Obama ‘agnostic’ about tax increases on middle class

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This comes via BusinessWeek. I imagine it is part of the much anticipated interview in which Obama said bank executives making millions "is part of the free-market system”.

President Barack Obama said he is “agnostic” about raising taxes on households making less than $250,000 as part of a broad effort to rein in the budget deficit.

Obama, in a Feb. 9 Oval Office interview, said that a presidential commission on the budget needs to consider all options for reducing the deficit, including tax increases and cuts in spending on entitlement programs such as Social Security and Medicare.

“The whole point of it is to make sure that all ideas are on the table,” the president said in the interview with Bloomberg BusinessWeek, which will appear on newsstands Friday. “So what I want to do is to be completely agnostic, in terms of solutions.”

Obama repeatedly vowed during the 2008 presidential election campaign that he would not raise taxes on individuals making less than $200,000 and households earning less than $250,000 a year. When senior White House economic adviser Lawrence H. Summers and Treasury Secretary Timothy F. Geithner suggested in August that the administration might be open to going back on that pledge, White House press secretary Robert Gibbs quickly reiterated the president’s promise.

In the interview, Obama said that putting preconditions on the agenda of a bipartisan advisory commission, which he said he would soon establish, would just undermine its purpose.

“What I can’t do is to set the thing up where a whole bunch of things are off the table,” Obama said. “Some would say we can’t look at entitlements. There are going to be some that say we can’t look at taxes, and pretty soon, you just can’t solve the problem.”

Was it George H.W. Bush who said “Read my lips. No new taxes?”  Obama certainly made a similar pledge. So, he is clearly back pedalling here.

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I see this interview as a PR disaster because the only thing we’ve learned so far is Obama says:

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  • “I know both [Lloyd Blankfein of Goldman Sachs and Jamie Dimon of JPMorgan Chase]; they are very savvy businessmen”
  • “I, like most of the American people, don’t begrudge people success or wealth. That is part of the free- market system.”
  • “There are going to be some that say we can’t look at taxes, and pretty soon, you just can’t solve the problem.”

Here’s my read of events. Obama wants to make sure big business knows he’s on their side.  He said as much in excerpts from the BusinessWeek interview that are already available.  Moreover, he wants to mollify deficit hawks – and that’s going to mean cutting spending and/or raising taxes as I have been saying since he turned hawkish.  That means double dip to me – and, over the medium-term at least, a double dip will most certainly mean lower tax revenue and higher budget deficits, the opposite of what is intended.

Of course, if he were forcing a liquidation of overcapacity and zombie companies that would be one thing. But, the bailout culture is firmly entrenched in America. Sure sounds like 1937 to me.

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