Larry Summers: No Tax Deal Could Spur Double-Dip Recession

FENG LI/AFP/Getty Images

A White House warning to Congressional Democrats today: If you block enactment of President Obama's tax cut deal with Republicans, you might trigger a double-dip recession.

"If they don't pass this bill in the next couple of weeks," said White House economic adviser Larry Summers, "it would materially increase the risk the economy would stall out and we would have a double dip."

Did Summers really mean what he just said, asked reporters?

"It would significantly increase the risk," Summers repeated.

Can any member of Congress, much less a member of the president's party, risk being held responsible for sending the economy back into negative growth?

But it reflects the determined high-pressure tactic the White House is willing to use to get the tax cut deal enacted.

At the same time, Summers conceded that the deal Mr. Obama struck with Republicans "is an imperfect agreement."

"It's got things we like and things we don't like," said Summers at a briefing for reporters intended by the White House to influence press coverage of the deal.

At the same briefing, White House senior adviser David Axelrod said Mr. Obama got what he wanted in the deal: an extension of Bush-era tax cuts for the middle class and a 13-month extension of unemployment benefits; while Republicans got what they wanted: an extension of tax cuts for upper income taxpayers and a less onerous variant of the federal estate tax.

Axelrod said he took issue with a reporter's suggestion that more Democrats are upset with the deal than Republicans. He said Republicans are better at "stifling dissent" than are Democrats. But White House spokesman Robert Gibbs was quick to cite criticism of the plan from former GOP vice presidential nominee Sarah Palin and Rep. Michele Bachmann (R-Minn.), among others.

Summers declined to put a price tag on the cost of all the elements of the entire tax cut plan but did concede there'll be "a significant increase in the deficit in 2011." He says the federal budget deficits will be higher in the short run but lower in the long run. He said that's because the tax cut extensions and other provisions have a lifespan of two years or less. He said the plan is still being scored by the Congressional Joint Tax Committee, but estimates of the cost of the agreement run as high as $900 billion.

For the third day in a row, Mr. Obama weighed in on the plan, insisting it's "inaccurate" to say Democrats feel betrayed by his deal with Republicans.

"I think the more they look at it, the more of them are going to say this make sense," said the president in response to a reporter's question during a photo op with President Bronislaw Komorowski of Poland.

Mr. Obama said the agreement has economists revising their forecasts to show the economy growing and unemployment declining.

For a second day, the White House dispatched Vice President Joe Biden to Capitol Hill to make the case to disgruntled House Democrats that the tax cut agreement is the best of option available. Biden delivered the same pitch yesterday to Senate Democrats, but even party leaders in Congress remain unenthusiastic; among them, House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid.

The White House wants to portray the agreement as a done deal that is the only possible hope of avoiding tax hikes on middle class Americans starting January 1.

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Mark Knoller is a CBS News White House correspondent. You can read more of his posts in Hotsheet here. You can also follow him on Twitter here.

[hsr060]

1. It's clear to me unless money finds the right place including clean energy, it will likely go to waste like war, necessary tax cuts.

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2. We are well aware that Extreme Capitalism failed entirely in 2008.
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3. From my perspective, Communism & Extreme Capitalism have several characteristics in common :

(a). Power First, Corruption at the cost of ordinary people !
(b). They hate competition, accordingly there is no progress.
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4. The current hostage deal looks headed for another Bush-era.
The deal based on the broken promises will lead to another Bush-era.
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** How do you pay for tax cuts for the wealthy ?
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1. First attempt : threatening Social Security and Medicare Cut through the deficit panel.
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2. Second attempt : holding the desperate Hostage, say, by the Ransom.
How long will it take for Obama to learn that we think compromise is a synonym for unconditional surrender, or another Bush-era?

[Sigrune1]

Aren't tax liabilities still determiued by taxable income: not by gross income or even adjusted gross income. This being the case, how many small busness owners will be impacted if the wealthy are required to pay their fair share for the benefits they derive from society, inspite of all the wax shelters they enjoy. Remember Leona Helmsley's accurate statement that only little people pay taxes. Any benificiary of unearned inherited wealth or any executive who gains from denying insurance benefits to people who paid to be covered for their medial needs; or those Wall Street executives who produce nothing, but receive outrageous compensation for moving other people's money around, speculating on their rigged games, and sucking off the productivity of American workers. These leeches would fire their accountants if they ever paid as much a percentage of their incomes as their secretaries, the teachers of their children, the law enforcement and firefighter, or any of the other citizens who create the wealth and security of this nation. How much more do they want? Is there no ceiling limit to greed?

[Sigrune1]

Aren't tax liabilities still determiued by taxable income: not by gross income or even adjusted gross income. This being the case, how many small busness owners will be impacted if the wealthy are required to pay their fair share for the benefits they derive from society, inspite of all the wax shelters they enjoy. Remember Leona Helmsley's accurate statement that only little people pay taxes. Any benificiary of unearned inherited wealth or any executive who gains from denying insurance benefits to people who paid to be covered for their medial needs; or those Wall Street executives who produce nothing, but receive outrageous compensation for moving other people's money around, speculating on their rigged games, and sucking off the productivity of American workers. These leeches would fire their accountants if they ever paid as much a percentage of their incomes as their secretaries, the teachers of their children, the law enforcement and firefighter, or any of the other citizens who create the wealth and security of this nation. How much more do they want? Is there no ceiling limit to greed?

[rmonroe401]

Yeah, right adding 95 billion to this years deficit will cause the country to colapse into a double dip recession I call bs on this one. It smells to high heavens. This bill is not what the public wants, it is only what the Republicans and the rich want. Progressive Dems, can you say FILIBUSTER!

[stn_sage]

I love this! Scaring the public in order to pass Draconian police state measures against the public works so well, that now, the Chief Executive uses the same tactic against Congress! In other words, set them up as a target of blame (in the future), in order to get them to respond with 'the herd mentality' and railroad this through, with limited or no thought! This IS government at it's WORST!

[tsigili]

This 900 billion in spending will do nothing to help the economy. It will simply delay what's coming.

[strikerF2]

If the Government would stop spending before it recieves,like the rest of US have to do,and start balancing the budget,they would not be so worried about revenue they have not recieved yet. No business nor family can deficit spend and survive.

[RobAla]

"If they don't pass this bill in the next couple of weeks," said White House economic adviser Larry Summers, "it would materially increase the risk the economy would stall out and we would have a double dip."

So, follow this logic - according to a Washington economic gurus greater taxes on the middle class would cause a double dip stall on the economy. So wouldn't it stand to reason that tax increases on the more wealthy Americans would cause an even greater economic downturn? This business about taxing the rich is nuts. It would certainly cause higher unemployment.

[nearl451]

Besides, most of the package is just KEEPING what is already in place, as insolvent an equation that it represents.

[RobAla]

We must couple this with reducing the size and scope of the federal government.

[nearl451]

Really a silly argument. 10% unemployment is the new norm for the US. THe recovery has already occurred, totheextent it will.

A full "Works" program is the only thingthat will drive unemployment much lower.