Here's the scene. The Democratic president seeks to raise taxes on the highest earners in the country to repair our deficit. A phalanx of conservative, libertarian and Republican critics accuse him of saddling small business with an unbearable burden and killing jobs. The president passes the tax increase and gets walloped in the following midterm election, and declared a bum. Coming fall 2010 to cable news channels near you?
We don't know. But we do know that this was the story of President Clinton in 1993. As Tax Policy Center's Eric Toder remarks, we've seen this movie before. We don't know how it will end for Obama, but we do know that the next six years for Clinton was one of the strongest economic expansions in U.S. history, one that created 20 million new jobs and moved the federal budget into surplus for the first time since 1969.
The point, Toder rightly says, isn't to nyah-nyah conservatives into accepting higher taxes because they're Always better for the economy. The point is that "the dire warnings that the 1993 tax increases would 'crush small business' and 'kill jobs' - never materialized."
The bigger picture for me is tax reform rather than the top two income rates. The Democrats need 60 votes to raise income taxes on the top two percent, and by my count they have no more than 54. Four moderates have said they don't want to raise taxes and others like Landrieu are publicly on the fence. Obama might not have a chance to pull a Clinton, but that's OK. I think he should be trying to pull a Reagan, anyway.