Emanuel Dodges Question on Postponing Income Tax Increases
November 10, 2008 - 8:12 PMDesignated chief of staff for incoming Obama administration says Obama does plan to "use" the economic crisis to "solve" some problems, like energy and health care.
Incoming White House Chief of Staff Rep. Rahm Emanuel (D-Ill.) proved elusive when asked whether – in light of the continuing financial crisis – president-elect Barack Obama planned to postpone raising taxes on wealthier Americans.
Appearing on ABC’s “This Week with George Stephanopoulos” Sunday, Emanuel said that the president-elect plans to push forward with his plans for middle class tax relief while remaining mum on Obama’s plans to raise taxes on upper-income Americans.
The Washington Post and other media outlets reported Monday that Emanuel had “hinted” during the interview that Obama would implement the planned tax increases.
But a look at the transcript of the interview, however, shows that Emanuel only mentioned that Obama’s tax priorities would focus on helping middle-class Americans.
George Stephanopoulos, host: I know that the president-elect also believes he has the right economic plan, overall, which includes a tax increase on wealthy Americans.
But is he willing to consider postponing that tax increase until the country has emerged from the recession?
Rep. Rahm Emanuel (D-Ill.): George, President-elect Obama and Vice President -- President-elect Obama and Vice President Joe Biden have all said that their economic plan at this juncture is based on giving 95 percent of the working Americans a tax cut, about $1,000.
Rep. Rahm Emanuel (D-Ill.): It is a net tax reduction.
Rep. Rahm Emanuel (D-Ill.): It was built around this basic premises, as I just outlined, that the fact over the years, the middle class have been squeezed consistently by rising costs on education, health care and energy, as well as a diminishing income. And their median household income has declined $2,000. And you must have an economic program that focuses on them.
It was not built for any particular data at this particular moment. It was built on the fact that the middle class had been hurt, and to have a strong recovery and a sustained recovery over a period of time means that the middle class must be the focus of the economic strategy.
George Stephanopoulos, host: And I understand that, that’s going to be the focus, but clearly, you just said that the president-elect is going to move on the middle-class tax cut right away. I’m just asking if he wants to postpone, not cancel but postpone, the tax increase on the wealthier Americans.
Rep. Rahm Emanuel (D-Ill.): The core economic part of his strategy is the middle class. That is the basis of it, George. And the economic plan was built on that. And whether -- when it’s dealing with, a) the first year of the tax cut, but also the immediate things of dealing with the reforms that are related to both education, health care, energy, taxes, those immediate -- those issues that are usually referred to as long-term are immediate, and this opportunity in crisis provides, as the president-elect has said repeatedly, the opportunity to do things that Americans have pushed off for years.
Health care costs for median -- seven years ago, the health care costs were $5,000 plus for a family of four. Today they’re $12,000. Today, we export $700 billion of our wealth to foreign countries. You cannot sustain an economy for the middle class and for the entire country in which two issues -- just take energy and health care -- are really squeezing the middle class.
Rep. Rahm Emanuel (D-Ill.): So this provides an opportunity to finally tackle the issues that for too long have been postponed, kicked down the road, kicked down the road basically. And so that’s what he says. We should use this opportunity, this crisis, to finally tackle the issues that have hurt the economy, both in the immediate basis as well as over the long term.
George Stephanopoulos, host: I think we’re going to put off that question for now. But let me just ask two quick political questions before I let you go –
(END OF TRANSCRIPT)
In his first news conference as president-elect on Friday, Obama himself was equally as elusive, refusing to directly answer whether or not he still planned to raise taxes.
“I think that the plan that we've put forward is the right one, but, obviously, over the next several weeks and months, we're going to be continuing to take a look at the data and see what's taking place in the economy as a whole,” he said.
Raising taxes to solve problems: Recipe for economic disaster?
Brian Riedl, senior federal budget analyst at the conservative Heritage Foundation said, what is becoming clear is that the incoming Obama administration plans to “use” the nation’s economic situation to “solve” problems like education, health care and energy -- by increasing spending.
That would be a recipe for economic disaster, he told CNSNews.com.
Riedl said that any money the federal government spends must first be taxed or borrowed from somewhere else, making any increase in spending an effective tax increase.
“Raising taxes is never a good idea, but raising taxes during an economic slowdown can be downright catastrophic,” he said. “When you increase taxes, you decrease incentive to work, save, and invest, which lowers productivity and hurts the economy even more.”
“Every dollar government spending injects into the economy must first be taxed or borrowed out of the economy,” Riedl added. “Whatever part of the economy is increasing in income and jobs, another part of the economy is decreasing in income and jobs.”
Riedl also said that Obama’s plans for expanded energy, health care, tax and education spending would not stimulate the economy, either.
“Nationalizing health care is not an economic stimulus, simply throwing money around is not an economic stimulus,” Riedl told CNSNews.com. “Raising taxes on small businesses will slow down the economy. Virtually no economist would tell you that raising taxes on individuals and small businesses is going to increase economic growth.”
Michael Ettlinger, vice president for economic policy at the liberal Center for American Progress disagreed, saying it’s all a matter of how the government spends money.
“You could repeal the high-end tax cuts without hampering economic recovery,” Ettlinger told CNSNews.com, “it all depends on how you spend the money.” He added “that’s something that people miss, if you spend the money wisely, that can have a net-positive effect on the economy.”
Ettlinger agreed with Emanuel that energy, health care and education will require long-term policies of their own, but said that they weren’t entirely disconnected from economic recovery.
“There are aspects of Obama’s agenda which are clearly more long-term focused,” he said. “The point of them is not to spark an immediate turnaround in the economy (but) they are legitimately connected to the economy. Some of them are more directly connected to the immediate crisis, but in terms of the long-term needs of the economy they’re all associated with those.”