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Obama Officials Don't Dismiss Possibility of New Taxes
The word in Washington Sunday is that the economic train is emerging from the tunnel of recession, but Obama administration officials could not explain why few jobs are waiting in the station and suggested new taxes may be around the bend.

Sunday, August 02, 2009

President Obama may have to break his campaign pledge and raise taxes on middle-class Americans to pay for public health care and the growing deficit, an eventuality that administration officials touched lightly on Sunday as they promoted an economy emerging from recession.

With an expected deficit next year of $1.8 trillion, and spending still being planned for a $1 trillion, 10-year health care reform, officials say something will have to be done to prevent further erosion of the economy.

"We will not get this economy back on track, recovery will be not strong and sustained, unless we ... can convince the American people that we're going to have the will to bring these deficits down once recovery is firmly established," Treasury Secretary Tim Geithner said on ABC's "This Week."

Asked point blank whether it was right to suggest it is a matter of when, not if, taxes will be raised, Geithner responded, "It is absolutely right."

But the president's team circling the Sunday morning news shows was quick to note that there are signs the recession is easing despite a persistent decline in job losses in the past six months.

Administration officials say they hope to see positive economic growth before the end of the year, and credit the $787 billion Recovery and Reinvestment Act passed in February with preventing recession from going into depression.

The legislation -- opposed by all but three Republicans in the House and Senate -- was intended to help save or create 3 million to 4 million jobs. But since that time, the jobless rate has grown to 9.5 percent, higher than the administration predicted even without a stimulus package.

National Economic Council President Larry Summers said on CBS' "Face the Nation" said jobs are a lagging indicator and once output increase, jobs will start to pick up.

"I think we have a ways to go. I want to emphasize the basic realities. Unemployment is still very high in this country," Summers said.

He added that it's not a good idea to rule out future taxes.

"There is a lot that can happen over time. ... 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 is not going to happen," Summers said.

Rep. Mike Pence, the No. 3 Republican in the House, said the economy is recovering in spite of the stimulus plan, not because of it. He added that Americans don't want to be given an additional burden of costly health care run by the government.

While economists agree spending is required in a recession, Pence said that money would be better spent by the American people, not the federal government.

"Borrowing a trillion dollars from future generations of Americans and spreading it around the economy is going to have some catalytic effect in the economy in the short term, but again, it's no substitute for fiscal discipline in Washington, D.C.," he said. 'This piecemeal approach -- government handouts through a government bureaucracy -- is no substitute for broad-based tax relief and fiscal discipline in Washington, D.C."

As Democratic lawmakers evaluate options to provide government-run health insurance, Rep. Charles Rangel, D-N.Y., the chairman of the House Ways and Means Committee, said tax cuts will only hit the wealthiest business owners.

"Under our statistics, 96 percent of small businesses would not be hurt by this tax. It's less than 1 percent of the wealthiest people in the United States that would be taxed, and that's at a 1 percent tax," he said.

Rangel added that it's only fair to give Americans a public option since the private insurers have made billions on coverage and then dropped those who had dire illnesses.

The president's advisers and supporters sought to measure intangibles as a way to determine the true cost of health care.

Rangel said to hear Republicans tell it, the cost of government-supplied health insurance all goes down a hole. In fact, he said, savings will be realized from people receiving treatment before their situations become grave, for example.

"They don't take the productivity in having a healthy, educated workforce. And they don't consider that America is the only industrialized country that doesn't have a national health plan," Rangel said.

The president is "insisting that we enact a set of measures that are not the kind that you can really do a bean count on and score precisely, but which we know will have effects over time, things like encouraging cost effectiveness research. So health care is the first sort of ground zero," added Summers.

Former Federal Reserve Chairman Alan Greenspan warned that even a deficit-neutral plan being touted by Democrats to fund government-run health insurance program won't be enough in the long run.

"We have to attack both the original shortfall and make sure we fund whatever new initiatives that occur in the health care area. It's not adequate to be strictly revenue-neutral, because there's a lot more to be done," he said, noting the large number of baby boomers who currently are signing onto Medicare.

Republicans and Democrats did agree on the need to extend unemployment benefits to those who are about to lose them after 26 weeks of recession.

"We did extend unemployment in a way that was hugely important in the stimulus act, and we're going to work with Congress to make sure that the unemployment insurance benefits that are necessary for the American people are maintained," Summers said.

"We need to take care of those who are unemployed, but we also need to make sure they get jobs," DeMint said.

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