Dems trying to make lemonade with approaching debate over tax increases

In response to that statement, Republicans delighted in pointing to comments by Christina Romer, now the chairman of the president’s Council of Economic Advisers, in a 2006 paper, when she wrote forcefully in opposition to tax increases.

“The most striking finding is that tax increases have a large negative effect on investment,” Romer wrote, at a time when she was an economics professor at the University of California-Berkeley. “This suggests that the negative impact of tax increases on investment via spending and expectations dominates any offsetting positive impact via interest rates.”

“In short, tax increases appear to have a very large, sustained and highly significant negative impact on output,” she added, in a quote that Sen. John Kyl, Arizona Republican, read out loud to reporters at the Capitol.

Romer also noted in that paper, while discussing the Bush tax cuts, that opinions on the impact of the cuts “vary so radically” because “measuring these effects is very difficult.”

The White House late Tuesday addressed the Romer paper. An administration official told The Daily Caller that Romer’s “study focused mostly on tax cuts for the middle class and does not present any evidence to support the notion that letting high-income tax cuts lapse is bad for the economy, especially in a time with significant deficit concerns.”

“Our country simply can’t afford those tax cuts for the very wealthiest families based on our fiscal situation and we believe they should lapse,” the White House official said.

Gibbs said that Obama, who promised during the presidential campaign not to raise taxes on Americans making less than $250,000, does believe the tax cuts for the lower brackets can be afforded, even though they will add about $2.4 trillion over the next 10 years to the budget deficit. The cuts for the top earners would add an additional $1.4 trillion to deficit projections if they were extended.

“The President believes that raising taxes on the middle class during this economic time would not make a lot of economic sense,” Gibbs said.

Conservatives and some Democrats say that if it doesn’t make economic sense to raise taxes on the middle class, the same logic applies to those in the top tax bracket.

Rep. Dave Camp, a Michigan Republican and ranking member on the House Ways and Means Committee, said that if taxes for the top two brackets were allowed to go up, small business owners would shoulder more than half of the burden, further depressing an already anemic job market.

Bayh agreed that the Bush tax cuts should be extended across the board.

“I think the best thing that Democrats can do right now is emphasize growth, job creation and investment. I think that means erring on the side of not raising taxes right now … until the economy gets some sustainable momentum going,” he said.

“Once the economy has achieved sustainable growth, then we’re going to have to pivot and emphasize the deficit. But right now we’ve got to emphasize job creation and economic growth,” he said.

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