Obama: Not Extending Middle Class Tax Cuts Could Hurt Growth

KOKOMO, Indiana: President Barack Obama said on Tuesday the United States must extend tax cuts for the middle class but could not afford to do so for the wealthy, laying out his position before next week's meeting on the issue with Republicans.

Obama, who also told hard-hit Americans the U.S. economy was on the mend, said extending the middle-class tax cuts was critical to keeping the economic recovery on track.

"If we allow these taxes to go up, the result would be that a lot of people most likely would spend less. That means that the economy will grow less," he told workers at an auto plant.

Republicans, who won control of the House of Representatives in November 2 elections as voters punished Obama's Democrats for a sluggish economy and high unemployment, want to make the tax cuts permanent for all Americans.

Touting the success of his government rescue of the U.S. auto industry in a campaign-style rally, Obama welcomed news that U.S. economic growth was picking up.

He warned it had a way to go before it was out of the woods and said that meant government must not take money away from households likely to spend it.

"Next year, taxes are set to go up for middle-class families unless Congress acts," Obama said. "If we don't act by the end of the year, a typical middle-class family will wake up on January 1 to a tax increase of $3,000 per year."

Data released earlier on Tuesday showed that U.S. output grew at a 2.5 percent annual pace in the third quarter, up from a previously estimated 2 percent, reflecting stronger spending and export earnings than initially thought.

MEETING NEXT WEEK WITH REPUBLICANS

The president meets Republican and Democratic congressional leaders on November 30 to work out what to do about the Bush-era tax cuts and other pressing legislation to complete before a new Congress begins in January.

Obama says taxes should rise for families making more than $250,000 a year, but he has made extending cuts for middle-class families a top policy priority.

"This is actually an area where Democrats and Republicans agree," he said. "The only place where we disagree is whether we can afford to also borrow $700 billion to pay for an extra tax cut for the wealthiest Americans -- millionaires and billionaires. I don't think we can afford (that) right now."

Obama used his visit to highlight U.S. jobs saved by his multibillion-dollar taxpayer bailout of the auto industry, after a successful stock float by General Motors last week underscored renewed investor demand.

The bailouts were unpopular with many Americans. Obama wants to persuade the public they were worth the money, and used his visit to the Midwest, critical to his re-election chances in 2012, to sell that message.

"We're coming back. We're on the move. All three American (auto) companies are profitable, and they are growing," he said. "I want everybody to be absolutely clear, we are moving in the right direction."

(Writing by Jeff Mason and Alister Bull; Additional reporting by Deepa Seetharaman; Editing by Peter Cooney)

Copyright 2010 Thomson Reuters. Click for Restrictions.

Comments

[afgail]

01:52 AM on 11/27/2010

Obama is nice guy, and as we all know nice guys always finish last. It's now or never for him to step up to the plate and play some first class hardball with the Republicans and the Blue Dogs. I thought for sure Obama understood Chicago politics and knew how to make the Blue Dogs an offer they couldn't refuse during the lame duck session.

[kevinw]

10:36 PM on 11/26/2010

You don't need 60 votes. The original Bush Tax cuts went through reconciliation. That is why they had the ten year expiration date. You can not pass a bill that raises the deficit over ten years using reconciliation. If the original bill used reconciliation there is no reason you could not have the Obama middle class extension bill use the same mechanism. That means you need 50 votes and the VP.

[not one of the sheep]

08:38 PM on 11/26/2010

A vast majority of the voting public, as evidenced by the last election, want the tax cuts extended in one form or another. It is evident that Peloser still doesn't have a clue as she will not let the tax cuts be brought up for a vote forcing them to expire. Clueless as ever, it's still "all about me and what I want". Her "screw you" attitude destroyed the dems in the last election and the ignorant vote to place her in a position of power will come back to haunt the party in the next election cycle. One can only conclude that the botox migrated to her cerebellum and extinguished vital brain cells needed to make logical and rational decisions.

[kevinw]

10:39 PM on 11/26/2010

Actually that is not correct. The polls show that the majority from the election want the middle class tax cuts extended and are in favor of letting the cuts for the rich expire.

[not one of the sheep]

12:35 AM on 11/27/2010

Let me restate this again, a vast majority of the voting public want the tax cuts extended iin one form or another, so again, what I state is factually correct. Also, Pelosi refuses to even let the tax cuts come up for debate or a vote because in her fantasy world she is queen of the universe and all should worship her. As the dem party went and continues to go down in flames, she continues to prance around picking flowers in LuLu Land while everyone and everything crashes and burns all around her. This will thankfully be remedied after the first of the year.

[castlerider]

02:04 AM on 11/27/2010

You're right of course, in spite of what anyone who FOLLOWS ALONG WITH THE REST OF THE SHEEP would say.

Besides, that, it's about the weight of the deficit, the fact that as job growth it FAILED for the last 9 years and the fact that yes, we should keep a tax cut, but only for the middle class. Calling the Madame Speaker names and blaming her inordinately sfter so much she actually has accomplished is immature and unnecessary.

[themodernleader]

10:07 AM on 11/26/2010

    Depending upon consumer spending to pull us out of this deepening depression is the same response as Hoover gave in the latter years of his failed administration.  Another consideration:  All Americans must support our government.  The Bush foolish tax cuts should be made to expire for all Americans.  Then targeted tax increases on windfall corporate, inheritance, Wall Street, hedge fund and millionaire profits should be enacted to fund the government sponsored public works that brings 30 millions of superfluous Americans back  to productive and tax paying citizens. 
    This Administration must think big and anew.

[HockeyMom]

09:52 AM on 11/26/2010

The war is taking all the money and then leaving us to fight over the scraps. The rich eat no matter what and the rest of us can go ........you know the rest.

[DecouplefromWallSt]

06:26 AM on 11/26/2010

Bush tax cuts produced $3.8trillion out of the $13.8 trillion deficit
http://finance.yahoo.com/tech-ticker/obama-is-toast-davidowitz-says-us-to-face-dollar-crisis-by-2012-yftt_535652.html

[kevinw]

10:44 PM on 11/26/2010

The deficit expanded greatly under Reagan. The deficit grew at a very low rate under Clinton and he had surpluses in his budgets. Bush ran the debt up from 5.7 trillion to 11.3. The tax cut was part of the debt growth, but there was also two wars (one by choice) and an unfunded Medicare drug benefit for the drug industry. For Bush you also have to add on TARP.

[Hvacrpro]

02:30 AM on 11/26/2010

TEA PARTY TIME OUT begins on December 6th, 2010 to December 10th, 2010. Five Business Days, its just a first time event to mark your calendar , or notebook , boycott them by merely changing the channel, or radio station, or news . simple stuff take away their notoriety their ego their propaganda machine for the neo con corporatist republican party.

[raphaelbonee]

02:03 AM on 11/26/2010

Let them lapse ... oh I get it. This is the little dance before the capitulation ... again.

[HockeyMom]

10:08 AM on 11/26/2010

Pitiful but probably right. darn. Was looking for a back bone and got a reed instead. I was looking for someone from the outside and ended up voting for someone, through a positioning of mirrors, voted for someone on the inside. darn. But what was the choice? Oh the man who abandoned his fellow captives as soon as he got home and voted against them over and over again, and his wonderful sidekick with the slick red shoes.

[McCauley]

09:04 PM on 11/25/2010

Nice words. I bet he caves in on the millionaires.

[Happylib]

07:06 PM on 11/25/2010

ONLY targeted tax cuts for hiring and tax cuts for those who will immediately spend it. Better yet....INCREASE food stamps for a year. We get about $1.71 stimulus for every $1.00. We only get about .35 cents of stimulus per $1.00 we spend on tax cuts. I know, I know, people will LOVE the food stamps and never want to work again....WHATEVER!

[Kassandra]

12:45 PM on 11/25/2010

End 'em all and let GAWD sort it out. Just don't cut Social Security. the tax cuts won't mean a thing if we lose that.
It's just a few dollars for the average household anyway....if they haven't taken your house yet, that is

[Muzzle Me]

12:21 PM on 11/25/2010

Well, I agree not extending the middle class tax cuts would hurt, but then WHY!!! the more than ever hyped up shopping blitz for the day after Thanksgiving. I mean, some folks could rightly think they got caught up in a time warp and it's "shop like it's 1994"!!! Could it be that the administration in just trying to appease the Chamber of Commerce?

[Aikaterina]

11:46 AM on 11/25/2010

It's time for the president to demonstrate some spine, his communication skills, and work as hard (as he did on his campaign) to get public support to end those "W" Bush tax cuts, once and for all, particularly for those earnings over $250-K.

The paltry $300 I got didn't encourage me to go out and spend. Most folks I know (including myself) either paid bills or put tax refunds-credits into their bank accounts. In case the president hasn't noticed, when folks have either already lost or fear losing their jobs, benefits, homes and life-savings, they're in no mood to just "go shopping." They're fighting to pay essential bills, keep roofs over their heads, and feed their families.

Those wealthiest folks are simply hoarding their cash in private, off-shore accounts, and have NOT (during the past 10 years) put their money into creating jobs, growth or prosperity for anyone but themselves, and the Chinese.

END ALL tax cuts, credits, subsidies except for those who create, invest in, expand and KEEP businesses (headquarters, manufacturing, services) in the US, hiring only American workers! This will not only improve the job situation, but alleviate the soaring deficits-debt.

Some things are too simple and common-sense to be considered, it appears. Mr. President, call the GOP's bluff, and end all tax cuts, deductions, loopholes, credits, subsidies, exemptions, and threaten to implement instead, a flat percentage tax on ALL sources of income, so everyone (business and individual) pays proportionately.

[mistykane]

08:03 AM on 11/25/2010

He has the votes right now. There's bipartisan support for extending all of the cuts for 2 or 3 years (I think making middle class cuts permanent). Even the democrats in Congress aren't willing to risk hurting the economy by letting taxes increase for anybody while the economy is so weak. Obama needs to go on and get this done.

[CrestedSparrow]

12:14 AM on 11/25/2010

Obama has his priorities right: extend tax cuts ONLY for the middle class. If only the Republicans agreed with him, but, alas, they do not. What to do? For starters, listen to your friend Warren Buffet or listen to the Millionaires' Club or read the signed petitions progressives have been collecting for you to help you make the right choice. We want the Bush tax cuts to expire make no mistake about that one. And if that means the middle class loses their tax cuts too then so be it. Don't use us--the middle class--as an excuse to make a deal with the devil.

[colourful]

01:10 AM on 11/25/2010

Hear Ye! Hear Ye!

[Aikaterina]

11:54 AM on 11/25/2010

Amen!

1. The minute sums most working folks got didn't inspire spending. Most folks either used it to pay bills or put the money aside.

2. People living on unemployment benefits (soon to expire), those who've already lost (or who fear losing) their jobs, homes, benefits and life-savings have little to be taxed anyway.

3. The "W" Bush tax cuts did not promote growth, revenues, jobs, prosperity, or benefits for anyone except the wealthiest and the Chinese.

4. Current tax codes offer incentives to move jobs abroad, and adding another $700-billion to the deficit-debt for more of the same won't "trickle-down" to the middle class, but rather finance more hardship.