Obama Flip Flops, Plays Politics On Tax Increases

Obama is running around the country these days demanding an end to the Bush tax cuts. He wants the rates on “millionaires’ (read: those making more than $250,000 a year) to go up to 39%. There are two ways we can view this move by the President. We can either view it as a curious flip flop or we can view it as a blatantly political move meant to shore up various constituencies within the Democrat Party. The latter is most likely what’s actually going on because it’s doubtful that Obama really understands economics enough to actually flip flop on an economic issue. In short, all of his economic statements are meant for short term political gain.

In August 2009 President Obama said that raising taxes in a recession is “the last thing you want to do.” Why? Because raising taxes “would just suck up – take more demand out of the economy and put business further in a hole.” Keep in mind, we have 1.9% growth today which is actually less than it was in August 2009. Job growth today is stagnant, averaging 75,000 new jobs a month which doesn’t keep up with population growth. In fact, the second quarter of this year has been the worst in two years. It may not be an official recession but it sure feels like one to most people.

In January 2010, coming off a 5.6% fourth quarter growth figure, Obama had the following to say:

I am just listening to the consensus among people who know the economy best. And what they will say is that if you either increased taxes or significantly lowered spending when the economy remains somewhat fragile, that that would have a destimulative effect and potentially you’d see a lot of folks losing business, more folks potentially losing jobs. That would be a mistake when the economy has not fully taken off.

This is an interesting statement on a couple of levels. First of all Obama always has to pretend that he’s in the center of some broad consensus. Whether there is a consensus or not, Obama always will pretend there is one and he’s right in the middle of it. Second, if the economy was fragile with 5.6% fourth quarter growth in January 2010, which ultimately dropped in the first quarter of that year to 3.2%, then what exactly is the economy today with 1.9% growth? If we don’t have a fragile economy today then what do we have?

In January 2010 Obama made the Republican case for extending the Bush tax cuts. You’ll recall that in December of 2010 Obama negotiated and passed through a 60% Democrat Congress an extension of the Bush tax cuts. Mind you this was with Nancy Pelosi at the helm in the House. He gleefully signed into law an extension of nearly all the Bush tax cuts, including those for the wealthy. The economy in the 4th quarter of 2010 grew at a 3.2% rate, much higher than today’s 1.9% growth rate.

So why did Obama oppose tax hikes in August 2009 and January 2010 while signing a Bush tax cut extension in December 2010? It’s all politics. He pushed for a Bush tax cut extension in December 2010 because he couldn’t politically survive a massive tax hike which was scheduled to take place on January 1st. He’s calculating his risks today. If re-elected, Obama won’t have to worry about another election and thus he won’t personally feel the political fallout of a massive and unpopular tax increase.

Obama has been playing footsie with class warfare tax policies throughout his administration. You’ll recall the ridiculous corporate jet tax he proposed last year which wouldn’t have collected more than a few million in tax. You’ll recall his billionaires tax that wouldn’t have collected more than a few billion in revenue. Obama floats these tax proposals for political purposes. He surely knows they won’t collect anything significant in revenue, he’s playing a demonization game. Demonize the rich and the poor will rally around Obama, or so he thinks.

Since the Bush tax cuts expire on January 1st 2013, Obama can safely support letting them expire without worrying about his re-election chances. Like Obamacare, the country won’t feel the pain until after he’s re-elected and we’re stuck with him. Until now, it’s politically paid for Obama to support lower taxes or at least support not raising them. The political winds have changed though, now he has to shore up his base and since the pain of tax hikes won’t be felt until after the election Obama thinks he’s safe.

But Obama isn’t safe on this matter because he’s spoken about not raising taxes in a recession before. Once again, Obama’s own words will come back to haunt him. This has been a problem for his entire life, he believes he can say whatever he wants and no one will ever call him out for flip flopping or outright lying. He opposed the individual mandate until he had no choice but to support it. Obamacare wasn’t a tax, unless he wanted it to be. He was conceived in Selma, Alabama after the great march on Selma. Except he was born four years before the march and had never been to the mainland of the US until college. He rode Greyhound Buses on vacation when he was 11 except that they don’t have Greyhound Buses in Hawaii and again, he didn’t come to the mainland until he want to college.

We are in double dip recession. It may not be an outright recession but it is a major slowdown in economic growth. The June Jobs Report was dreadful. When we had greater economic growth Obama said we shouldn’t raise taxes. He was right then. So why should we raise taxes now when economic growth has slowed down and is much less than it was in August 2009, January 2010 and December 2010? Obama must be held to account for this flip flop. We have his very own words and actions available to us on You Tube. If the press won’t ask the question, the American people should. President Obama, why do you want to raise taxes in a recession today when you said it was a bad idea earlier in your term?