Fox, Hoft distortion: Summers said “increasing taxes on the rich” fuels job growth

Gateway Pundit: “Larry Summers told reporters ... increasing taxes on the rich is a great way to fuel job growth.” In a February 11 post on Gateway Pundit, entitled “Obama Top Advisor Larry Summers: Most Economists Agree Higher Taxes Fuels Job Growth,” Hoft cited Summers' February 9 appearance on the Fox Business Network and claimed that “Larry Summers told reporters yesterday that increasing taxes on the rich is a great way to fuel job growth.” Hoft quoted a Business and Media Institute article which reported that Summers “defended proposed rate-hikes for those making over $250,000.” Hoft concluded by predicting, “It's going to be a long and destructive four years.”

Varney attacks Summers for being “totally wrong” that “raising taxes on the rich” creates jobs. On the February 12 edition of Fox News' Fox & Friends, after playing a clip of the Summers interview, co-host Brian Kilmeade asked guest and Fox Business anchor Stuart Varney to respond to what Kilmeade claimed was Summers' statement that “the economists agree that taxes fuel job growth.” Varney responded by calling Summers “very, very political” and “plain wrong.” According to Varney, “A lot of economists ... will tell you that raising taxes on the rich especially does not create jobs.” Varney later accused Summers again of being “political -- the man is entirely political. Always has been. He is toeing the party line. ... I think he's flat out wrong.” During the segment, on-screen text read, “Tax Hikes Fuel Job Growth?”

In fact, Summers listed measures he argued were more effective than extending Bush tax cut for wealthy

Summers argued other measures would have greater job creation “impact” than extension of Bush tax cut for those making over $250,000. On the February 9 edition of Fox Business Network's Fox Business, co-host Liz Claman asked Summers if it had “been discussed to consider at least holding off on the sun-setting of the Bush taxes for those who make more than 250,000, that higher echelon that you talk about? Because some would argue ... that it is that upper echelon that gives the biggest economic punch when it comes to hiring people.” Summers responded:

SUMMERS: There are people -- of course there are people who argue that, there are people who argue almost anything. But the president's budget, though, is focused on doing things that will have the maximum impact: rewarding people directly for hiring workers, rewarding people directly for new investments in plant and equipment, rewarding entrepreneurs directly by eliminating that zero capital gains tax. Those are the ways that the president believes tax policy can have the greatest impact on demand. And I must say, almost all economists who study these things take that kind of view and would favor supporting current law augmented by a whole range of tax cuts directed at those who are more likely to spend.

Economists agree that extending Bush tax cuts on wealthy would not be effective in spurring job growth

CBO scores extending tax cuts on high-income households as lowest-scoring policy proposal to create jobs. According to a January 14 report, CBO considered policy alternatives for job creation and economic stimulus. The lowest-scoring alternative for both “Cumulative Effects on GDP, 2010-2015” and “Cumulative Effects on Employment” for both the 2010-2011 and 2010-2015 periods were “Reducing Income Taxes in 2011.” This option includes “extend[ing] higher exemption amounts for the [Alternative Minimum Tax]” and extending the Bush tax credits. CBO also reported that “allow[ing] the rate increases for the top brackets to go into effect” would “cost less than would deferring all of the scheduled tax increases, and it would be more cost-effective because the higher-income households that would be excluded would probably save a larger fraction of their increase in after-tax income.” From CBO:

CBPP: Tax cuts for “upper-income people” during “a recession or economic slowdown is a very inefficient way to stimulate consumer spending and to thereby spur economic growth and job creation.” Citing CBO, the Center for Budget and Policy Priorities (CBPP) noted that "[t]he economic evidence is strong that upper-income people have a higher propensity to save additional income that they receive and a lower propensity to consume." Because of this, CBPP reported that “channeling a dollar of federal revenue to them during a recession or economic slowdown is a very inefficient way to stimulate more consumer spending and to thereby spur economic growth and job creation.”

Fewer than 1.3 percent of those who claim small-business income would be affected by expiration of Bush tax cuts to wealthy taxpayers. Despite Claman's claim that it is the “upper echelon that gives the biggest economic punch when it comes to hiring people because in many regards they either run or own the businesses that would then be hiring those people,” according to the Tax Policy Center's table of 2009 tax returns that reported small-business income, 457,000 of those returns -- or 1.3 percent of them -- are in the top two income tax brackets, which include all filers with taxable incomes that would be affected by Obama's proposal to end those Bush tax cuts.