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Obama officials admit tax hike is likely

By
August 3, 2009

Two of President Barack Obama’s economic heavyweights said middle-class taxes might have to go up to pare budget deficits or to pay for the proposed overhaul of the nation’s health care system.

The tough talk from Treasury Secretary Timothy Geithner and National Economic Council Director Lawrence Summers on Sunday capped a week that brought rare good news for the economy: The worst recession in the United States since World War II could be on the verge of ending. Even so, officials appeared willing to extend unemployment benefits.

Geithner and Summers both sidestepped questions on Obama’s intentions about taxes. Geithner said the White House was not ready to rule out a tax hike to reduce the federal deficit; Summers said Obama’s proposed health care overhaul needs funding from somewhere.

"There is a lot that can happen over time," Summers said, adding that the administration believes "it is never a good idea to absolutely rule things out, no matter what."

During his presidential campaign, Obama repeatedly pledged "you will not see any of your taxes increase one single dime." But the simple reality remains that his ambitious overhaul of how Americans receive health care — promised without increasing the federal deficit — must be paid for.

"If we want an economy that’s going to grow in the future, people have to understand we have to bring those deficits down. And it’s going to be difficult, hard for us to do. And the path to that is through health care reform," Geithner said. "We’re not at the point yet where we’re going to make a judgment about what it’s going to take."

On Friday, a report detailed the economy dipped only slightly in the second quarter of this year — falling at a 1 percent annual pace, better than expected. The government report permitted optimism that the economic downturn is approaching its end.

The president cautioned against instant turnaround, though.

"Well as I’ve said, I think we maybe are beginning to see the end of the recession but it’s still going to be some time before we are seeing companies hiring again, that’s usually the last thing that happens," Obama said in an interview with Univision that aired on Sunday.

"So I think we are still going to have a tough remainder of the year — probably until next year — but, you know, at least what we are seeing — we’ve pulled back from the possibility of a depression. That’s not the danger."

And many analysts think the economy is starting to grow again in the current quarter, setting up a long-awaited recovery.

"Most private forecasters — and let’s use their judgment — suggest you’re going to see unemployment start to come down maybe beginning in the second half of next year," Geithner said, adding those same economists predict positive growth during the second half of this year.

At the same time, Geithner and other administration officials are contemplating how to ask Congress to extend — again — unemployment benefits for the millions of Americans who have lost their jobs in recent months. The proposal drew measured support from Sen. Jim DeMint, R-S.C., as long as the benefits are drawn from the already approved economic stimulus package.

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

Those jobs, though, are still elusive. Former Federal Reserve Chairman Alan Greenspan said the economy is slowly coming back and that he is "pretty sure we’ve already seen the bottom."

"Collapse, I think, is now off the table. We were teetering for a while," he said.

Geithner and Greenspan appeared on ABC’s "This Week." Summers appeared on NBC’s "Meet the Press" and CBS’ "Face the Nation." DeMint was interviewed on "Fox News Sunday."