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Scot Lehigh

Tiptoeing toward the truth about taxes

By Scot Lehigh
August 7, 2009

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IT’S A POLITICAL exercise as predictable as it is lamentable. An expert aide inches toward acknowledging reality, only to have his remarks disavowed by the White House for political reasons.

Except this week, not one but two top-level officials tiptoed toward the truth, this time on taxes.

On Sunday, Treasury Secretary Timothy Geithner was almost candid in refusing to rule out a middle-class tax hike.

“We have to bring these deficits down very dramatically,’’ he told ABC’s George Stephanopoulos. “And that’s going to require some very hard choices.’’

Appearing on CBS’s “Face the Nation,’’ National Economic Council Director Larry Summers wasn’t quite that blunt, but he did note that “it’s never a good idea to absolutely rule things out, no matter what.’’

Whereupon White House Press Secretary Robert Gibbs promptly smote reality squarely on the sconce. Disavowing the administration’s fiscal and economic experts, Gibbs said the president would stick to his campaign commitment not to raise taxes on the middle class, which, politically at least, has been defined as families making less than $250,000.

“Unfortunately President Obama made a big mistake when he made a promise during the campaign that he wouldn’t raises taxes on anyone who made less than $250,000,’’ says former comptroller general David Walker, now president of the Peter G. Peterson Foundation, an organization dedicated to educating Americans about the nation’s fiscal challenges. “The math just doesn’t come close to working. There is no question that federal taxes will have to be raised over time and there is also no question that that additional burden will have to be borne by many more taxpayers than just those making $250,000 or more.’’

Adds Rosanne Altshuler, co-director of the Urban-Brookings Tax Policy Center: “It is inevitable that we are going to have to tax more than the rich going forward. If we don’t, we will almost double the national debt over 10 years.’’

Which means Summers was right: It’s unwise to rule out a tax hike.

Just ask George H.W. Bush, who found that large deficits forced him to raise taxes despite his “read my lips’’ pledge. Further, though Ronald Reagan is enshrined in Republican memory as a tax cutter extraordinaire, after his initial tax cuts, the Gipper actually acceded to several tax hikes to curb resulting deficits. Bill Clinton, meanwhile, abandoned his plans for a middle-class tax cut and pushed a tax package to staunch the tide of red ink.

Although Clinton left us on firm fiscal footing, huge deficits now yawn again. George W. Bush’s tax cuts, plus the spending increases he oversaw, set us on a course far out into the red sea. The Obama administration’s plans would add trillions more in debt over the next decade.

In June, the Congressional Budget Office estimated that, under the president’s proposals, we’d be on track to accumulate $9 trillion in total new debt over 10 years. Further, the budget deficit in 2019 would still be a whopping $1.1 trillion, or 5.5 percent of GDP, a level widely considered unsustainable.

Now, it would be economic folly to raises taxes while the economy is still sputtering badly. But by the same token, it’s highly disingenuous to suggest that taxes on the middle class will never have to rise. When the recovery comes, this nation simply has to start putting its fiscal house in order. And you can’t do that just by cutting spending and raising taxes on high earners.

That’s the reality that Obama’s experts, and particularly Treasury Secretary Geithner, were at least inching toward.

“It is a sign of just how detached from reality the whole fiscal debate has become that they would have to be corrected,’’ says Bob Bixby, executive director of the Concord Coalition, the fiscal watchdog. “I’m sure they both thought they were just stating the obvious.’’

It’s all the more disappointing because President Obama has generally been good about leveling with the American people about the challenges we face. But on this issue, he made an unrealistic campaign promise - and now, by undercutting experts who hint at the truth, the White House is only digging him in deeper.

Scot Lehigh can be reached at lehigh@globe.com.

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