Via the Wall Street Journal’s Notable & Quotable, here is columnist James Pethokoukis explaining why, contrary to Keynesian theory, President Obama wants much higher taxes.
It’s the great mystery of the debt ceiling debate: Why is President Barack Obama so darn adamant about raising taxes? “This may bring my presidency down, but I will not yield on this,” Obama told Republicans before dramatically exiting their budget meeting last week. . . . Wouldn’t standard Keynesian economics, much beloved in the White House, actually call for cutting taxes (or increasing spending) to boost aggregate demand? Doesn’t Obama know that even his former chief economist, Christina Romer, says tax increases “will tend to slow the recovery in the near term.” . . .
But Obama’s tax obsession becomes understandable when you realize the long game he’s playing: Big Taxes to fund Big Government. Decade after decade. . . . On everybody. And if we have a debt crisis, maybe those tax increases come sooner rather than later.
The paper Pethokoukis is talking about, written by Christina Romer and her husband David Romer, is here. And here is the NBER digest of the paper, if you don’t feel like reading the whole thing. A key sentence in the paper is the following:
Tax changes have very large effects: an exogenous tax increase of 1 percent of GDP lowers real GDP by roughly 2 to 3 percent.
There is a very simple explanation as to why Obama wants to raise taxes. He is an economic illiterate! An ignoramus, if you will, when it comes to economics. Would be interesting to see in those hidden transcripts of his if he ever took an economics course, would it not? Of course that would require the MSM to actually do their job and look into the guy’s background and that isn’t ever going to happen.
Reply to this commentLinkReport AbuseHe needs the GOP and the Tea Party to fracture to win in 2012 ... a tax hike would help that if the GOP agreed to it ... that is mostly what this is about ... plus he wants to spend more ...
Reply to this commentLinkReport AbuseSpot On.
Reply to this commentLinkReport AbuseWhy is Obama so adamant in raising taxes?
Fairness.
The economy was booming under the Clinton tax rates.
The deficit shouldn't all be on the backs of the middle class and poor.
Cut the military. Bring back Clinton tax rates. And then cuts to entitlement programs can be less draconian.
It's a fair compromise.
Reply to this commentLinkReport Abuse"It's a fair compromise."
A fair compromise would be to return to clinton era spending levels.
I'd wager you, as a liberal, would be opposed to that.
Reply to this commentLinkReport AbuseIt depends on what you cut to get there, I guess.
I believe the best mix to get the deficit in hand would include raising taxes to Clinton levels and cuts to military spending.
Not just cutting Medicare and Social Security.
It seems reasonable to me. America did very well under the Clinton rates.
Reply to this commentLinkReport AbuseTomas, you can wish for unicorns all you want, but it won't affect reality. Your argument suffers not only from a lack of facts, but also stems from an incorrect premise. Your premise is that spending levels at are a bare minimum and any cuts would be painful instead of the inflated level they are at versus 12 years ago, which if Republicans went back to, you would call the end of the World, while never offering a peep during Clinton's Presidency I would bet. Secondly, you simply have no concept of the depth of the problem. Even if you get to raise taxes on the rich back to pre-Bush levels, you will raise around 700 billion over 10 years at best and that's if the rich don't change their behavior (I'll be happy to bet on that). Let's say you get to somewhat gut the military and reduce it 15% a year saving you something in the neighborhood a 100 billion a year. That gets you about another trillion or so. So with all your proposals, at best you will get 1.7 trillion. The CBO has estimated, with way to high a guess of economic growth, that our deficit will be 10 trillion with the path we are on now (and it will be higher than that). So you've gotten us 17% of the way there, so now where is your spending cuts to get us to the other 83%? Like the rest here, I'll be waiting for a while I'm sure. No, you and the other liberals here try and assign a causality that doesn't exist in that Clinton era tax rates helped economic growth. Nothing could be sillier. If anything, they held down growth from even higher rates. Also, the capital gains tax cuts during Clinton spurred investment and growth and added revenues to the Government from that before the tax cut. No, Clinton did one thing extremely well, he stabilized and kept strong the dollar. This fact alone is more important than any tax policy (a lesson Bush never learned to his detriment and one Obama is taking to new heights). Simply put, tax cuts are good for economic growth, but they cannot overcome the growth retarding policy of a weak dollar. To not understand this makes most of the commentary here from those on the Left rather silly
Reply to this commentLinkReport AbuseI love unicorns!
Different economists and analysts have different takes on what we should be doing now (as well as what happened during the Clinton/Bush years).
You and I trust different economists.
Hence, our different positions.
But, given that, why not take a compromise that cuts entitlements and raises taxes much less than I would prefer?
If you win the next election, you can cut the taxes right back. Politically, it's a lot easier to cut taxes than raise them.
Why risk default?
Reply to this commentLinkReport Abuseshow me a poor person who pays taxes in this country....
Reply to this commentLinkReport AbuseIf you look at the paycheck of a maid at a Sheraton or a cashier at Home Depot etc..., you'll see that taxes are taken out every paycheck. Poor people also pay sales taxes.
But, the issue is how best to reduce the deficit. And I think removing the bush tax cuts should be part of the mix.
Reply to this commentLinkReport AbuseSo... a person with a good job with a good company (and, if the recent study of "poverty" is accurate, a flatscreen TV, a place to put it--a home or apt., a car or the cost of transportation to/from that job, a video game for their kids, a microwave for their popcorn, clothing, food on the table, etc. etc. is how you define "Poor"????
The deficit has gone up more in the past two years than it did in the preceeding 8 Bush years. Under simple LIFO accounting, it would make sense to eliminate the most recent spending INcreases first.
So admit it, please? You aren't really about an abstract deficit drop OR about real poor people. You are about ideology and picking and choosing winners and losers and which kind of deficit spending you LIKE and which kind you don't.
By the way, "removing the bush tax cuts" would hit that maid and clerk too.
Reply to this commentLinkReport AbuseJust because someone disagrees with you, it doesn't mean that they have some sinister agenda.
I don't think I'll persuade you of my position. But if I'm polite and reasonable, you may see why I believe it.
I think cuts to medicare and social security will hurt retirees. They may have flat screens, but most folks depend on these programs and will in the future.
I believe cuts to the military and raising taxes will make cuts to entitlements less severe.
Reply to this commentLinkReport AbuseSure they pay taxes. And at the end of the year, when they file the tax returns, they get every cent of it back. And even some extra to boot! If you pay $1500 in taxes through the year, and get a refund of $3000, how can you claim with a straight face that they pay taxes?
Reply to this commentLinkReport AbuseLike nearly all conservative commentary about taxes, this is, of course, a lie.
The working class does not receive their social security and medicare taxes back at the end of the year. They do not receive their sales taxes back at the end of the year.
The EITC does return their income taxes in many cases, along with a small supplement to their income... a policy which was specifically designed to discourage welfare and encourage work, and is in line with Milton Friedman's ideas for addressing poverty.
Reply to this commentLinkReport AbuseNo one receives their FICA or Medicare tax payments back, but everyone (big contributors and small ones) all get to draw to limitless levels from the "trust funds." In that sense, they (we) will all will get our taxes back should we survive long enough--that is until actions like Obama's half-trillion dollar cuts to Medicare finally hobble that horse.
So far as Federal Income Tax goes: those who pay FIT are outnumbered by those who don't. No way, no how that is either what was intended or sustainable politically for much longer.
Reply to this commentLinkReport AbuseForget hiking the rates to Clinton-era levels. That won't do it. Nor will hiking taxes on the mythical rich - there aren't enough of them to come close to closing the 40% gap between revenues and expenditures. If we're going to have no cuts, then what is required is that the ~49% or so of Americans who actually pay income tax pay 40% more than they are now paying.
I'm fine with that as long as the Republicans make it clear that it's the president's plan - no cuts, tax hikes only. Then let's let the cards fall where they may next November.
You can have infinitely expanding benefits but you can't have them without infinitely increasing taxes.
Reply to this commentLinkReport AbuseThey want to raise your taxes!
They want to take away your medicare!
Scare-tactic politics work both ways.
A compromise would give cover to both sides.
A raise in taxes alone is not enough. Nor would military cuts be enough.
But, they make the cuts to Medicare less severe.
Obama isn't even asking for a full repeal of the Bush tax cuts.
Reply to this commentLinkReport Abuse"Obama isn't even asking for a full repeal of the Bush tax cuts."
....Yet.*
*(These are the cuts, of course, that he wanted to utterly remove until political reality forced him not to. Give him time, Tomas. Give him time!)
Reply to this commentLinkReport AbuseIt's amazing how many times liberals tell this lie. One would almost think that they actually believe it.
1) The economy was booming before the Clinton tax increases. After, not so much.
Reply to this commentLinkReport Abuse2) Much of that so called boom was in fact the dot com bubble.
It's amazing how many times conservatives lie about the honesty of this claim. In fact, I'm pretty sure they DO believe it, because actually checking the data is too hard, and it's much easier to believe whatever you heard on the radio.
Clinton's first budget, including some modest tax increases on upper income brackets and the gas tax, was signed into law in August 1993 and went into effect for 1994.
Compare the 1993 numbers to the 1994 numbers. See any changes? Then look at '95 and '96. See an obvious pattern? Well, no. There isn't one. But do the data show that "the economy was booming before the tax increases; after, not so much"? Absolutely not.
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