Before this weekend, the Capitol Hill catchphrase was “Go big or go home.” Now it’s “Go big and go home,” as Republicans balked at the notion of adding a trillion dollars in tax hikes for ambiguous cuts in spending and a Democratic distancing from entitlement reform. Sources near John Boehner flooded the zone on Saturday night to announce that the Speaker had demanded a smaller-scale, more temporary debt-ceiling deal that would put the issue firmly on the table for the 2012 elections. Yesterday on Fox News Sunday, Senate Minority Leader Mitch McConnell put himself on the record as refusing to accept any deal with tax hikes of the scale proposed by the White House, calling such a deal a “job killer” (via CNS News):
Oddly, this sounds like a great point for bipartisanship. No, really! The Weekly Standard notes that even Barack Obama once understood the damage a tax hike in a recession would do:
In August 2009, on a visit to Elkhart, Indiana to tout his stimulus plan, Obama sat down for an interview with NBC’s Chuck Todd, and was conveyed a simple request from Elkhart resident Scott Ferguson: “Explain how raising taxes on anyone during a deep recession is going to help with the economy.”
Obama agreed with Ferguson’s premise – raising taxes in a recession is a bad idea. “First of all, he’s right. Normally, you don’t raise taxes in a recession, which is why we haven’t and why we’ve instead cut taxes. So I guess what I’d say to Scott is – his economics are right. You don’t raise taxes in a recession. We haven’t raised taxes in a recession.”
Todd reminded Obama that he had promised to raise taxes on “some of the wealthiest” Americans.
Obama responded by reiterating his opposition to tax hikes during a recession and making an argument about timing. “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’s absolutely right, the last thing you want to do is raise taxes in the middle of a recession because that would just suck up – take more demand out of the economy and put business further in a hole.”
That wasn’t the last time Obama made that argument, either. He took credit for extending the Bush-era tax rates in the deal forced on him by House Republicans in December, as the Standard quotes the President: “Millions of entrepreneurs who have been waiting to invest in their businesses will receive new tax incentives to help them expand, buy new equipment or make upgrades – freeing up other money to hire new workers.”
So we should have a broad agreement — raising taxes in a recession kills jobs by sucking capital away from the investors who create them. We’re apparently heading into another recession, so why accelerate that process by sapping what capital we do have in the private market for more government spending?