Obama Admits That Tax Cuts For The Rich Won’t Create Jobs

President Obama was on NPR’s Morning Edition Friday discussing the compromise on the Bush tax cuts when in response to a listener’s question about how keeping the tax cut for the rich will create jobs Obama said, “It doesn’t, which is why I was opposed to it — and I’m still opposed to it.” Obama admitted that he had to compromise because if he didn’t he felt that the economic recovery would be endangered.”

Here is the audio courtesy of Think Progress:

When asked about the role of the Bush tax cuts in terms of job creation Obama said, “It doesn’t, which is why I was opposed to it — and I’m still opposed to it. The issue here is not whether I think that the tax cuts for the wealthy are a good or smart thing to do. I’ve said repeatedly that I think they’re not a smart thing to do, particularly because we’ve got to borrow money, essentially, to pay for them.”

Obama framed the tax cuts as the first shot in a battle over the tax code, “The problem is, is that this is the single issue that the Republicans are willing to scotch the entire deal for. And in that circumstances — in that circumstance, we’ve got, basically, a very simple choice: Either I allow 2 million people who are currently getting unemployment insurance not to get it, either I allow the recovery that we’re on to be endangered or we make a compromise now, understanding that for the next two years this is going to be a central battle as part of a larger discussion about how do we reform our tax code so that it’s fair and how do we make sure that we actually are dealing with the deficit and debt in an intelligent way?”

Everyone who isn’t a blind right wing ideologue who isn’t in total denial of economic reality knows that extending the Bush tax cuts is not going to spur job creation. It is not logical to believe that keeping taxes at their current levels is going to have some sort of magical effect on job creation, but Republicans have long been believers in the dream of trickle down fairy dust. The myth of the magic of trickledown economics is a whimsical cover to story to hide the redistribution of wealth in this country from the bottom to the top. Trickledown economics is behind the Republican rationale for keeping the Bush tax cuts, and Obama is essentially saying that he made the choice to save the fragile economic recovery by giving the Republicans something that he knows is an expensive fool’s errand.

While the President’s consideration of those in the direst of need is commendable, it will not be easy for him to argue that these tax cuts are unnecessary now that he has agreed to extend them. If the economy starts humming along again, Republicans will ignore reality and give all the credit to the tax cuts. Democrats and Obama will give credit the stimulus and the traditional increase in government spending during a recession.

The point is that that this compromise likely will make Obama’s future battle with the Republicans on taxes and tax cuts even more difficult. The threat to the economic survival of two million Americans forced Obama to make this deal, but both he and the Republicans are gearing up for a total war on the issues of taxes, the tax code, and the deficit. While America is thinking short term, Obama is focusing on the long term big picture. A president’s time in office is so limited that long term thinking presidents are rare. It will be interesting to see if America will accept a president that has a long term strategy in this age of instant gratification politics.

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21 Replies to “Obama Admits That Tax Cuts For The Rich Won’t Create Jobs”

  1. Jason, this is spot on. Tough decisions mean looking past this week. I appreciate your critical examination and you’ve framed it well. Thank you for this article.

  2. I have never been a proponent of the flat tax or the fair tax thing, but I think if it was handled right that could work. First of all you totally ignore a person’s wealth. If a person gets out there and is smart enough to get rich then so what. Everybody has to buy groceries, everybody pays for their utilities, everybody buys tires and cars, etc. etc. etc.

    yes this is harder on the poor. But in order to sell their goods manufacturers and providers are going to have to settle on a cost of their materials and products that will be equitable for as many people as possible by with the tax added in. If they don’t simply not going to sell the amount of product they want to sell. If they want demand that they’re going to have to sell it for equitable price and drop some of the greed.

    Putting that aside, we will never settle on an equitable tax system that works for everyone. It’s Obvious the Republicans do not want the rich to pay taxes for some ungodly reason. so as far as I’m concerned we have to get away from you pay this, your neighbor pays this, and the rich man on the hill pays this. let’s get away from tax cheating by forcing everyone to pay with what they buy. Let’s get a hold of our government and make sure that they start no more wars. Tax reform, en route trying to reform the current system will not work.

    Of course that’s just my opinion. What do I know?

  3. I keep waiting for President Obama to walk out on us all. This man has taken enough grief from both sides, neither of whom is fair or accurate in their criticisms – and neither of whom is thinking about those 2 million Americans let alone our economy. Children playing games.

  4. –If the economy starts humming along again, Republicans will ignore reality and give all the credit to the tax cuts.
    THe republicans will ignore reality no matter what. The fact is the president did a reasonable thing considering the circumstances. If we are willing to endanger the economy to boost our own politics we would be as bad as them. Let’s remember half this country -maybe more- is willing to vote republican despite the fact that it harms their own interests. this is not Obama’s fault but he is their president too and he does have to concede to some of their wishes no matter how stupid. He is not just the president of those who voted for him.

  5. The Republicans are blind to economic reality? Your bio says your undergraduate is in political science. With a political science background I would’ve assumed you to have taken a couple economics courses. Econ 101 and 102 perhaps? After reading the article though, I now have my doubts. If you have indeed taken at least a couple basic econ courses, I will offer an apology.

    On the topic of taxes, I truly cannot understand why the left, which is constantly touting their want for “fairness and equality”, can be for any kind of progressive taxation scheme. Its nor fair nor equal! How can taking more from some people be fair? or considered somehow equal? A flat tax by definition is fair and equal, although an impractical impossibility in the real world. A flat RATE tax however…..
    Seriously, taking at a higher rate from some, just because they have more (or less), will never translate to fair and equal treatment in my mind.

    cheers

  6. So you see no problem with taxing the rich more to help provide for the poor to help them gain a better life?

    yes some shirk and do not deserve the money they are given in tax breaks and benefit, but so are some of the rich through inherited wealth, they never work a day in their lives and yet live of daddies investments.

    nearly all of the “problems” that the right seem to give for not giving the poor tax breaks extend across all of the social strata of wealth, its just not a noticeable problem for the rich, drug use,alcoholism,violence and the unlwillingness to work is all written off or just plain ignored.

    i do not see personally how you can stand by and watch someone struggle from day to day to pay for basic amenities when a tax break would alleviate them from this problem, but you say no because you do not want the people in the highest income bracket having to pay, is it 4%?, more tax.

    ta

    (from the now ex -“socialist” England)

  7. Sometimes its issues like this, which make you think that, maybe, just maybe – it might be better if a giant asteroid hit Earth and wiped out two thirds of the population so that we might then realize what is really, truly important.

  8. In response to all those who don’t think it is fair to tax the rich more, here is why I think it makes sense. When you look at the infrastructure of a country, state, county, and imagine the different toll it takes getting someone 10 million, or someone 30,000, then taxing the people who in getting their wealth, put more strain on the infrastructure, it seems to make sense to me. If you are someone who makes 10 million a year, you are probably the head of a large company. If you are a CEO of say, Staples, you send out trucks all over to deliver your paper. A lot of trucks have to drive over thousands and thousands of miles of road, for you to get that much money. This is a simplistic way of looking at things, but in reality, money comes from some where. You have to have a solid infrastructure to be able to make money. I was recently in Mexico, and they are building roads and new facilities, everywhere, through the middle of nowhere to connect places that weren’t connected before. It’s because they what to be able to bring goods new places. Here we have already built our country, but we need to upkeep it. Also, the people who have put themselves in a position to make money, are also the people who usually are in a pace to make a decision to fire large scale amounts of people. If your money is accumulated by firing a bunch of Americans and sending those jobs over seas, then you are creating a scenario where you are straining the infrastructure of the country by flooding it with the unemployed. A progressive tax structure isn’t punitive in my opinion, if you look at the country as a whole, and not as individual attack. Whether people like it or not we all live in this country, and it needs to remain functioning, and those who have the most, do make a lot of the the decisions that make the country run, and therefore deserve more pay, but in turn, to generate that wealth, put a greater strain on the basic services and utilities that keep the country functioning.

  9. Tim I understand what you’re saying, and looking at it from an economics classroom perspective you are likely correct. I took a number of econ classes throughout university and I hope you were told as I was that it is a theory you’re working with when it comes to creating supply and demand graphs. One of the issues I have with those graphs is that they incorrectly use money as the sole incentive to create a balance between supply and demand. The reason is obvious as to why they do this (money is quantifiable) but unfortunately it’s not how the world actually works. There is more of an incentive to people than just money. The wildly successful are likely in such a place because they have a legitimate passion for what they do, if you tax them more it doesn’t mean they will work significantly less hard or that productivity will fall in a measurable way. I’ll also point out that defenders of capitalism claim that hard work is enough to find you success. I agree with this to an extent. Hard work and determination are enough to get you into the upper class, however to truly make yourself rich requires a great deal of chance occurrences that are 100% out of your control. These are the people making over $250,000/year (I’ve chosen this figure arbitrarily, but I think it holds true). The book “Outliers” provides a fascinating backstory to those who have found abnormal success.

    Whether or not a progressive tax system is fair is debatable (life isn’t fair, why should taxes be?). I think what matters most is whether or not something actually works. I don’t believe that returning the richest Americans to their previous tax rate will have an adverse effect on society.

    I will also add (this is no longer in reply to you Time but rather to the article itself) that in no way can the country afford these tax cuts. The US is borrowing a ridiculous amount of money to pay for this and this compromise has lead to increased spending with decreased tax revenues.

  10. Raise the rich taxes and down the poor taxes, that isnt too hard to do.
    some richs already go around and dont declare all their incomes, offshores are paradise.

  11. I bet your just a richie richington. And whooooa, Mr. College here thinks he knows everything about politics and the economy. Tax and Spend economics has always worked for almost every country in history that is struggling financially. Great depression much? You’d learn this if you took history 101, or 102

  12. Hmm, so will tax cuts for the middle class create jobs? Come on now if we are going to strees equality in society make it apply to everyone… Varying tax rates based on socioeconomic status is not equality…

  13. The Fair Tax really is the solution. Under the fair tax you are taxed on what you buy, not what you earn. Rich people tend to spend their money but if they choose to instead live a meager lifestyle, so be it. Buy used items and there is no tax which is great for the environment. Because of the pre-bate, the poor effectively don’t pay taxes under the fair tax. The fair tax dramatically simplifies the tax code, people that get paid in cash (drug dealers, illegal immigrants) can’t avoid it, and congress can’t create fancy tax situations for their rich supporters. It encourages investment and savings But most importantly, IMHO, it puts how much tax you pay in your hands. Learn more at http://www.fairtax.org.

  14. There is a comment about how the rich create are a bigger burden on our national infrastructure so they should pay more. The fact is, they already do. First of all we have things line gasoline tax for this very reason. The second and more important point is that corporations effectively don’t pay taxes. Raise their taxes and they won’t just sit there and live with lower profits. They will raise prices. So an increase in taxes on corporations is really just a price increase for consumers. One nice thing about the Fair Tax (http://www.fairtax.org) is that it eliminates corporate tax which would make the US the best place I’m the world to HQ your company and that creates jobs.

  15. Everyone seems to ignore the fact that tax revenue has gone up after a severe decline the last two times high income earners have been given tax relief. They reinvest in their business and this spurs economic growth. It happened after Reagan took a beating during his first midterms and it happened post tax buts in 2003. These are the FACTS. Saying that providing cuts to high income earners that encompass many small businesses who file tax returns as individuals doesn’t stimulate growth and increase tax revenue is just a bold faced lie to appease middle income voters who aren’t educated with the facts

  16. No, the rich DON’T spend “more” than the poor. As a percentage of income, the rich spend FAR less. Thus your so-called fair tax is just another regressive scheme.

  17. The can only raise prices so far before nobody buys their stuff. So, after some point, they will have to “suffer” smaller profits and/or lower pay for their non-producing executive class.

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