What prompted the original and due to expire Bush tax cuts cited in the so-called fiscal cliff discussion?

Answer 1

Since President George W. Bush first instituted tax cuts in 2001 and 2003, this has been a very controversial part of economic policy. It was a strongly-held belief on the part of the Republican Party that cutting taxes would grow the economy (called by supporters "supply-side" and by opponents "trickle-down" economics). When the tax cuts were first enacted, the country was in the midst of a war, and critics noted it was highly unusual to cut taxes during war-time. Further, critics noted the tax cuts mainly helped the wealthy, and contributed to what became a growing budget deficit. But supporters said the tax cuts were necessary: they said the government took too much money from taxpayers, and Mr. Bush was providing them with tax relief.

The tax cuts were set to expire in 2010, but they were renewed by Barack Obama as part of trying to negotiate a compromise with Republicans during budget talks in 2011. However, Mr. Obama believed then, and continued to believe during his 2012 campaign, that raising tax rates on the top 2% would bring in much needed revenue and not harm the economy at all. He noted that under Bill Clinton, the wealthy paid that slightly higher rate and the economy was booming. The president would like to continue tax cuts for the middle and working-class but end the tax breaks for the wealthy. Republicans, however, believe that nobody, even the top 2%, should have their taxes go up, so they have blocked any efforts on the part of the president to let the Bush tax cuts on the wealthiest Americans expire.