Why is the White House’s Council of Economic Advisers Helping the Republicans?

Why is the White House trying to scare average people about the consequences of the “fiscal cliff?”

If the President’s strategy is to hold his ground and demand from Republicans tax increases on the wealthy, presumably his strongest bargaining position would be to allow the Bush tax cuts to expire on schedule come January – causing taxes to rise automatically, especially on the wealthy.

So you’d think part of that strategy would be reassure the rest of the public that the fiscal cliff isn’t so bad or so steep, and that at the start of January Democrats will introduce in Congress a middle-class tax cut whose effect is to prevent taxes from rising for most people (thereby forcing Republicans to vote for a tax cut for the middle class or hold it hostage to a tax cut for the wealthy as well).

But today (Monday) the White House’s Council of Economic Advisers issued a report today warning that if Congress allows the Bush tax cuts to expire January 1and the Alternative Minimum Tax to kick in, the middle class will face sharply-rising taxes.

The result, says the Council of Economic Advisers, could slow consumer spending by 1.7 percent next year, and slow overall economic growth by 1.4 percent. The loss of $200 billion in consumer spending is just about what American families spent on all the new cars and trucks sold in the U.S. in the last year, according to the report. About $36 billion less would be spent for housing and utilities, $32 billion less for healthcare, and $26 billion less for groceries and at restaurants.

This kind of fear-mongering plays into Republican hands.

This piece is cross-posted from Robert with permission.

3 Responses to “Why is the White House’s Council of Economic Advisers Helping the Republicans?”

SB GravelyNovember 27th, 2012 at 4:05 pm

Is it possible for Mr. Reich to stop being supremely politically partisan and hope that he has some concern for handling the economic situation for the best future benefit of the entire US population and not for his polical party? It is Reich's type of partisanship that has made this country so divided. He is a sad little partisan.

Nate PNovember 29th, 2012 at 1:31 pm

they could have done the same thing before and Obama caved and kept the wealthy tax cuts in place after threatening a veto for months. GOP has all the leverage in this and Democrats know it.

Most Read | Featured | Popular

Blogger Spotlight

Richard Wood Richard Wood

Richard has published papers on wages policy, the taxation of financial arrangements and macroeconomic issues in Pacific island countries. Views expressed in these articles are his own and may not be shared by his employing agency. He is the author of How to Solve the European Economic Crisis: Challenging orthodoxy and creating new policy paradigms