White House Press Secretary Robert Gibbs speaks to the media during the daily briefing at the White House in Washington Monday.
(Alex Brandon/AP)Photos (1 of 1)
Read their lips: Mixed signals from Obama team on taxes
The White House said Monday that Obama's commitment not to raise taxes on the middle class stands firm. Some economists question if that's realistic, given America's fiscal plight.
By Mark Trumbull | Staff writer/ August 3, 2009 edition
Divergent messages from the Obama administration in the past two days hint at a tough political reality: Nobody likes higher taxes, but that may be the price of getting America’s fiscal house back in order.
Although Barack Obama campaigned on a pledge of no tax hikes on the middle class, top administration officials on Sunday appeared to open the door to rethinking that position. Then on Monday the White House press secretary said the door really isn’t open.
Either way, the discussion of possible tax hikes is already out of the stable. Economists generally agree with Treasury Secretary Timothy Geithner that the nation is on an unsustainable fiscal path, and that hard choices will need to be made – although the reckoning may not occur on Mr. Obama’s watch. Some say the magnitude of the hole to be filled is so large that spending cuts alone are unlikely to do the job.
“It’s going to take a combination of things that will slow the growth of spending … and increasing [tax] revenues,” predicts Jim Horney, a budget expert at the Center for Budget and Policy Priorities, a left-leaning Washington research group. Virtually “all agree that under our current path we’re going to see over time an explosion in deficits and debt.”
The path of inaction would have serious consequences, he warns: slower economic growth, greater risk of rising interest rates, and a growing burden of debt dumped on younger generations of Americans.
Political peril of tax hikes
But the path of action has consequences, too, if tax hikes are involved. Just ask George H.W. Bush, who lost the White House in 1992 after departing from his pledge, “Read my lips: No new taxes.”
In the election, Obama pledged that tax rates wouldn’t rise for Americans with household incomes below $250,000 a year. Recent polls confirm that Americans are generally not in a mood for a broad tax hike. Asked if they are willing to pay more taxes to reduce the federal deficit, 56 percent said no and 41 percent said yes in a New York Times/CBS News survey late last month.
Deficit outlook worsens
But the mammoth federal spending designed to lift the economy out of recession, coupled with a recession-related slump in tax revenues, has made the outlook for budget deficits much worse. Add the projected costs of covering healthcare for baby-boomer retirees and, possibly, those who are currently uninsured, and it’s clear why the issue of taxes is weighing heavier on the public and politicians lately.
In a televised interview on ABC on Sunday, Secretary Geithner talked about the need to make “hard choices” to rein in federal budget deficits. And the president’s top economic policy adviser, Larry Summers, said on CBS that healthcare reform will cost money, and “it is never a good idea to absolutely rule things out.”
Is this code language for reconsidering a middle-class tax hike?
On Monday, White House spokesman Robert Gibbs insisted that’s not the case. “The president’s clear commitment is not to raise taxes on those making less than $250,000 a year,” he said.
The 8 percent solution?
Whereas conservatives talk about solving the budget problem by cutting spending, and liberals (including Obama) call for making the highest-earning Americans pay more, the scale of the challenge may end up defying those prescriptions. The federal deficit “is projected to average at least $1 trillion per year for the 10 years after 2009, even if the economy returns to full employment and the stimulus package is allowed to expire in two years,” economists William Gale of the Brookings Institution and Alan Auerbach of the University of California, Berkeley, concluded in a study earlier this year.
They say the US must close a gap equal to about 8 percent of gross domestic product. That means if the nation acts now, taxes must either go up that much or federal spending must go down that much, permanently, to put government finances on a sustainable course.
For comparison, federal revenues totaled about 18 percent of GDP in 2008.
To close the whole gap with tax increases might crimp economic growth, as the government grabbed a larger share of national income. Spending cuts of that magnitude might displease legions of voters who – whatever they may say about bureaucracy – rely on government services. It’s hard for policymakers to agree to a shift that big all on the spending side, or all on the tax side. In the past, Mr. Horney says, progress on budget deficits has generally come with compromises on both sides of the ledger.
Not everyone agrees on the size of the so-called “fiscal gap.” But budget experts agree that the gap grows progressively larger, as a percentage of GDP, with each year of delay. The nonpartisan Congressional Budget Office offers one scenario outlining the gap being 8 percent of GDP if action is taken today, and 12 percent of GDP if action is taken in 2030.
—-
Follow us on Twitter.
Comments
2. martifr | 08.03.09
Mixed signals coming from the same administration can only mean that somebody is not telling the truth.
3. Timtan | 08.03.09
Oh gee! The economists finally figured this out! What a joke!
My god, if it took them this long, then maybe they shouldnt be an economist… This was obvious from day one…and it didnt take an economist to figure it out!
Hey economists….Why not go back to school where you belong. The real world isnt a place for you, and you are totally out of touch with reality.
Wait….doesnt that describe a schizophrenic?
Let the people be the judge!
I say CAN everyone of our current politicians and start over. Specifically, anyone currently holding a political position. No exceptions. None of them are doing the job they were elected and paid for.
4. fantum | 08.03.09
Obama-talk translation…
“healthcare reform” = government takeover and rationing of healthcare.
“tax reform” = Take money from taxpayers and buy votes.
“climate change legislation” = Energy tax to buy votes.
“science” = Believe what we tell you not what the scientists say.
“cash for clunkers” = Tax your grandchildren to buy votes.
“fix the economy” = Triple the deficit and double the debt to buy votes.
(Modified from another post)
6. DEF | 08.03.09
Have you noticed they are smiling, while Americans are frowning!!!!!! How much more money will they require and how much more does the government have to grow before the promises of utopia and the utopic dreams of equality for the poor and under privileged are fulfilled??? How much (Pity the poor) money is handed to the poor and how much is used up in the bureaucracy that is set up to oversee it’s soup line duties? A Building must be built, a staff must be hired, a landscaper must be contracted, vehicles must be purchased, fuel, utilities, supplies and administrative costs also must be figured in, so how much does it cost you to give your poor neighbor $200.00 dollars, routed through the government distribution system??? Who knows, but I’ll bet you could’ve saved thousands, if you’d just crossed the street and handed him a couple of hundred, even knowing he/she would waste it anyway!!!!!!!!!
7. Matt | 08.03.09
Wouldn’t have to tax the middle class if you took back the billons laundered through the AIG bailout that went to Goldman’s ‘profit’. Democrats might want to re-align their cross-hairs from the middle class and be confiscatory on the wallstreeters and bankers if they want to be re-elected.
9. Bucky | 08.03.09
This is a “sticky wicket” if there ever was one. Conservatives certainly failed to close the gap, and, in fact, widened it with the taxt cuts and drunken sailor spending of the past 8 years. It will be a real challenge for the liberals to pull this off without taxing the middle class. I’m with the economists that question whether this goal is realistic.Hard choices ahead no matter how you look at it.
10. Jaquestowe | 08.03.09
This is absolutely ridiculous. Obama can’t have it all. He wants more government without raising taxes on the middle class. He is ultimately going to have to come to a crossroad - either more taxes or less initiatives. When he gets to that point, I think we all know he will opt for more taxes. What a stupid position to be in - he becomes a liar if he doesnt deliver his initiatives, and a liar if he raises taxes. What a liar.
11. Ojay | 08.03.09
Obama clearly lied to the public about his true motives for healthcare and tax increases.
12. Lukuj | 08.03.09
When you campaign mostly on “Tell what they want to hear” reality is bound to kick in at some point. There is not an unlimited amount of money. Promises were meant to be broken in Obama’s world. The middle class tax increase balloon was floated. When people actually remembered the promises, then the increase is denied. The trial balloon will be floated again in a little while - just to see if the American people still remember the promise. After all, as Bill Maher says, the American people are “stupid.”
13. Craig - Internet marketing services | 08.03.09
Now that’s what I call being between a rock and a hard place. Sounds to me like what we need to do is a little bit of both. Cut spending some and raise taxes some. Why does it have to be framed as an either or choice?
14. LarryArizona | 08.03.09
I guess I’m a “conservative.” The problem is simple to me: the government should not spend more money than we have. Don’t look for new ways to tax more and different people. Let people keep more of what they earn. Maybe they will hire people. Stop government spending. If they don’t have the money, go like Arnold, get the knife out, and carve things from the budget. Show some spine, or get out of the way for some reformers to bring down the size of overspending government.
16. Bill MacDonald | 08.03.09
We are seeing the Obamanation of our country. I do think the country has awoke to the bad dream thay created when they put the Democratic party in power. I think we will see a dramatic change in the power structure next election.
17. paul | 08.04.09
If Obama thinks 5% of the population is going to pay for 1)health insurance reform, 2)under-funded Medicare, 3)the ever-increasing deficit, he’ badly mistaken. Of course the middle class will have a huge tax increase.
18. Summerdog | 08.04.09
$4 a gallon gas genius? That will depress the demand for gas more than it is now with the sluggish economy. With less demand, less purchasing, less purchasing will bring lower tax revenues. Wow that was a great idea.
Why is an 8% cut in govt spending thought of as “crazy talk”? Haven’t we all had to trim back over the past couple of years during the recession? Why can’t the imperial federal govt? I just don’t understand the difficulty in putting this option on the table.
19. badcrow | 08.04.09
Are you kidding? All taxes must be lowered now! We are being taxed to the brink of ruin! If these fools insist upon raising our taxes one more penny they wil have a shooting revolution on their hands. The American people are not their personal ATM.
20. TD | 08.04.09
Single party government always ends up with over spending. It takes Republican Congressional control and a Democratic President to make this country work.
21. waldo5 | 08.04.09
While USA was still in the Depression era, it was attacked at Pearl Harbor and became launched into World War II. Franklin Roosevelt immediately called for war contracts with arms-makers and mobilized the nation to defend itself. Then, with people still out of work and struggling—he did the impossible—he called for taxes. But he did it in a subtle way—appealing to the love/patriotism/crisis-time thinking of citizens. People will give their funds if they know the funds will protect them. So FDR promoted the slogan, “Taxes, to defeat the Axis” and sent out newsreels, radio bulletins, his fireside chats—to mobilize the nation. He explained in great detail what these taxes would do. He even told how many steel pins it would take to make a battleship, how many tincans to make a tank, etc. Even schoolchildren participated by saving/collecting scrap metal, knitting woolen socks/sweaters, saving/collecting food. President Bush never asked USA for sacrifice. It’s time this president did.
22. Mauricio Villablanca | 08.04.09
How do you like the Hope now, cult followers? It was obvious during the campaign that the Marxist-in-Chief had an agenda that involved taking money from us all.
What were you thinking?
23. Tommy | 08.04.09
The person that recommends raising taxes on gas for it to cost 4.00 a gallon is an idiot. Do you realize how you cripple this country when you add taxes to every delivery of anything in America. Most of us have jobs that pay from 20,000 to 45,000 and a lot of us are one income households. It is not that we don’t pay enough taxes in this country, its so many people expect the handouts to just keep coming. We have always been different than Europe and that is a good thing and now this screwed up Democratic administration wants to change us to be just like them even though we can see it works horribly over there. I have been to England and America is much better in all ways. Stop giving illegals free run of the country and make alcoholics and drug addicts get treatment and go to work instead of giving them SS disability and food stamps. If you are healthy enough to work then you should work. If you cannot afford health insurance then work 2 jobs instead of one. The government is not supposed to take care of you from cradle to grave, if thats what you want just go to Europe. We have been the greatest country in the world where millions and millions continue want to come here and break the law to do so. I wonder why? Taxes should never be raised, everytime you get a raise they get a raise and that should be all they get. If we spent like the government did we would all be in bankruptcy court. We need a more libertarian government. We are about to get into a form of government that will change our way of life forever. WAKE UP AMERICA!!!!!
24. MiBu | 08.04.09
The US was facing an outside threat in WW2. The current situation was made by politicans spending far beyond their means. Now, according to the story 56% said no to tax hike, 41% said yes. If those are accurate numbers, what’s the problem? The 41% group can always stroke a check for a donation to the government. I don’t believe the government would turn that down. If 41% of taxpayers each donated $2000 of THEIR money, that could work out to substantial chump change.
25. Mike M | 08.04.09
Hark back to the primary debate in April 2008 between Obama and Hillary Clinton. Did you ~forget~ Obama’s MARXIST response when Charlie Gibson admonished him that federal revenue DECREASED when tax rates were increased in the 1980’s, (see the “Laffer curve”)? Obama was CORNERED and ended up saying that it was OKAY TO LOSE FEDERAL REVENUE because the additional tax was in the interest of ~”FAIRNESS”~. His exact quote: “I would look at raising the capital-gains tax for purposes of fairness.” Obama’s number ONE agenda is to punish success and reward failure - clearly it appears that agenda is on track and not failing as Rush Limbaugh had hoped. We are all seeing NO ‘hope’ and BAD ‘change’.
26. Scott | 08.04.09
$4 gas?
I have an idea. How about letting the market set the price and if the price increases naturally let the market come up with cheaper alternatives?
27. Spring Mountaineer | 08.04.09
Another classic example of how liberals can never make do with what they have. They want to grow government and have more control over us without any regard to “living within your means”. Budgets mean nothing to these people. I don’t think any of ‘em have any idea what they’re doing.
28. Zee | 08.04.09
If you look at what a government should provide, it’s not much but one of the things every citizen needs is health care. So I’m for keeping the defense department, the courts, taking the new health system, and axing the rest ’til the budget balances - starting with “Homeland Security”. When you think about it, you really don’t get much from your federal tax dollar.
29. kevin | 08.04.09
Read my lips NO NEW TAXES. It lost Bush #1 my vote and lost his reelection. Do it Obama. I dare you. National sales tax without tax creidits for ANYONE. Its fair, everyboby would pay there fair share even the lazys.Im tired of paying for others T-bone steaks and ice cream while my childern have to eat beans and rice to get by!!!!!!!!!
30. Tammy | 08.04.09
When is America going to wake up and see tax hikes are not the answer? We need to do the same thing Ronald Reagan did and cut taxes. You will never have growth if you continue to tax the heck out of those who produce income. Small businesses employ most of America and they are being taxed to death. I for one am fed up with this government and what All of them are doing (right or left). You can find me in Washington D.C. on September 12 for the Tax Payers March on Washington. http://www.912dc.org If any one else is fed up please join the rest of us who would like for the insiders of Washington to remember what the constitution means.
31. joelias | 08.04.09
Summerdog has it right. When will folks (our govt leaders in particular) learn that increasing taxes in a stressed economy or on non-necessities will lower tax revenue? Anyone remember the luxury tax on boats? Boat makers shut down and people lost their jobs. We keep making the same mistake over and over again.
32. William Paul | 08.04.09
Most people don’t know that the Bush administration ran up the deficit to over $10 trillion to screw up the next administration. Even though the Wars, tax cuts and phony low interest rates goosed the economy, the buildup in debts had to be recognized one day. Bush just wanted it done on somebody else’s watch. The real losers here are the kids, the retired, the poor and the working poor and the middle class.
the rich are richer, the executives have windfalls, and Wall Street has insiders in government to give taxpayer money to Wall Street to pay bonuses with.
Obama was blind sided, but he chose the same people from Wall Street who fleeced the Goverment out of trillions before he could get the healthcare done. To win election, he must tax the heck out of the rich and Wall Street to even the playing field IMO
33. JML | 08.04.09
Still waiting for that “line by line” examination of the federal budget Obama promised. Why is the solution always to raise taxes; never cut spending?
34. Howard | 08.04.09
Raising taxes even for such beneficial things as health-care,deficit reduction or added government benefits just adds pressure to the downward spiral of the economy. A tax increase will have the opposite effect and reduce revenues by dragging the economy down further into depression. The current negative business climate is largely a function of a lack of confidence in the anti-business, anti wealth policies of this Democratic Administration. Literally, the money is moving elsewhere. Only confidence that it will not be expropriated will bring it back.
35. eROKv | 08.04.09
four dollar gas was the spark that started this whole thing that almost destroyed our country. why would you do that again only to give the government more of our money to waste?
36. tom | 08.04.09
There is no mixed signals. Obama is going to raise taxes on everyone in some form or another. Bend over America. You’re about to get screwed. Obama voters can be first in line.
37. Mark Buehner | 08.04.09
Look- nobody, not Bush and certainly not Obama, has seriously looked at cutting government spending. We know they have increased it. I’m not talking about critical programs, but how many redundant, ridiculous programs are there out there studying the sex lives of caterpillars or whether the color green makes prisoners happy? Start there. I know its not going to cut a trillion dollars, but do what every real family does and stop the economic bleeding in the obvious places. Obama promised to scour the budget with ‘a fine toothed comb’ and came up with a few tens of millions of dollars- that is a disgrace. I’d trust any American not living in DC to lop off 50 billion without breaking a sweat just by going line-item by line-item and removing the silly and redundant stuff. We CANT start thinking about raising taxes under we tame the spending beast- because we know government will suck that money dry and never cut a dime. Cut first, then we can consider taxing.
38. Harry Taft | 08.04.09
Ayn Rand wrote “Atlas Shrugged” back in the 50’s. Reading it today it is spooky. It is also thought provoking. If you want to know how all this government-grabbing could turn out, give it a read.
39. Marcia | 08.04.09
Listen carefully: this is a three-step scheme, which is too complicated for most Americans’ limited attention span. Obama is appealing to our worst nature - our envy of others - to get us to raise taxes on the “rich” families with incomes over 250,000. Meanwhile, the Fed is printing funny money guaranteed to cause massive inflation. Within just a few years, $250,000 will be just above poverty level - so that we will ALL be paying huge taxes.
40. Lee | 08.04.09
There will always be those that have more than others. I have less than some and more than others. I don’t blame anybody for my short fall, I just work as hard as I can to support my family. What I do have a problem with is paying for those that refuse to pay for them selves. I dont need the government to help me, I can help myself.
41. Adam Smith | 08.04.09
Obama just wants the tax idea out there so we become used to it. After awhile, Congress will propose tax increases and Obama will agree, saying it is the only solution to our fiscal problems. Just remember, “Its patriotic to pay taxes!”
42. Sandy | 08.04.09
What is particularly interesting to me is what seems to be the lack of discipline in the Obama administration. Is his cabinet rogue? Do they speak for Obama in an official capacity, or are they simply just out there, flapping their jaws, making waves? I can’t believe that two of his highest level economic advisors would come out and say taxes on the middle class will increase without having clearly understood this to be fact. Perhaps Obama is upset that this cat is now out of the bag. Perhaps Obama had wanted to serve up the healthcare beast to the hungry masses BEFORE presenting them with the bill. After all, isn’t the cornerstone of democrat-controlled politices to give and then tax/pay later?
43. JB | 08.04.09
Wait until China stops buying our debt, all this spending, and not enough taxing (especially the middle class) will make the USA’s debt worthless. Good luck getting re-elected when interest rates skyrocket and the Dems have to raise taxes on the middle class to keep the USA from going bankrupt.
44. concerned | 08.04.09
$4.00/ gallon gas?!?! Are you NUTS? That is a HORRIBLE idea!! Apparently, the genius that posted that doesn’t realize that virtually everything in this country is carried by vehicle(s) that consume petroleum products (truck, train, plane, freighter). Put gas at $4 and the price of EVERYTHING goes up, up, up!!! How’s that going to effect your net worth/”disposable” income? Obviously, you weren’t paying attention last summer.
What this country needs is MUCH less government, and MORE incentive for individuals and small companies to become successful. Even leaving the tax code as it is, this would obviously increase tax revenue, due to the same percentage being taken from a larger base amount. (”Taken” being the operative word there; it should really say being “stolen”, since that’s what gov’t does, regardless of who’s in power.)
45. Douglas Goodall | 08.04.09
I do not believe that the government wants to kill off the older people. But the existing situation with extreme high costs of health insurance and the unreliable insurance companies that refuse to pay can have that very effect. The situation is not as simple as some see it. It seems to me that the rich have gotten richer while the middle class has taken a reduction in life style. That isn’t exactly fair, but on the other hand, all my life I had to think about how to compete for the money I wanted to support myself. Obviously those with big bucks were more clever or sinister than I at getting a share of the pie. People all around me are losing their houses over the cost of medical insurance, services, and prescriptions. Something has to give.
46. alex | 08.04.09
Tell the people what they want to hear…..CHANGE….YES WE CAN….and
then rush to pass every single PORK bill you can to pay back your friends. Obama is a joke, and not a good one. He is a regular dem…if his lips are moving, then he is lying
47. ski mcnulty | 08.04.09
Carlos G.F.Althaus
You have a job? Or you must be rich. Working people can’t afford gas at $4.00/gallon.
48. PAswingvoter | 08.04.09
Why not cut spending, there is an idea that the White House probably have not thought of.
49. Nick Tyme | 08.04.09
President Obama has been less than truthful from the beginning. This doesn’t surprise me.
50. Dave | 08.04.09
If the Republicans spent like a drunken sailor then the Democrats are spending like a drunken Fleet!
51. maco | 08.04.09
These Washington elite morons have got to lose this “Zero Sum” out look on our economy. Our economy can expand and produce mountains of tax revenue if they will just let it. Try suspending the federal income tax for 1 year and watch consumer spending go through the roof. But they just keep bleeding us with more taxes and somehow there is less tax revenue at the end of the day. They are just killing the goose that laid the golden egg.
52. Marcia | 08.04.09
Adam Smith, Obama does not need to raise taxes. He can loot money from our bank accounts and retirement incomes by having the Fed print more money, which is distributed among his friends at Goldman Sachs. When the Fed triples the money supply, our dollars are worth 66% less - which effectively places a 66% tax on EVERY American. But that is just the beginning. This same inflation means that pretty soon it will cost $250,000 just to live modestly. (Remember when candy bars were 5 cents rather than 50?) I think the reason Obama keeps leaking little stories about raising taxes is to focus attention away from the REAL heist - which is being accomplished through deliberate inflation.
53. Sharon | 08.04.09
Well, they need to stop blaming Bush for the way the economy is. If they do raise taxes on the middle-class then when their time comes up for re-election we must remember Obama’s promise to the middle class & vote them out of office & we should also impeach Obama because he did not keep his promise to the American middle class. Only when we start doing this will these politicians quit the lying & realize that we are not going to accept their lies & remind them that they are our employees, not the other way around.
54. Anon | 08.04.09
The door for new taxes on the middle class shouldn’t be open until the 2011 electoral cycle. By then the economy might be in recovery mode and more of us will be able to pay the new taxes.
But now, the President should be about getting back the money that the corporations stole from the American people during the eight years of the GWB administration. I wonder how much Mr. Cheney and others have made (and are continuing to make) via no bid contracts.
55. huck | 08.04.09
it is always a collection problem with every level of Government, never a spending problem
56. Rick | 08.05.09
The debt is not repayable. $11 Trillion plus $50 Trillion in unfunded liabilities. In ten years time, if we don’t “change”, The United States will be a wasteland. If you’re still bickering over Democrats and Republicans, you need to realize that both parties got us into this mess. The only way to get out of it is with true fiscal responsibility by lowering taxes and cutting the majority of Government spending. Vote Libertarian, or prepare to be part of a fascist nation.
57. Ned Ward | 08.06.09
Clinton had the deficit problem well in hand when he left office. The Bush Administration seemingly lost site of deficits in its foreign policy endeavors. Then Bush tossed on Medicare D to add to the deficit party. Politicians are in near total denial on the deficit. Taxes must be raised and spending cut. How quickly can we get out of war mode abroad and out of recession rescue at home? These are difficult problems to weigh. Make no mistake about it, someone has to be adult about the situation and better us than our creditors abroad. We cannot be free without control of our financial future.
Trackbacks/Pingbacks
1. CS Monitor — Read their lips: Mixed signals from Obama team on taxes | The Kansas Progress | 08.03.09
Leave a Comment
We do not publish all comments, and we do not publish comments immediately. The comments feature is a forum to discuss the ideas in our stories. Constructive debate - even pointed disagreement - is welcome, but personal attacks on other commenters are not, and will not be published.
Tip: Do not write a novel. Keep it short. We will not publish lengthy comments. Come up with your own statements. This is not a place to cut and paste an email you received. If we recognize it as such, we won't post it.
Please do not post any comments that are commercial in nature or that violate copyrights.
Finally, we will not publish any comments that we regard as obscene, defamatory, or intended to incite violence.
1. Carlos G.F.Althaus | 08.03.09
If a tax increase is needed to close the fiscal gap, perhaps a tax on gasoline will help substantially. Four dollars a gallon, for instance, whatever the market price of oil happens to be, could generate good money to help balance the budget. In addition, it will reduce oil imports and stimulate car manufacturers to build fuel efficient cars.