The conversation in Washington right now is about two topics: Ron Suskind and the second tranche* of the president’s jobs/deficit roll-out. The second piece of news reminds me of something related to the first. The White House is dumping on Suskind now, sure, but in 2004, Democrats received his tell-all book with Paul O’Neill as a lost gnostic gospel. One of the classic revelations from that book – totally unsurprising, when you think on it – was a 2001 memo to O’Neill telling the Treasury Secretary that he needed to say there’d be no negative effect on social spending from the president’s new tax cuts.
Key background information: the public prefers spending on things like health care and education over cutting taxes. It’s crucial that your remarks make clear that there is no trade off here — that we will boost education spending and set aside Social Security and Medicare surpluses to address the future of these programs, and still we will have an enormous surplus.It’s still true. Check Bruce Bartlett’s rundown of polling – polling that reflects a solid year of austerity talk from both parties. The striking numbers come from the NYT/CBS poll, which show public opinion rising in support of some combination of tax hikes and spending cuts, from 63 percent in July to 74 percent in September. This has always been an issue that Democrats win on. I take it back: They would win on it, but congressional reality tilts the board against them. Republicans, who can win the argument simply by denying votes, can play games like the one the RNC is playing right now. On Twitter, it asks: “Tell us: Do you agree with Obama in 2009 when he said that we shouldn’t raise taxes in a recession?” Where does that Obama comment come from? This interview, which is worth quoting more fully.
Todd: Let me jump to another topic, Scott Ferguson, he’s upset about taxes, he says: “Explain how raising taxes on anyone during a deep recession is going to help with the economy.” And he actually wants to you look at historical markers where this has been — you say, you know, where this has been a helpful thing coming out of a recession.
Obama: Well, first of all, he is right. Normally, you don’t raise taxes in a recession, which is why we haven’t and why we have instead cut taxes. So I guess what I would say to Scott is his economics are right, you don’t raise taxes in a recession. We haven’t raised taxes in a recession. We don’t have a…
Todd: But you might for health care. You might for the highest – for some of the wealthiest.
Obama: The — 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 is 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 in a further hole.This has always been the argument: Don’t raise taxes yet, but bring back taxes on the rich when the recession ends. Currently, the taxes are scheduled to return in January 2013. So, let’s recap. 1) Republicans realize that voters don’t want to keep low tax rates on people above a certain income level. 2) They also realize that these tax rates will only be hiked – if Obama gets his way! – in 15 months. 3) They claim that any tax increase represents class warfare and assume that the recession will endure for 15 months. You can see why a battered White House thinks it can win this. *One of the only good things about the era of economic crisis is the rediscovery of this word.