Obama hints economy strong enough for tax hike

The president suggested the economy had become sturdy enough to absorb the consequences of letting the lower tax rates originally introduced by George W. Bush expire for households with incomes above $250,000.

By The Fiscal Times Nov 16, 2012 4:42PM
By Josh BoakThe Fiscal Times logo

President Obama has previously urged tax hikes on wealthier Americans, only to back down two years ago in the face of a brittle economy and a resistant and resurgent GOP.

That won’t happen again, he assured the country today in his first news conference since securing a second term last week.  The president suggested the economy had become sturdy enough to absorb the consequences of letting the lower tax rates originally introduced by George W. Bush expire for households with incomes above $250,000.

But the country can’t endure a $200 billion hit from letting all of the Bush-era rates end as scheduled next year. That would wallop middle class households who on average have seen their incomes fall in recent years. Obama sought common ground by encouraging the Republican majority in the House to vote for a measure to continue the tax breaks for the 98 percent of the country who fall beneath the $250,000 level.

“What we can do is make sure that middle-class taxes don’t go up,” Obama said. “If we get that in place, we are actually removing half of the fiscal cliff. Half of the danger to our economy is removed by that single step.”

The news conference touched on the FBI investigation that uncovered former CIA director David Petraeus’ extra-marital affair, Syria, Iran, climate change, and Republican criticism of Susan Rice, the ambassador to the United Nations, mistakenly characterizing the Sept. 21 terrorist attack in Libya as spontaneous.

This disagreement with Republicans—who claim increases on wealthier Americans would kill job creation—is the primary source of friction in discussions curb the deficit while averting the fiscal cliff, which also includes $110 billion in automatic spending cuts next year.

When the Bush rates were first slated to expire in 2010, GOP lawmakers basically compelled Obama to break a 2008 campaign promise and extend the rates across-the-board for another two years. Their bargaining power was strengthened at the time by a 9.4 percent unemployment rate, which has since dropped in Obama’s favor to 7.9 percent.

“Two years ago, the economy was in a different situation. We were still very much in the early parts of recovery from the worst economic crisis since the Great Depression,” Obama said. “What I said at the time is what I meant, which is this is a one-time proposition. What I have told leaders privately as well as publicly, we cannot afford to extend the Bush tax cuts for the wealthy. What we can do is ensure that middle-class taxes don’t go up.”

That slow but certain improvement in the economy helps Obama in the negotiations this time around. Back in 2010, the gist of the bargaining was to bolster a fragile economy, whereas the case this time is to not squander what gains have been achieved.

The president opened the door to raising taxes on the wealthy by restricting deductions—an idea touted by some Republicans — but his basic principle is that more of the responsibility for trimming the deficit should rest with high-earners.

His argument is backed up by analysis by the progressive Center on Budget and Policy Priorities. The Washington-based think tank, drawing on projections by the Congressional Budget Office, concluded that the lower rates for Americans with incomes above $250,000 would add just a tenth of a percentage point to gross domestic product.

But House Budget Committee Chairman Paul Ryan, who was Mitt Romney’s running mate in the presidential election, told ABC News that last week’s presidential election did not give Obama a mandate to raise taxes. The Republican majority in the House was preserved, the Wisconsin congressman said, so Obama will have to consider options other than his proposed $1.6 trillion tax increase over the next decade to shear the deficit.

"Raising tax rates hurts economic growth and of all things we need right now, to prevent a fiscal cliff, prevent a recession, prevent a debt crisis, is we need people to go back to work," Ryan said. "There are other ways of getting more revenue into our government without damaging the economy, and that's the kind of thing we hope to achieve."

Josh Boak is the National Correspondent at The Fiscal Times. Subscribe to The Fiscal Times' FREE newsletter.

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84Comments
Nov 19, 2012 5:06PM
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yep. 8% unemployment, 47,000,000 on food stamps, 16,000,000,000,000$ debt , the dollar in freefall. and we are supposed to pretend this is a recovery? obama is clueless. recession coming again in mid 2013.
Nov 19, 2012 4:54PM
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Obama has never seen a reason NOT to raise taxes. How else can he appease the leeches of our society?
Nov 19, 2012 4:12PM
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And why is the f^&*#(^ jackass traveling again to give away more of my money. He wants to raise taxes and all the hell he  is doing is spending and giving away my money. All foreign aid needs to stop and we need to stop funding the UN.
Nov 18, 2012 12:59PM
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Obama and you LIberals are fing retards! 900 more regulations, higher taxes, high fuel and energy and food prices,

18,000 jobs lost cause of big unions, GMC bailout a disaster, stimulus money given away to Obama's friends, big

unions, Obama care killing healthcare and cutting services rates skyrocketing, fast n furious and libya scandals

and the LIES and corruption from the Obama administration and you still believe this complete failure of a president? your insane!

america is on the way down and may never recover!

Nov 16, 2012 7:01PM
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I am less than midle clas. I say Let everyone pay more taxes.

 

LET THE BUSH TAX CUTS EXPIRE.

 

1)Why let China assume more of our debt.

 

2) This will keep our childrens children from being strapped.

 

Think of the future.

 

Oh thats right Obama will just spend tha and more!

 

LETS GO OVER THE CLIFF TOGETHER!

 

 

Nov 19, 2012 2:52PM
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You need to blame the government. It has an insatiable appetite for spending, it can't curb its addiction to cheap money and credit. Why do people have to pay higher taxes because of the government's incompetence to manage money? When does taxation become legalized theft? Why should anyone pay more taxes only to have the government waste it and create more debt? Taxing home incomes above $250K is not the solution. That's not the rich folks. If you haven't noticed money doesn't go very far these days.That's every mom and pop store, mall and shopping center you can think of across the country, folks who hire and are barely making it because of higher costs, burdensome regulations, high insurance premiums that cause low profit margins that keep them from prospering, staying open and hiring. That's every small business in the U.S. Even if you taxed 100% of the top 1% and then took every citizens savings, income, investments and assets. The government could only run for 3-4 months based on the spending, entitlement and credit disease it has. You people need to wake up, you're misguided and convoluted mentality is in the wrong place.
Nov 21, 2012 6:40AM
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Yeah, and when the sh-t hits the fan he'll figure out some way to blame it on the Republicans. This guys a walking Benghazi answering machine---try this---try that---golly, I just slept through the whole thing. Disgusting that he got re-elected. As 2013 rolls on, more and more people will hit the unemployment line as the ACA takes effect and the Republicans didn't have a damn thing to do with it.  
Nov 20, 2012 12:36PM
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that green stuff in your pocket is just paper. it's not backed by anything but the printing press promise to print you some more if your bank fails. monopoly money basically. you've all been had. don't believe me? just watch as they inflate it all away.
Nov 20, 2012 5:04PM
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There may be plenty of reasons that some changes are needed, but the argument that the economy is strong enough to weather the tax hikes the President wants is illusionary at best.

Nov 19, 2012 4:10PM
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He is more of an idiot than I thought.
Nov 19, 2012 10:52AM
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ok..Obama won..He  is president.I didnt vote for him but I will support him now.I will also question when I see something I do not like.But we need to stop the namecalling and bickering. We sound like a bunch of ...well faceless, annoumous internet posters. spell checkers have fun
Nov 22, 2012 1:49AM
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I've yet to see a tax increase the Dems didn't like. These tax increases on the books don't just impact the rich. They impact everybody and the middle class far more than anyone else. So, to get a piece of the ultra wealthy you'd sell your soul to the devil. BO fed you Dems a line of goods and you bought it. Time to pay the piper.
Nov 26, 2012 9:25AM
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thank you to all the morons who voted for the decline of america

you will soon be seeing the folly of your choice

Nov 20, 2012 12:26PM
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while our polititians squabble, the fed burns the currency. a slight of hand game designed to keep us forever in debt. mass inflation is coming to a town near y'all.
Nov 23, 2012 1:20PM
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tax the rich                                                                          

feed the poor

till there are no

jobs no more.

Nov 21, 2012 1:12AM
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the only war that's ever won is the one that is never fought. but that does not mean we do not have the right to defend ourselves. fight on israel.
Nov 24, 2012 8:45AM
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i may have misread the title? Did it say BO is strong enough to take a hike?
Nov 21, 2012 5:23PM
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The fool in the WH focuses only on increasing taxes.  Yet, the bigger component of the budget deficit is runaway spending and must be addressed.  Only a novice would think that major budget cuts would not happen unless you're aiming for socialism big-time.  So the absence of any mention of cutting programs is either rank amateurism or an agenda for taking the country towards dependency and socialism.  There can be no other explanation for the cynical campaign of class and racial war-fare that O waged.
Nov 21, 2012 12:12PM
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Repubs don't want any tax hikes and the Dems and most Independents want to help the middle class, so pass the extension of the Bush tax cuts for the middle class now.... no strings attached.

I bet the Repubs wouldn't do it.

Nov 27, 2012 10:31AM
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The Federal government has a SPENDING problem not a tax revenue problem. This whole 'class warfare' attack is asinine and a disingenuous reason to raise taxes. The middle class and small business owners are going to get hit the hardest. On top of B.O.'s tax proposals, Obamacare has 18 taxes attached to it that will affect every single American regardless of social or economic status. Pensioners, homeowners, savers and retirees are going to get creamed on capital gains taxes. This fallacy of 98% of Americans won't see a tax increase is ludicrous and a flat out lie. At what point does taxation become theft and legal plunder on the American people. What right does the government have to use the police powers of government to take away the fruits of my labor just because the Federal government has an insatiable appetite for spending and can't balance it's budget.
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