When the news broke on Sunday that two members of the Obama Administration refused to rule out tax increases for the “middle class,” all sorts of static swirled through the blogosphere. For example, the Lonely Conservative took the refusal to rule out such a tax increase as proof that there would be such a tax increase. At The Plain Truth, the same inevitability was attached to increases in middle-class tax rates, accompanied by three iterations of the word “LIARS.” From the Heritage Foundation comes the announcement that the “Obama Middle-Class Tax Hike is Coming.”

So is there going to be a tax increase on the “middle class”? I put that term in quotes because there are so many definitions of middle class. Is someone earning $400,000 a year a member of the middle class? Compared to someone making $2,000,000 annually, probably. Compared to someone earning $75,000 a year, probably not. Assuming for a moment that by middle class the various pundits are referring at least to people earning between $50,000 and $250,000 annually, what exactly did these Obama Administration officials say? The best place to find out what Secretary of the Treasury Timothy Geithner said is to examine the transcript of the conversation.

Geithner was asked whether the prediction by former deputy Secretary of the Treasury Roger Altman that the issue isn’t “whether tax revenues should increase but how,” was correct. Geithner replied by explaining that to sustain an economic recovery, the federal budget deficit must be reduced. He noted that the previous eight years ended with the deficit sitting at 1.3 trillion dollars, in part due to “making a bunch of commitments to cut taxes” and in part due to “spending without paying for those [expenditures].” He noted the obvious, that the nation is “not going to be able to afford to do that.” Asked if dealing with the problem would involve “new revenues,” Geithner replied:
Well, we're going to have to look at – we're going to have to do what's necessary. Remember the critical thing is people understand that when we have recovery established, led by the private sector, then we have to bring these deficits down very dramatically. We have to bring them down to a level where the amount we're borrowing from the world is stable at a reasonable level. And that's going to require some very hard choices. And we're going to have to do that in a way that does not add unfairly to the burdens that the average American already faces.
The interviewer then commented:
So to bring the deficits down, there is not enough money in the discretionary budget, we all know that. That means more revenues. The President has said that taxes won't go up for any Americans earning under $250,000, but it doesn't appear that he's going to be able to keep that promise if you're going to bring the deficits down.
To this, Geithner responded:
[W]e can't make these judgments yet about what exactly it's going to take and we're going to get there. But the very important thing, and no one is going to care about this more than the President of the United States, is for people to understand that we do not have a choice as a country, that if we want an economy that is going to grow in the future, people have to understand that we have to bring those deficits down. And it's gonna, it's going to difficult - hard for us to do and the path to that is through health care reform. But that's necessary but not sufficient. We [are] going to do some other things too.
The interviewer continued to push, “So revenues are on the table, as well?” As Geithner was answering, “Again, we're not at the point yet where we're going to make a judgment about what it's going to take. But the important thing...,” the interviewer interrupted, “But you're not ruling it out, you can't rule it out.” To this Geithner replied, “I think what the country needs to do is understand we're going to have to do what it takes, we're going to do what's necessary.”

Geithner did not say that taxes on the middle class would be increased. He refused to deny the interviewer’s assertion that taxes for people “earning under $250,000” would be increased. Why? Why not reaffirm the Obama campaign promise that taxes would not be increased for taxpayers with incomes under $250,000? Perhaps the answer is that the Administration is sending a message. Perhaps it is saying to Americans, “Our attempt to finance health care reform by raising taxes on incomes exceeding several hundred thousand dollars was met with fierce resistance by those with the resources to keep the Congress from adopting that approach. So if they succeed, revenues will need to come from the middle class. So wake up, middle class, and start pushing back at the folks who hire the lobbyists to keep those tax cuts in place even though those tax cuts and the refusal to repeal them when military spending soared led to eight years of ever-increasing federal budget deficits that threaten to keep this country in a perpetual recession.” If this is what some officials are doing, it could be a brilliant tactic.

And the best place to find out what Lawrence Summers, Director of the National Economic Council, said is, again, the transcript of the interview. Asked, “You don’t see another round of tax increases coming?” Summers replied, “Tax increases -- look, let’s understand where we have been. Let’s understand that the president put in place as part of the stimulus bill, as part of the economic recovery act, a measure he had campaigned on, the making work pay tax act that is reducing taxes by $800 for working -- for working families. That’s where -- that’s where the focus is.” When interrupted by the interviewer with “No tax increases for middle-income Americans?” Summers finished his previous thought, “... of this economy. There is a lot, though, there is a lot that can happen overtime. But the priority right now, so it is never a good idea to absolutely rule things -- rule things out no matter what.” After finishing his reply to the previous question, he then answered the one that was interjected by explaining, “But what the president has been completely clear on is that he is not going to pursue any of his priorities -- not health care, not energy, nothing -- in ways that are primarily burdening middle-class families. That is something that is not going to happen.”

Of course, a quick and careless listening or reading of this exchange makes it appear that “... of this economy. There is a lot, though, there is a lot that can happen overtime. But the priority right now, so it is never a good idea to absolutely rule things -- rule things out no matter what.“ was the response to “No tax increases for middle-income Americans?” but to me it appears as though the answer to that question came after Summers finished his response to the preceding question. Interviewers ought not interrupt, because the outcome is the sort of garbled cross-talk that opens the door to misinterpretation and twisting of words.

The propaganda games being played with serious national fiscal issues is even more apparent when one examines how one news outlet dealt with Geithner’s comments. According to this report, “Asked point blank whether it was right to suggest it is a matter of when, not if, taxes will be raised, Geithner responded, ‘It is absolutely right.’" By cutting off the rest of Geithner’s response, the impression that the report gives is totally different from what was said. When asked that question, Geithner replied, “[I]t is absolutely right and very important for everyone to understand we will not get this economy back on track, recovery will not be strong enough to sustain unless we can convince the American people that we're going to have the will to bring these deficits down once recovery is firmly established.” That is NOT the same as saying that there will be tax increases. And even if it is interpreted to mean that there will be tax increases, it is not the same thing as saying there will be tax increases on the middle class. This sort of reporting not only is misleading, it is dishonest and a disservice to the nation. It’s also horrible journalism.

A day after these two interviews, and the resulting barrage of alarms, outcries, and misinformation rampaging through the airwaves and the internet, White House press secretary Robert Gibbs reiterated that, "The president has made a clear commitment not to raise taxes on middle-class families." He said that Geithner and Summers “allowed themselves to get into a hypothetical back and forth.” Does this mean that Geithner’s refusal to rule out tax increases on the middle class is not part of some clever strategy to remind Americans that if the Bush tax cuts are not repealed that the middle class will continue to pay the price, as it has for the past eight years of those cuts? Not necessarily. It would make no sense for the Administration to admit there is such a strategy, at least not at this point.

Obama is in his first term. If he were to support raising taxes on the middle class rather than on the wealthy, he would guarantee that his would be a one-term presidency. There are too many votes in the middle class to put them at risk in 2012. It would not surprise me to see comments from Geithner and others in the Administration during the coming months, as the repeal of the unwise Bush tax cuts for the wealthy is debated, suggesting that such a repeal would eliminate any discussion of middle class tax increases. Hopefully, the policy debates will take place against a background of actual facts and not the innuendo and misinformation currently clogging the forums of public discourse.

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