Geithner: Higher Taxes Hurt Economic Growth

Here is an illuminating exchange today between Sen. Mike Crapo and Treasury Secretary Tim Geithner:

SEN. MIKE CRAPO, R-Idaho: “You say that the tax increases will only happen when the economy has recovered. I understand that a lot of economists are saying we are going to be recovered by 2011. Frankly I think there are economists who are saying maybe our recovery will not be so strong by then. My question to you is, are these tax increases contingent on a recovery or are they going to happen regardless of what happens in 2011?”

SEC. GEITHNER: “Senator, I think it is a very important question. I think, again, we need to lay out an ambitious path for bringing those deficits down, commit to achieving that with a mix of measures on the resource side and the spending side to do the best possible job of leaving our economy stronger, and that’s what the President’s budget tries to do. Now of course we are going to have to watch how the economy evolves and I want to underscore that one of the mistakes governments have made over time in dealing with economic crises is putting the brakes on too quickly or in ways that hurt growth just as it’s starting to take hold. We just want to be careful not to do that.”

Me:  By that standard, it might be time for a White House "no new taxes" pledge until the economy grows at least 3.5 percent or more in back-to-back years. Team Obama thinks we will do that in 2010 and 2011. But that bullish forecast is a real outlier.