Bush Tax Cuts May Get 2-Year Extension, Malpass Says: Tom Keene

A two-year extension of the expiring Bush-era tax cuts may be the best way to break a stalemate for Congress and the president hoping to negotiate a deal by year- end, according to David Malpass, founder of Encima Global.

“I think what they are actually debating in Congress is whether to do a two-year extension, one that falls after the November 2012 election so that you can have some stability,” Malpass, said today in a radio interview on “Bloomberg Surveillance” with Tom Keene. “A two-year extension kind of works for the Republicans and the Democrats.”

President Barack Obama and many Democrats want to retain lower rates enacted in 2001 and 2003 only for individuals with an annual income of $200,000 or less and married couples earning no more than $250,000 a year. Republicans are seeking to keep the Bush-era tax cuts for all income levels. All of the tax cuts are scheduled to expire at the end of the year.

“The president came out and said nice things about the Republicans and vice versa because they both know that the public doesn’t want them to be fighting in public,” said Malpass, president of Encima, a New York City-based economic research and consulting firm. “The reality is that they are still worlds apart in terms of their outlook on taxes. It’s going to very hard to get 60 votes to pass a bill through the Senate.”

Malpass joined 22 people last month in signing a letter to Federal Reserve Chairman Ben Bernanke expressing concern about the central bank’s decision to buy $600 billion of Treasuries.

‘Huge Uncertainty’

After meeting for almost two hours with Republican and Democratic congressional leaders at the White House yesterday, Obama said that both sides agree action is needed to extend tax cuts to middle-income families before the end of the year even as they remain divided on tax rates for the wealthiest Americans.

“There’s this huge uncertainty on what’s going to happen on U.S. tax policy,” said Malpass, a former Bear Stearns Cos. chief economist who ran as a Republican candidate for the U.S. Senate from New York this year. “It’s a huge budget buster and it’s a thick bill, so how do you reconcile that with the vote that just occurred where people want clear responsibility out of Congress?”

The U.S. House will vote tomorrow on extending middle-class tax cuts, Majority Leader Steny Hoyer said today.

Republicans will take control of the House in January, while the Democrats retain a majority in the Senate.

To contact the reporters on this story: Susanne Walker in New York at swalker33@bloomberg.net; Tom Keene in New York at tkeene@bloomberg.net

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net

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