At his news conference Wednesday President Obama insisted on tax increases for “the wealthy” a strategy that directly targets small and medium sized businesses that are most likely to create jobs. He was reminded by a reporter that he had agreed in 2010 to give up fighting for tax hikes and keep all the Bush tax rates in place. Considering we face the same situation, a lame duck Congress with only a few days to prevent across the board tax hikes he was asked why he would not agree to extend them again. Part of his answer:
Well, two years ago the economy was in a different situation. We were still very much in the early parts of recovering from the worst economic crisis since The Great Depression, and ultimately we came together, not only to extend the Bush tax cuts, but also a wide range of policies that were going to be good for the economy at that point.
The chart to the left shows the last four quarters of GDP growth before the President decided in December 2010 that the economy was too weak to sustain a tax increase. There had been one barely adequate quarter followed by three hopelessly weak quarters. Such anemic GDP growth simply can not support the kind of robust job growth that some 23 million unemployed or underemployed Americans desperately need. So the President decided, correctly, to go along with Congressional Republicans and even some Congressional Democrats who said a tax hike on high income taxpayers, mostly small businesses, would further weaken an already pathetic economy.
The next chart displays the economic report card the President’s advisers are showing him today. It looks very similar to the situation in 2010, a mediocre quarter followed by three quarters too weak to rebuild a prosperous economy. The difference is the weak quarters are even worse than they were in 2010!
Yet somehow Obama has determined that today’s economy is strong enough to sustain the same tax increases he rejected in 2010!
The President’s demand for tax hikes is a political act, disconnected from economic reality. He campaigned against “the rich” and he is determined to whack them with a tax hike, even if it results in continued mass unemployment and economic misery for the middle class folks he claims are his primary concern.