Across the cable TV news shows on Monday was a smirking cynicism about President Barack Obama supposedly reneging on his campaign pledge not to raise taxes on the middle-class, but this new conventional wisdom rested on a weak foundation.
The cable news programs supported their contention with snippets of weekend interviews with Treasury Secretary Tim Geithner and White House economic adviser Lawrence Summers, although the actual comments didn’t really support the conclusions.
ABC News’ “This Week” got the ball rolling with an off-point Internet headline for its Sunday show, “Geithner Won’t Rule Out New Taxes for the Middle Class.” But Geithner appears to have been referring to “new revenues,” not necessarily a tax on the middle class.
The Q&A came as Geithner was commenting about the need to repair the financial system and contain rising health-care costs as prerequisites for getting budget deficits under control.
“We can do this, it just requires the will to act,” Geithner said, before moderator George Stephanopoulos interjected: “Including new revenues?”
Geithner answered: “We're going to have to do what is necessary. Remember the critical thing is people understand that when we have recovery established, led by the private sector, and we have to bring these ... deficits down very dramatically.
“We have to bring them down to a level where the amount we're borrowing from the world is stable at a reasonable level. And that's going to require some very hard choices. And we're going to have to try to do that in a way that does not add ... unfairly to the burdens that the average American already faces.”
Stephanopoulos then interjected: “So to bring the deficits down ... that means more revenues. The President has said that taxes won't go up for any Americans earning under $250,000. But it doesn't appear he's going to be able to keep that promise if you're going to bring the deficits down.”
Geithner responded: “George, again, we can't make these judgments yet about exactly what it's going to take and how we're going to get there. But the very important thing, and no one is going to care about this more than the President of the United States, is for people to understand that we do not have a choice as a country.
“That if we want an economy that's going to grow in the future, people have to understand we have to bring those deficits down. And it's going to be difficult, hard for us to do. And the path to that is through health care reform. But that's necessary but not sufficient. We're going to do some other things as well.”
Stephanopoulos: “So revenues are on the table as well?”
Geithner: “Again, we're not at the point yet where we're going to make a judgment about what it's going to take. But the important thing...
Stephanopoulos: “But you're not ruling it out. You can't rule it out.”
Geithner: “Well, I think that what the country needs to do is understand we're going to have to do what it takes. We're going to do what's necessary.”
What is clearly on the Obama administration’s table – but what senior officials don’t want to talk about now – is a higher marginal tax rate on wealthy Americans, those making more than $250,000 a year, as Obama signaled during the campaign.
Under President George W. Bush, the top rate on the top portion of income for those top-earning Americans was cut from 39.6 percent to 35 percent, a policy choice that benefited many of the TV “talking heads” whose salaries far exceed $250,000 but that helped push the federal deficit to about $1.3 trillion when Obama took office last January.
During Bush’s presidency, the federal debt, which had been headed downward in 2000 (possibly toward zero) , instead rose $6 trillion to nearly $10 trillion. During this reversal, it’s hard to recall a time when Washington pundits hectored Bush administration officials about their fiscal profligacy.
Now, to address the debt crisis, the Obama administration may have to restore the top marginal rate to a figure closer to the 50 percent that existed until the mid-1980s when it was lowered by Ronald Reagan. [In the 1950s under Dwight Eisenhower, the top marginal rate was over 90 percent.]
Though Geithner’s doing “what’s necessary” comment could have meant the political lugfest that would surely come over reversing the Reagan and Bush tax cuts for the wealthy, it’s become an article of faith among Washington pundits that the heavier tax burden should not fall entirely on them, their friends and other well-to-do Americans.
But that concern sounds less self-serving if presented in the context of middle-class taxpayers also getting dinged for deficit reduction.
So, the Washington news media has been on the lookout for any indication that the Obama administration is contemplating a tax increase – and has been eager to present such a sign as a violation of Obama’s pledge not to raise taxes on people earning under $250,000.
Besides jumping on Geithner’s ambiguous remark, the Washington press corps also cited Summers’s response to Bob Schieffer’s follow-up on CBS News’ “Face the Nation.”
Unlike many of Monday’s cable shows, Schieffer accurately summarized Geithner’s remarks on ABC: “He was asked directly whether he would rule out new taxes and he said the country must understand the administration will do, in his words, ‘what is necessary.’ Was he laying the groundwork here for a new round of taxes?” [Note that Schieffer didn’t use “middle-class.”]
Summers responded, “No, not at all.”
Schieffer followed up: “You don’t see another round of tax increases coming?”
Summers: “Tax increases? Look, let’s understand where we have been. Let’s understand that the President put in place, as part of the stimulus bill, as part ... the ‘Making Work Pay Tax Act’ that’s reducing taxes by $800 for working families. That’s where the focus is. We are going to keep working to strengthen the foundation of this economy.”
Near the end of that sentence, there was cross-talk with Schieffer interjecting, “No tax increases for middle-income Americans?”
Summers: “There’s a lot that can happen over time. ... So it’s never a good idea to absolutely rule things out no matter what. ... But what the President has been completely clear on is that he is not going to pursue any of his priorities – not health care, not energy, nothing in ways that are primarily burdening middle-class families. That is something that’s not going to happen.”
While none of this was particularly newsworthy or even new, Washington pundits – and Republican operatives – seized on even the slightest shades of gray, like Summers’s truism that you don’t know what the future holds. The CNBC free-marketeers, led by Larry Kudlow, were ecstatic about this supposed sign that Obama was breaking a campaign promise.
Other pundits suggested that Geithner and Summers were floating a trial balloon, testing out the reaction to a middle-class tax hike, though it was obvious from the context of the interviews that neither Geithner nor Summers had invited the tax questions (and Summers made no reference to the issue when he appeared on NBC’s “Meet the Press.”)
Watching the Washington press corps behave, it’s hard to imagine how the United States will ever get turned in the right direction.
Robert Parry broke many of the Iran-Contra stories in the 1980s for the Associated Press and Newsweek. His latest book, Neck Deep: The Disastrous Presidency of George W. Bush, was written with two of his sons, Sam and Nat, and can be ordered at neckdeepbook.com. His two previous books, Secrecy & Privilege: The Rise of the Bush Dynasty from Watergate to Iraq and Lost History: Contras, Cocaine, the Press & 'Project Truth' are also available there. Or go to Amazon.com.
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This story was published on August 4, 2009.