How safe is Obama's middle-class tax cut?

Remember how President Obama vowed during the presidential campaign not to raise taxes on the middle class? That promise has been coming under intense scrutiny lately.

In remarks to the White House press corps Monday, press secretary Robert Gibbs reiterated that Obama has no desire to raise taxes on U.S. families earning $250,000 or less. Gibbs had to work hard to distance himself from the earlier remarks of Obama's top economic advisers indicating that a tax increase was possible.

Some observers are now saying that barring some sort of economic miracle that swells the coffers of local, state and federal governments, Obama may find that cornerstone of his election campaign a hard promise to keep.
Obama is well aware of this. That's why he had his two top economic advisers, Timothy Geithner and Larry Summers, drop the trial balloon over the weekend that the once unthinkable tax increase was possible. Of course, it was disavowed by Obama Press Secretary Robert Gibbs on Monday.

The trouble is that fiscal conservatives are not buying Obama's denial. Grover Norquist, head of conservative group Americans for Tax Reform, told DailyFinance he believes the administration is trying to "soften up" the American public for a tax increase. Even more moderate political voices argue that the middle class may have to shoulder a bigger tax burden given the skyrocketing federal deficit.

Obama faces the same problem that George H. W. Bush faced with his "read my lips" pledge. People will hold a presidential candidate responsible for ill-advised economic declarations made during the heat of a campaign.

Conn Carroll, a blogger with the conservative Heritage Foundation, lashed out at Obama for backtracking on one of his key promises made during the presidential campaign. "So you've been warned, America: the Obama administration is no longer promising not to raise your taxes," Carroll wrote. "And how can they? Just this past week the administration's Cash for Clunkers burned through $1 billion in less than a week."

The U.S. deficit may reach more than $1.84 trillion, according to the Congressional Budget Office. That red ink -- funded by China in large part -- equals about 10 percent of U.S. gross domestic product, a level that economists argue is unsustainable. There has not been a broad-based tax increase in more than 20 years. Most recent presidents have made tweaks to the system, either by raising taxes or lowering them for taxpayers at the high end.

"The nation is on an unsustainable fiscal path, and ultimately, once the economy is back on track, taxes and spending will be on the table," says Chuck Marr, director of federal tax policy at the director of Center on Budget Policy Priorities.

Obama may have little choice. The $787 billion economic stimulus package hasn't given the U.S. economy the jolt some had hoped for. Signs indicate that the economy is improving, though the rebound has not improved the lives of many Americans hurt by the economic tsunami.

Though some pundits said that Obama was going to take his tax-talking aides to "the woodshed," it's likely that nothing of the sort happened. The president was more likely floating a trial balloon, dropping a hint about something controversial to gauge the reaction.

ABC's George Stephanopoulos, host of This Week With George Stephanopoulos, put it succinctly on his blog: "Geithner was clear that he believes a key component of economic recovery is deficit reduction," he writes. "When I gave him several opportunities to rule out a middle class tax hike, he wouldn't do it."
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