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Tax Hikes – What It Takes to Plug the US’s Gaping Budget Deficit?

National Economic Council Director Larry Summers and Treasury Secretary Tim Geithner provided rare good news about the US economy. It seems that the worst economic crisis that hit the country since World War II is finally coming to an end. However, this raises a new, and probably equally daunting question, “how will the Obama administration pay for its free spending ways?” It seems that President Obama will have no choice but to increase taxes or possibly, a second stimulus package?

Obama’s Broken Promises?

The administration’s economic officials have failed to assure the public that there won’t be any tax hikes despite the President’s previous (campaign) promise that Americans who earn less than $150,000 a year won’t see their taxes go up “by a single dime” while Obama is president. In fact, they did just the opposite; the hinted that middle-class Americans may need to pay more in order to pay the gaping budget deficit.

In separate television interviews, both Tim Geither and Larry Summers both did not clearly state the President’s intension. However, they refused to rule out tax hikes as well. Summers, as he was discussing the healthcare proposal, said that the funding needs to be sourced somewhere.

Meanwhile, Geither said that the White House will “do what it takes” to tackle the deficit problem. He further stated that “If we want an economy that’s going to grow in the future, people have to understand we have to bring those deficits down” while adding that the solution might come in the form of healthcare reforms.

Republican Reactions

The planned tax hike is, of course, greeted by angry protests from Republican critics. They say that this is another socialist reform by the Obama administration. John McCain, Obama’s rival for the presidency, stated that “it’s pretty clear that if you pump trillions of dollars into the economy, you will see some recovery”. But he cautions that the long term consequences of this action can be devastating.

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Category: Government Bailout

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One Response

  1. [...] and market watchers are expressing a small sigh of relief. However, no one can deny that a lot of taxpayer money has been invested into the economy and this contributed significantly to the growth. The question is, how much can be attributed to [...]

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