Why did President Obama want to repeal the Bush era tax cuts on upper income taxpayers? How would the repeal of these tax cuts impact aggregate demand and to what degree? How did the economic conditions in 2010 make such a repeal less likely to take place?

President Obama wanted to repeal the Bush tax cuts on upper income taxpayers in order to decrease the size of the federal budget deficit and also to reduce income inequality. Repealing these tax cuts would amount to an increase in taxes which would decrease aggregate demand. From an economic perspective, any factor that led to a decrease in aggregate demand would be an unwelcome suggestion since a recessionary gap existed leading up to 2010 . However, since the upper income households typically save a greater portion of their incomes than lower income households, the MPC for the former group would be somewhat lower which would limit the impact of such a tax increase in terms of the multiplier.