Extend Bush-era tax rates, says … Larry Summers?; Update: WSJ retracts

posted at 10:01 am on June 6, 2012 by Ed Morrissey

Yesterday, Bill Clinton got into hot water by making the radical suggestion that having a massive tax hike in a recessionary environment might not be such a great idea.  Clinton walked that back later in the day after other Democrats attacked him and questioned his motives for, er, making economic sense.  Those critics might be turning their guns on Barack Obama’s first Director of the National Economic Council and a key architect of Obama’s economic policies, who said the same thing earlier today on MSNBC’s Morning Joe [see update below]:

Lawrence Summers said Wednesday that Congress should temporarily extend Bush-era tax cuts, making him the second person with ties to the White House who is undercutting President Barack Obama’s position that the rates on upper-income Americans should rise at year’s end.

“The real risk to this economy is on the side of slow down…and that means we’ve got to make sure that we don’t take gasoline out of the tank at the end of this year,” he said on MSNBC’s “Morning Joe” program. “That’s gotta be the top priority.”

Mr. Summers’s comments echoed remarks made by his former boss, former President Bill Clinton. Mr. Clinton suggested Tuesday that Congress should temporarily extend the tax cuts, but later in the evening a spokesman for the former president walked back his comments.

Yesterday, Summers backed Obama on spending, arguing that low rates meant that government should borrow more rather than less:

In other words, from either political perspective, Summers is batting .500 this season.

The argument on tax rates will make it more difficult for Obama to cast his position as moderate, and for good reason.  Hiking taxes means necessarily pulling more capital out of the private sector, which is one reason why investors are currently sidelining capital until they see what changes will take place at the end of the year.  Some of the immediate problem is related to the ambiguity, but as the CBO has repeatedly warned about Taxmageddon, it’s also related to the seizure of capital that might have been put to work instead.

Resolving this issue now, even with another two-year pass, would encourage some of those investors to get back into the game now.  Summers — and Clinton — understand that Obama needs that kind of an outcome immediately, if he wants to salvage some of this summer and have some economic growth and momentum going into the election.  Republicans would probably come along just to ensure that a deal locking in the rates takes place at all.  That would soften Obama’s hyperpartisan edge built up since last September and make him look more effective as an executive, even if it means that Republicans get a temporary win on the policy.  Therefore, it’s both an economic and political win … and we can expect both Summers and Clinton to get pilloried for suggesting it by the same forces that are grimly marching their party over an electoral cliff.

Update: The WSJ now has retracted their report that Summers endorsed an extension of the Bush tax rates.  He said that the priority for economic policy should be to avoid Taxmageddon.


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Summers is on his way to the Corey Booker Memorial Woodshed.

NavyDavy on June 6, 2012 at 10:04 AM

Truth and facts – thorny things.

derecho on June 6, 2012 at 10:04 AM

Obama is going to be forced into it.

If they don’t extend the current tax rates SOON, the economy is going completely off the rails in the next couple months.

Taxmageddon has ALREADY STARTED.

wildcat72 on June 6, 2012 at 10:05 AM

Tire tracks ALL OVER Axelrod’s talking points.

NoDonkey on June 6, 2012 at 10:05 AM

Summers is on his way to the Corey Booker Memorial Woodshed.

NavyDavy on June 6, 2012 at 10:04 AM

Ironic because this is the first time he’s ever been right about anything. Stopped clocks and all that.

wildcat72 on June 6, 2012 at 10:06 AM

Resolving this issue now, even with another two-year pass, would encourage some of those investors to get back into the game now.

You really think Obama will do that? He’s a hyperpartisan and a hardcore left-wing ideologue. He WANTS higher taxes on upper income earners. Not to mention he’ll look like he’s schizo if after all the class warfare talk, he ends up signing another extension of the Bush tax cuts.

Doughboy on June 6, 2012 at 10:06 AM

I love this bit of fun, first thing in the morning.
I can just imagine, and happily so, my looney far left relatives if their guy Obama extended the Bush Tax Cuts.
He won’t do it.

ORconservative on June 6, 2012 at 10:06 AM

You’re gonna need a bigger bus.

Drained Brain on June 6, 2012 at 10:07 AM

Another rat jumping from a sinking ship in search of dry land. :-)

Punchenko on June 6, 2012 at 10:07 AM

Bush just keeps on pimp slappin’ President I Won without saying a word.

search4truth on June 6, 2012 at 10:08 AM

When the wheels are about to fall off the car, just saying “I don’t hear anything” doesn’t work anymore.

RBMN on June 6, 2012 at 10:08 AM

There seems to be a high level Democrat revolt in progress against Obama. He is not getting much needed support from some very important people on his side of aisle on a number of issues. It appears that Democrats may be more fractured than Republicans.

SC.Charlie on June 6, 2012 at 10:09 AM

This doesn’t mean anything if we can’t get the spending under control.

cajun carrot on June 6, 2012 at 10:10 AM

He must not be using the “fairness” quotient Robert Reich uses in his “scientific” analyses.

I have a better idea – raise taxes by the 32% needed to cover 2013 spending, and then let’s reconvene after the economy has collapsed and have a serious conversation about our spending levels.

stout77 on June 6, 2012 at 10:10 AM

Mr. Summers’s comments echoed remarks made by his former boss, former President Bill Clinton.

I know it’s the WSJ, but his quote just floating out there before explaining what Clinton said almost asks liberals to believe there is some sort of Clintonian conspiracy.

MobileVideoEngineer on June 6, 2012 at 10:10 AM

Therefore, it’s both an economic and political win … and we can expect both Summers and Clinton to get pilloried for suggesting it by the same forces that are grimly marching their party over an electoral cliff.

May the lemming replace the donkey as the Democrat’s mascot. This country’s been suffering with Obama-itis for 3 1/2 years. I just hope the Republican’s won’t screw it up if they win.

MessesWithTexas on June 6, 2012 at 10:11 AM

There seems to be a high level Democrat revolt in progress against Obama. He is not getting much needed support from some very important people on his side of aisle on a number of issues. It appears that Democrats may be more fractured than Republicans.

SC.Charlie on June 6, 2012 at 10:09 AM

They see the writing on the wall.

Punchenko on June 6, 2012 at 10:13 AM

Obama’s driving this car, and he ain’t asking for directions!

Actually, if somehow he does extend the cuts, it’ll end up sounding like it was his idea all along.

AubieJon on June 6, 2012 at 10:14 AM

Is this the Larry Summers that I read about in Culture of Corruption who lost $1.8 billion for Harvard through some wayward investments? His latest advice must be a Demsperation move.

stukinIL4now on June 6, 2012 at 10:16 AM

Their plan is to extend the bush tax cuts, then blame Bush after the fact.

jeffn21 on June 6, 2012 at 10:18 AM

walked that back later in the day

…a lot of Democrats are doing that lately….what happened to FORWARD?

KOOLAID2 on June 6, 2012 at 10:18 AM

Yesterday, Summers backed Obama on spending, arguing that low rates meant that government should borrow more rather than less:

At some point even with low rates you reach a limit where your interest only payments exceed what you can pay.

chemman on June 6, 2012 at 10:21 AM

The Dems are more fractured than the Republicans and they suck at hiding it.

ORconservative on June 6, 2012 at 10:22 AM

The preference cascade is gaining speed in the Dem Party now, as in “We prefer not to be thrown on the ash heap of history.”

They’ve got a month before the May jobs report gets revised from 69,000 to zero and the June report is negative.

This is what Accountability looks like.

Dusty on June 6, 2012 at 10:22 AM

The preference cascade is gaining speed in the Dem Party now, as in “We prefer not to be thrown on the ash heap of history.”

They’ve got a month before the May jobs report gets revised from 69,000 to zero and the June report is negative.

This is what Accountability looks like.

Dusty on June 6, 2012 at 10:22 AM

+1,000,000

They’re all lining up now to kiss the Clinton ring now that Barry will most likely be a loser come November. :-)

Punchenko on June 6, 2012 at 10:29 AM

Summers is on his way to the Corey Booker Memorial Woodshed.

NavyDavy on June 6, 2012 at 10:04 AM
Ironic because this is the first time he’s ever been right about anything. Stopped clocks and all that.

wildcat72 on June 6, 2012 at 10:06 AM

He was also right about women in academia, and the harpies at Harvard drove him out for his accuracy.

Wethal on June 6, 2012 at 10:29 AM

Not a shocker. He obviously believes massive borrowing is the least of three evils. Of course if the Fed is actually impeding a recovery by prolonging its monetary stimulus, this should create quite a spectacle.

Seth Halpern on June 6, 2012 at 10:30 AM

The Winkelvosses could not be reached for comment.

Attila (Pillage Idiot) on June 6, 2012 at 10:33 AM

Let the record show that social democrats support inflating our way out of this mess, which is a direct assault on the working poor It’s just more covert, which is why sneaky liars prefer this method instead of, say, Scott Walker’s.

stout77 on June 6, 2012 at 10:36 AM

He was also right about women in academia, and the harpies at Harvard drove him out for his accuracy.

Wethal on June 6, 2012 at 10:29 AM

Well, they were all Native American women weren’t they?

TXUS on June 6, 2012 at 10:36 AM

Good grief, make the current (Bush) tax rates permanent and live within your means at the federal level. Everyone benefits when they know what the tax bite will be.

onlineanalyst on June 6, 2012 at 10:37 AM

Yeah, Summers is an old-school “moderate” leftist, as opposed to a nihilist radical. Now and then something sensible emerges from him. He used to be roundly excoriated for it in the media, but our MSM have gone off the deep end and seem unable to to focus on anything intelligible now. They just act as a faithful repeater for whatever themage comes out of the current hite House.

J.E. Dyer on June 6, 2012 at 10:47 AM

Poor Larry is destined for an undercarriage bus seat since this is not the first time he has left the ‘crazy carpet’ in the Oval Office.

In the early days of the Solyndra debacle, as the reality dawned on the White House that its half-billion-dollar investment was about to go belly-up, former Obama economic adviser Larry Summers famously observed that, “Government is a lousy venture capitalist.”

NeoDawg on June 6, 2012 at 10:49 AM

The ‘Bush Tax Cuts’ have been around so long they should be put in place permanently and not batted around every couple of years.

In the name of ‘fairness’ President Obama seeks to ruin the economy by putting higher taxes on those who invest, run companies, and generally do most of the hiring in the economy: small businesses.

Democrats are starting to realize that the big, shiny bright thing in the sky is a good sized meteor about to hit the political landscape and a few of the more developed members of the species are recognizing that this does not end well with the current course being charted. If enough D’s in the Senate start to see this, like those up for re-election, they just might want to ‘reach across the aisle’ and bypass Reid for some sort of extension. That won’t help them, overmuch, but it might help the Nation. The President’s veto would not be a guarantee as, by then, the heat of that shiny thing coming closer will be felt even by the thick headed.

Too bad socialists aren’t advanced enough to know economics beyond trying to destroy economic systems. It is all they know.

ajacksonian on June 6, 2012 at 10:49 AM

Extend Bush-era tax rates, says … Larry Summers?

Oh My, that’s unhelpful GRIN.

Dr Evil on June 6, 2012 at 10:51 AM

Well Mr. Obama will have to get back to us, after he attends FOUR fund raisers today…. The commercials just keep writing themselves.

DVPTexFla on June 6, 2012 at 10:57 AM

Will you people please stay on message? Sheesh!

Finbar on June 6, 2012 at 10:57 AM

Larry is looking for a job from Hillary Clinton 2016…

albill on June 6, 2012 at 11:01 AM

Some of the junk mail I get every day sounds like Summers: keep borrowing so you maintain your credit rating! What good is a credit rating if you don’t use it? If you pay off everything and your credit rating falls into disrepair, what if you find some day that you really need to borrow and you can’t?

slickwillie2001 on June 6, 2012 at 11:02 AM

Yesterday, Summers backed Obama on spending, arguing that low rates meant that government should borrow more rather than less:
At some point even with low rates you reach a limit where your interest only payments exceed what you can pay.

chemman on June 6, 2012 at 10:21 AM

…mmmmmmmm!…see they learned their lesson when people were only paying the cheap interest on mortgages…

KOOLAID2 on June 6, 2012 at 11:12 AM

If they don’t extend the current tax rates SOON, the economy is going completely off the rails in the next couple months.

Taxmageddon has ALREADY STARTED.

wildcat72 on June 6, 2012 at 10:05 AM

It’s already too late. By accurate accounting we are already in a recession.

You are correct, the effects of Taxmageddon are already starting.

dogsoldier on June 6, 2012 at 11:29 AM

Another White House insider puts down The One!

Pass the Popcorn!

PattyJ on June 6, 2012 at 11:35 AM

It’s already too late. By accurate accounting we are already in a recession.

You are correct, the effects of Taxmageddon are already starting.

dogsoldier on June 6, 2012 at 11:29 AM

How much you want to bet that jugears blames Boosh! for this recession: It’s his fault for Taxmageddon for passing tax cuts in the first place!

/sarc

wildcat72 on June 6, 2012 at 11:50 AM

JugEars will be sending out his hit squads after Summers.

jqc1970 on June 6, 2012 at 12:13 PM

Tie GOP approval of a temporary extension of the Bush tax rates to POTUS approval of the XL pipeline.

DrW on June 6, 2012 at 12:27 PM

I wonder, did Summers buy any Facebook stock./s

SC.Charlie on June 6, 2012 at 1:44 PM

Ed:

That would soften Obama’s hyperpartisan edge built up since last September and make him look more effective as an executive….

I. Don’t. Think. So.

How on earth would caving on the central plank of his campaign make Obama look more effective? And why would investors quit hedging their bets a few short months before November? Even if we were treated to a dramatic infusion of investment cash, it wouldn’t immediately improve circumstances on the ground for the masses of unemployed. And even it did, the benefits would represent a triumph of Republican tax cutting principles..

Summers and Clinton were talking about extending all the tax cuts, not Obama’s modified, limited, middle class hang out, and they weren’t trying to give Obama helpful advice. Looks like they’re trying to save their own political asses to me.

JM Hanes on June 6, 2012 at 3:08 PM

Sounds like they’re edging up to a compromise on tax cuts to try to keep the economy from completely tanking and costing Obama his re-election.

Of course, they’ll take so long before accepting the compromise that the economy probably won’t have the chance to recover anyway. After all, the uncertainty remains until the deal is done, and the uncertainty is enough in itself to suppress a recovery.

tom on June 6, 2012 at 5:50 PM

The woodshed is getting crowded…

aposematic on June 6, 2012 at 6:02 PM