affluent Americans, the budget deficit will still increase enormously:
In sum, and as CBO has reported before, permanently or temporarily extending all or part of the expiring income tax cuts would boost income and employment in the next few years relative to what would occur under current law. However, even a temporary extension would add to federal debt and reduce future income if it was not accompanied by other changes in policy. A permanent extension of all of those tax cuts without future increases in taxes or reductions in federal spending would roughly double the projected budget deficit in 2020; a permanent extension of those cuts except for certain provisions that would apply only to high-income taxpayers would increase the budget deficit by roughly three-quarters to four-fifths as much. 
Democratic policy dictates income redistribution to fuel social spending that will be impossible if all of the Bush-era tax cuts are extended. Someone will have to foot the bill for the orgy of spending that will ensue if Democrats retain power after the elections. When our legislative branch finishes fleecing the well-to-do, they will set the tax increase bar a bit lower.
1..The Gavel. The Top 5 Tax Cut Whoppers Republicans are Pedaling. September 14, 2010. http://www.democraticleader.gov/blog/?p=2710.
2..The White House Blog. White House White Board: CEA Chair Austan Goolsbee Explains the Tax Cut Fight. Jesse Lee. September 30, 2010. http://www.whitehouse.gov/blog/2010/09/30/white-house-white-board-cea-chair-austan-goolsbee-explains-tax-cut-fight.
3..Congressional Budget Office. The Economic Outlook and Fiscal Policy Choices. Statement of Douglas W. Elmendorf, Director, before the Committee on the Budget. United States Senate. September 28, 2010. Summary page.
4..Congressional Budget Office. The Economic Outlook and Fiscal Policy Choices. Statement of Douglas W. Elmendorf, Director, before the Committee on the Budget. United States Senate. September 28, 2010. p. 11.
5..Congressional Budget Office. The Economic Outlook and Fiscal Policy Choices. Statement of Douglas W. Elmendorf, Director, before the Committee on the Budget. United States Senate. September 28, 2010. p. 6.