President Obama is drawing fire from his left for seemingly agreeing, if a Huffington Post interview with White House adviser David Axelrod is any indication, to a two-year extension of the current federal tax rates. (UPDATE: Axelrod is now walking back that notion. Big surprise.)
I’m not sure what else Obama’s critics expected him to do.
In the first place, most economists agree that, if there’s ever a good time to raise taxes, this isn’t it. The economy is still too weak. Even speaking from a purely political standpoint, if Obama were to refuse to extend all tax rates for high earners and the economy were to remain stagnant, he’d be very vulnerable to further attacks that he was to blame.
Second, it’s undeniable that one loud and clear message from last week’s elections was that a majority of the electorate believes Washington’s fiscal problem is spending, not revenue. That said, it is hard for Republicans to argue at this point that they won enough of a mandate to make the rates permanent. We are in the middle, not the end, of a debate over federal taxing and spending. It will last through the 2012 elections.
Which brings me to the third point: Keeping the status quo on tax rates seems to be the only option compatible with taking seriously yesterday’s initial draft proposal from the president’s debt and deficit commission. The commission’s co-chairmen proposed a tax-code overhaul that moves in the direction of lower marginal rates and fewer deductions. Their specific ideas will continue to be debated, but I think enough people agree that this is the correct general direction. So, it would be very counterproductive to move in the direction of higher marginal tax rates in the meantime.
I’m still going over the commission co-chairs’ proposal and will have more to say on it soon. But I can already say that it is a serious enough set of ideas that it should be considered very carefully. There will be changes, I’m sure. However, I think that’s all the more reason not to add political noise to the discussion by changing tax rates now.
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