Liberals frequently point out that Bill Clinton raised taxes in 1993, and the economy did just fine afterward. GDP rose by 2.9% in 1993, 4.1% in 1994 and 2.5% in 1996. Thus from that historical example, they see little risk in raising taxes right now.
But when Clinton signed his tax hikes in August 1993, the economy had averaged a brisk 3.4% annual GDP growth over the previous 18 months. If taxes were to go up in January of 2013, the economy might well have notched averaged growth of less than 2% over the same span given how 2012 is shaping up.
Growth that weak puts the U.S economy in the recession red zone where it doesn’t take much to spark another downturn. As it is, Citigroup thinks letting just the upper-end Bush tax cuts expire would knock 0.4 percentage point from GDP growth.
Hard to see the policy reason for raising taxes right now.