Outside the Beltway

Obama: Don’t Raise Taxes During Recession

A year ago, President Obama was emphatically against raising taxes during the recession — even on the rich.

James Joyner
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Bruce McQuain and Stephen Hayes remind me that, just a year ago, President Obama was emphatically against raising taxes during the recession — even on the rich.

We have not proposed a tax hike for the wealthy that would take effect in the middle of a recession. Even the proposals that have come out of Congress—which by the way, were different from the proposals I put forward—still wouldn’t kick in until after the recession was over. So he’s absolutely right, the last thing you want to do is to raise taxes in the middle of a recession because that would just suck up—take more demand out of the economy and put businesses further in a hole.

Of course, while the economy is still in the toilet and unemployment is higher than Obama warned it would be if we didn’t pass his stimulus package, the recession is technically over.  But no sane politician would tout that fact.  And there’s a real chance we’re in for a double dip.

Says Hayes:

But inside the White House gates it’s still the “Summer of Recovery.” Treasury Secretary Timothy Geithner told NBC’s David Gregory last month that he does not believe we’re headed toward a double-dip recession. And while he acknowledged that the recovery could take a while, he was quite optimistic. “You are seeing recovery. You’re seeing private investment expand again, job growth starting to come back.” When he was asked specifically about raising taxes on top income earners, as is scheduled to happen on January 1, 2011, Geithner said, “The country can withstand that. The economy can withstand that. I think it’s good policy.”

It was an interesting word choice: “withstand” a tax hike? So the U.S. economy is strong enough to endure the additional constraints the Obama administration wants to place on it in pursuit of its redistributionist goals? This is the triumph of ideology over economics.

The degree to which a couple percentage point increase on high earners would suck up demand from the economy is debatable.  But it’s interesting that Obama seems to have reversed course on this issue since this time last year.

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3 responses to “Obama: Don’t Raise Taxes During Recession”

  1. reid Avatar
    reid

    “Redistributionist goals”? That sounds like a watered-down but just as idiotic and partisan-driven term as “socialist!1!”. Did Reagan or Bush have “redistributionist goals” when they raised taxes? Seems like Hayes is the one with an ideology problem. And out of curiosity, has he ever complained about the deficit?

    Is it really useful to nitpick the Administration’s actions when they’re trying to juggle getting the economy on track and combat the growing deficit? I’d say it’s NOT all that interesting that Obama may raise taxes on the top few percent, given current conditions. Maybe to those that are trying to concoct a “gotcha”…. I’m all for a president that will change course as reality warrants.

  2. john personna Avatar
    john personna

    To say “the recession is technically over” is to misunderstand the technical rules, and the current risks.

    The current argument (the argument today, actually) amongst economists is whether this is a doiuble-dip or one-long recession. Robert Reich’s “Forget a Double Dip. We’re Still in One Long Big Dipper.” is but one example:

    http://robertreich.org/post/953941192/forget-a-double-dip-were-still-in-one-long-big

    On taxes and recessions though, I’d beware binary thinking. Recessions and taxes can not be just “on” or “off.” Given that some taxes have to be collected all the time, the best we can actually do is turn the dial and adjust the rate of taxation with the health of the economy. Ideally, that dial would be adjusted for counter-cyclical government action. We have higher taxes and lower spending in recoveries and lower taxes and higher spending in recessions.

  3. Drew Avatar
    Drew

    I’m with JP on this one. I know people are in revisionist history mode right now: Roemer’s tax multiplier analysis doen’t apply to the rich. But I rub elbows with the rich for a living. And that revisionism is pure BS.

    We should be very, very careful of a tax increase right now. It could put us in a double dip, and that would be a disaster. An avoidable one at that.

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