The Hill News

In an apparent break with the White House, Peter Orszag, the former director of the Office of Management and Budget (OMB), recommended Tuesday that Congress extend the expiring Bush tax cuts for two years, then do away with them altogether.

Writing his first column for the New York Times since leaving the administration, Orszag argues that extending all the cuts would help the struggling jobs market, which he dubs a "painful jobs deficit," but that letting all of them expire in two years would help bring down the federal budget deficit.

{mosads}"In the face of the dueling deficits, the best approach is a compromise: extend the tax cuts for two years and then end them altogether," he writes. "Ideally only the middle-class tax cuts would be continued for now! . Getting a deal in Congress, though, may require keeping the high-income tax cuts, too. And that would still be worth it."

Orszag's compromise plan comes as Congress is gearing up to debate the future of the expiring Bush tax cuts when members return from August recess next week.

President Obama has said that he wants Congress to extend the cuts for individuals making under $200,000 and families making under $250,000, but wants the upper income tax breaks to expire.

The tax cuts have been a sharp point of contention between both parties: Vice President Joe Biden recently said that the GOP's arguments for extending all the cuts are "a bunch of malarkey."

Republicans say now ! is not the time to let any of the cuts expire, because doing s! o would hinder job growth that is already working at a slow pace.

Orszag gives creedence to that argument, but also says that a permanent extension of the cuts like many Republicans have recommended would deepen the deficit.

"Why does this combination make sense? The answer is that over the medium term, the tax cuts are simply not affordable," he writes. "Yet no one wants to make an already stagnating jobs market worse over the next year or two, which is exactly what would happen if the cuts expire as planned."

The former budget director's argument also underscores the disagreement about what to do with the cuts within the Democratic Party. Some on the left want to let all the cuts expire while centrist Democrats want to extend all the cuts, at least temporarily. Orszag said that compromise is the best option on the table. 

"Despite a dire fiscal outlook, many progressives want to make the tax cuts permanent for all but the very highest earners. Many ! conservatives are even worse: they’d make the tax cuts permanent for the likes of Warren Buffett, even though he’d prefer they didn’t," he writes. 

"Senate Democrats and Republicans almost never come together anymore. This month, they should fight the dual deficits rather than each other. Let’s continue the tax cuts for two years but end them for good in 2013."