Let’s say President Obama soundly defeats the GOP in November and he hunkers down for a second term. If that happens, some critics think he will allow all of the Bush tax cuts to expire. All of them. Arguably, this would lead to a increase in taxes on the middle class.
Noam Scheiber, author of The Escape Artists: How Obama's Team Fumbled the Recovery, thinks there's reason enough to suspect the president would allow this to happen.
What’s even more unpleasant than the thought of tax increases during this time of economic stagnation is the fact that the White House originally floated this idea back in 2009.
According to Scheiber (via The Daily Beast):
In the fall of 2009, Obama’s chief congressional lobbyist, Phil Schiliro, touted a clever idea for dealing with the tax cuts: introduce a bill that would extend the middle-class cuts for two years while allowing the upper-income portions to expire. After two years, the middle-class cuts would also expire unless Congress paid for them with offsetting savings or tax increases.
By November 2009, Orszag [the former Director of the Office of Management and Budget] had become so fond of the idea that he insisted on presenting it to the president in the Oval Office. Orszag’s fellow wonks were cool to the plan, having heard him and Schiliro sing its praises repeatedly. But the administration’s chief wonk—Barack Obama—was intrigued. He asked a series of encouraging questions about how the proposal would work. According to two sources in the room, he was taken with both the political merits—that is, putting Republicans on the defensive—and the policy rationale of lopping trillions off the deficit. He gave no indication that he was troubled by the plan’s most explosive feature: that it would likely break a central campaign promise—not raising taxes on the middle class—one Republicans would surely wrap around his neck with populist glee.
So let's say President Obama is reelected. What happens when these tax cuts come up again? He doesn't have to fear losing an election. He doesn't need to worry about appealing to moderates. Simply put, "the chance to let the Bush tax cuts lapse may simply be too tempting to pass up," Scheiber writes.
And the implications could be devastating.
“Were this to happen, 2013 really could be the brutal year of fiscal contraction people have been fearing,” writes Business Insider’s Joe Weisenthal.
“And even if nothing happens, it's depressing to think that in 2009, when things were going horribly for the economy, there was a serious discussion of tax hikes and deficit reduction at the highest levels of government.”