Will Bush Raise Taxes?

A few economists think that he actually might:

SAN FRANCISCO (CBS.MW) — He never felt the need to recite his father’s infamous “no new taxes” pledge, and yet President Bush ran for re-election on a tacit promise to extend the tax cuts he lobbied so hard to pass in his first term.

Unfortunately, say some analysts, the reality of wartime spending and other obligations make it increasingly likely that Washington will be forced to consider tax increases, rather than cuts.

“President Bush is very much against raising taxes,” said Alan Auerbach, an economist at U.C. Berkeley who worked on the Kerry campaign. “On the other hand, he’s got a war. He just asked for an additional appropriation for that. Expenditures on large entitlement programs are going up every year. That is not a sustainable path. He’s going to have to do something.”

“I won’t say he’s painted himself into a corner but he’s made it pretty clear he wants to make his tax cuts permanent. He’s also made it clear he’s not in the mood to introduce new taxes. It’s not clear how he’s going to accomplish this.”

…”Within the next six months or so, (Bush) is more than likely going to be forced into a major budget deal that will include a significant element of higher taxes,” said Bruce Bartlett, a senior fellow at the National Center for Policy Analysis, a conservative research group.

Some economists, including Bartlett, say there are a variety of economic triggers that could push Congress to move fast to restrain the deficit through higher taxes.

“This is going to be forced onto Congress by the markets,” Bartlett said.

I’d like to think that Auerbach and Bartlett are right, but I’m quite sceptical. Given the well-established track record of ideology trumping sound policy in the Bush administration, I think that even when the financial markets start sending clear signals that the budget deficits are hurting the economy, Bush will choose not to see those signals. Economic growth will suffer, but Bush will refuse to believe that the budget deficit is the cause. After all, according to Bush’s way of thinking, when things don’t go well it’s never his fault…