The big takeaway from Barack Obama’s interview with Bloomberg is this line:
“We’re going to have to see rates on the top two per cent go up… We’re not going to be able to get a deal without it.”
Of course higher tax rates on the wealthy are part of the liberal wishlist.
But as Josh Barro explained in Bloomberg View, higher tax rates have nothing to do with averting the fiscal cliff, which is about averting austerity.
So why is President Obama threatening to block any solution to the austerity crisis unless it includes tax rate increases on the top 2 per cent of Americans? A high-income tax increase doesn’t do anything to solve the austerity crisis; in fact, it’s a mild dose of austerity itself.
Barro also explodes the idea that higher taxes on the rich would somehow pay for higher stimulus spending:
As a result, insisting on raising taxes on the wealthy does not create room for other fiscal stimulus. It actually reduces the room for fiscal stimulus: If he holds the line on his tax demand, Obama has less ability to extract concessions from the Republicans on other austerity measures, like the sequesters.
For more Barro, here’s him commenting right after the interview.
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