Stimulus-Response

September 8, 2008

Obama’s latest statement on taxes and the economy seems like a mistake to me. In brief, he said that if America was in a recession when he took office, he might (would? The AP report is weak on direct quotes) delay rolling back the Bush tax cuts for the wealthy, while moving ahead with his middle-class tax cuts, but that he wouldn’t go so far as extending them past their expiration date at the end of 2010.

There is nothing inconsistent about this; one could very plausibly argue that – given current levels of government spending – the wealthy aren’t being taxed as much as they should be, while maintaining that now is not a good time to be tightening fiscal policy. (I’m not saying that this is the case, but it surely would be the case for some combinations of spending levels, tax rates, and economic conditions.) At some point the need for short-term economic stimulus becomes more pressing than addressing the deficit.

That doesn’t mean, however, that talking about this contingency is a good idea. A much better plan would have been to model his position on his statements about withdrawing from Iraq, saying something along the lines of: “I am, and always have been, dedicated to getting rid of the Bush tax cuts on the wealthiest Americans, but of course economic factors will affect how quickly that can be accomplished.” He would get a little flak for being too slick, but nothing to write home about.

Instead, he has set himself up for attacks on two fronts. First, Republicans will charge that he is reversing his position. This is more or less nonsense, for the reasons discussed above, but the simplistic break down won’t sound good: Obama said he would get rid of the Bush tax cuts, now he says maybe he won’t. This will help insulate the McCain campaign from their lies about the Bridge to Nowhere. The situations aren’t at all analogous, but when people start saying that Obama was for tax hikes before he was against them, a lot of voters will be convinced.

Secondly, right wingers are already pushing the line that this shows a contradiction in Obama’s thinking about taxes in general. If Obama doesn’t want to raise taxes during a recession, then raising taxes on rich people is bad. But he’s been saying that raising taxes on rich people is good. What gives? Now, anyone making this argument is either being intellectually dishonest or has a very primitive capacity for reasoning. But that doesn’t mean it won’t resonate.

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