Obama's plan to tax the rich won't work
(Sent from Flipboard)
Sent from my iPad
Get iDrudgeReport on your iPod Touch, iPhone or iPad free at the iTunes Store:
Sent from my iPad
It's the great mystery of the debt ceiling debate: Why is President Barack Obama so darn adamant about raising taxes? "This may bring my presidency down, but I will not yield on this," Obama told Republicans before dramatically exiting their budget meeting last week.
"This," of course, is his demand that large spending cuts be "balanced" with tax increases on wealthier Americans, entrepreneurs, investors and unpopular businesses such as Big Oil and Wall Street. But why insist on higher taxes in the middle of weakest economic recovery in the post-World War II era?
Wouldn't standard Keynesian economics, much beloved in the White House, actually call for cutting taxes (or increasing spending) to boost aggregate demand?
Doesn't Obama know that even his former chief economist, Christina Romer, says tax increases "will tend to slow the recovery in the near term." Not that things look much better a few years out. The International Monetary Funds sees economic growth below 3 percent through 2016. And Democrat-friendly Goldman Sachs now thinks a double-dip recession is possible even as it lowers its growth forecast and raises its prediction for unemployment.
But Obama's tax obsession becomes understandable when you realize the long game he's playing: Big Taxes to fund Big Government. Decade after decade. See, it's an almost universal belief among left-of-center journalists, economists, policymakers and politicians that Americans must pay higher taxes in coming years to cover the medical expenses of its aging population – not to mention all sorts of brand new social spending and green "investment." Dramatically higher taxes. On everybody. And if we have a debt crisis, maybe those tax increases come sooner rather than later.
And it's not even a secret, really. Here's liberal economics columnist Ezra Klein of The Washington Post:
The reality is that we're going to have higher taxes in the coming years, and beyond that, we're going to have higher taxes than we've traditionally had during periods in which taxes were relatively high.
And liberal economics columnist David Leonhardt of The New York Times outlines a completely implausible scenario — at least to himself — to avoid massively higher taxes:
For taxes to remain where they are, Washington would need to end Medicare as we know it, end Social Security as we know it, severely shrink the military – or do some combination of the above.
How high? Three liberal think tanks recently devised budgets to put the U.S. government on a sustainable fiscal path through 2035. Their plans, collectively, called for Washington to collect an average of 23.6 percent of GDP vs. the post-World War II average of 18.5 percent. To put that in further perspective, the highest level of tax revenue that Uncle Sam has ever taken is 20.9 percent in 1944.
And to reach such a stratospheric level of taxation, these groups are calling for unprecedented tax hikes via millionaire surtaxes, higher taxes on alcohol and tobacco, securities transaction taxes, higher taxes on capital gains, higher taxes on corporations, higher death taxes, carbon taxes, and gasoline taxes. None of which, supposedly, would hurt economic growth. Even worse, all those tax hikes would still fail to balance the budget. And when you move past 2035, taxes would almost certainly need to go even higher.
That is the high-tax future the liberal establishment has in store for America. No wonder Obama rejected his own debt commission last December. It would limit the tax and spending burden to 21 percent of GDP. Neither is nearly enough for the Obamacrats and their successors. Just look at Obama's budget from last February. Over a decade, it never reduces spending to less than 23 percent of GDP and spending is actually higher at the end of the ten-year span than in the middle. And eventually all that spending would need to be paid for via higher taxes. Recall that back in 2009, the White House floated a trail balloon about a instituting a value-added tax to pay for healthcare reform or general debt reduction.
Underlying all this longing for higher taxes is a belief government can't and shouldn't be cut. Nonsense. Both the American Enterprise Institute and Heritage Foundation have devised workable fiscal plans that would keep taxes below 20 percent of GDP. And Rep. Paul Ryan's Path to Prosperity shows how to reduce spending to below 19 percent of GDP by 2040. And rather than managed decline toward a slow-growth, EU-style social welfare state (that even the EU can't afford anymore,) these plans would help keep America growing and living standards rising as they have for decades. Those are high stakes in the debt ceiling debate — and in the battles over taxes and spending in the years to come.
Sent from my iPad
After working hard to compile a list of Obama's rather questionable record of fiscal promises and actual executions, the gist of which is represented best by the violent clash between myth and realty in Christina Romer's "The Job Impact of the American Recovery and Reinvestment Plan" whose epic failure is defined by one simple chart, we were disappointed to learn that Paul Ryan had already done this. And leaving Paul Ryan's politics aside, the facts do speak themselves. They speak even louder when one considers the din raised by the same president who back in 2006 said: "The fact that we are here today to debate raising America's debt limit is a sign of leadership failure. It is a sign that the U.S. Government can't pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government's reckless fiscal policies. … Increasing America's debt weakens us domestically and internationally. Leadership means that 'the buck stops here. Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better." Indeed they do president Obama. Indeed they do.
So without further ado... A brief history of President Obama's fiscal record.
Despite newfound concern with the debt overhang stifling economic growth, President Obama's record falls far short of his rhetoric. Let's review the decisions made by President Obama and Congressional Democrats over the past couple of years, and the disappointing results of their policy choices:
January 20, 2009
President Obama sworn into office
President tells the American people in his Inaugural Address: "Those of us who manage the public's dollars will be held to account, to spend wisely, reform bad habits, and do our business in the light of day, because only then can we restore the vital trust between a people and their government."
Debt Held By Public = $6.31 trillion
February 17, 2009
President Signs into Law the Spending Stimulus
The stimulus adds $821 billion in new spending according to the Congressional Budget Office (CBO).
The White House promises this infusion of spending and borrowing would keep unemployment rate below 8%. As millions of Americans are painfully aware, that promise was broken.
Debt Held by Public = $6.48 trillion
February 26, 2009
President Issues FY2010 Budget
The President's budget adds $2.7 trillion in new debt in FY2010 and imposes $1.4 trillion in new taxes.
March 11, 2009
President Signs FY2009 Omnibus Appropriations Act
The massive spending bill includes 8,696 earmarks at a cost of $11 billion.
The spending bill adds $19 billion in new spending above the baseline – an 8.6% spending increase.
Debt Held by Public = $6.66 trillion
April 29, 2009
Congressional Democrats Pass FY2010 Budget
The Congressional Democrats' budget calls for a $2 trillion debt increase in 2010, and another 8.9% increase in non-defense discretionary spending.
The reconciliation process is abused to later pave the way for health care overhaul to be jammed into law.
Of note: this is the last time Congressional Democrats will bother budgeting.
Debt Held by Public = $6.85 trillion
February 2, 2010
President Issues FY2011 Budget
The President's budget more than doubles the debt; pushes the FY2011 deficit to a new record of $1.6 trillion; drives spending to a new record of $3.8 trillion in fiscal year 2011; and raises taxes by more than $2 trillion through 2020, under the administration's own estimates.
Debt Held by Public = $7.85 trillion
March 23, 2010
President Signs Health-Care Overhaul Into Law
The massive new law adds $1.4 trillion in new spending over the next decade, and over $2.5 trillion once the law is fully implemented.
Despite sluggish economic growth and high unemployment, the law imposes over $500 billion in new tax hikes. CBO Director Elmendorf would later testify that the law would reduce employment by roughly half a percent – a reduction of approximately 800,000 jobs.
Debt Held by Public = $8.18 trillion
April 15, 2010
Congressional Democrats Decide Not to Do a Budget for FY2011
The 1974 Budget Act requires Congress to pass a budget each year by April 15.
In an unprecedented budget failure, House Democrats not only failed to pass a budget – they opted to not even propose a budget.
Debt Held by Public = $8.39 trillion
July 21, 2010
President Signs Financial Regulatory Overhaul Into Law
In addition to heightened regulatory uncertainty, the massive new law adds $10.2 billion in new spending.
Debt Held by Public = $8.69 trillion
February 14, 2011
President Issues FY2012 Budget
The President's budget yet again calls for the doubling of the debt in five years, and tripling the debt in ten years.
The President's budget spends $47 trillion over the next decade, imposes over $1 trillion in new tax hikes, and fails to address the drivers of the debt.
Debt Held by Public = $9.45 trillion
April 13, 2011
President Delivers Speech on Deficit Reduction
The President appears to abandon his own budget by offering a 'framework' that calls for additional tax increases, defense spending cuts, and Medicare price controls – yet lacks sufficient detail to back-up claims of deficit reduction.
Debt Held by Public = $9.65 trillion
April 15, 2011
House Passes FY2012 Budget Resolution
The House-passed budget cuts $6.2 trillion in government spending over the next decade, saves Medicare, strengthens the social safety net, lifts the crushing burden of debt, and spurs economic growth and job creation.
Senate Democrats fail to meet their legal requirement to pass a budget by April 15.
Debt Held by Public = $9.68 trillion
April 18, 2011
S&P Issues Credit Warning on U.S. Debt
The rating agency sets off the latest alarm bells, warning of lawmakers of unsustainable fiscal course.
President Obama has still not proposed a credible budget; Senate Democrats have still not proposed any budget.
Debt Held by Public = $9.68 trillion
May 13, 2011
Medicare and Social Security Trustees Issue Warning of Looming Insolvency
According to the programs' own trustees, the unsustainable future of Medicare and Social Security threatens the health and retirement security of America's seniors.
President Obama and Congressional Democrats continue to engage in a partisan campaign to attack efforts to save and strengthen these critical programs – while offering no serious solutions of their own.
Debt Held by Public = $9.67 trillion
May 25, 2011
Senate Unanimously Rejects President's FY2012 Budget; Vote is 97-0
While the President's plan to accelerate our nation toward bankruptcy is unanimously rejected, the stunt on the Senate floor reveals the bankruptcy of Senate Democrats' ideas.
Senate Democrats have still not proposed any budget.
Debt Held by Public = $9.72 trillion
June 23, 2011
CBO Director Further Discredits President's Fiscal Record
In testimony before the House Budget Committee, CBO Director Doug Elmendorf responds to questions on the President's 'Framework': "We don't estimate speeches. We need much more specificity than was provided in that speech for us to do our analysis."
Debt Held by Public = $9.74 trillion
July 8, 2011
Unemployment Hits 9.2%; Day 800 Since Senate Democrats Last Passed A Budget
A devastating jobs report that shows the unemployment rate at 9.2% coincides with the 800th day since Senate Democrats last thought the federal government needed a budget.
Debt Held by Public = $9.75 trillion
July 11, 2011
Senator Conrad Gives Budget Speech on Senate Floor
On Day 803 since the Senate last passed a budget, Senate Budget Committee Chairman Kent Conrad takes to the Senate floor to deliver a speech about the Senate Democrats' non-existent budget resolution.
Senator Conrad makes the case for imposing over $2 trillion in new taxes, but provides no actual budget resolution and no credible details.
Debt held by Public = $9.75 trillion
July 15, 2011
President Holds Press Conference: "We're Running Out of Time" to Deal with Debt
President Obama tells reporters: "I've got reams of paper and printouts and spreadsheets on my desk, and so we know how we can create a package that solves the deficits and debt for a significant period of time. But in order to do that, we got to get started now."
The American people have still not seen any "paper" or "printouts" of what specific spending cuts the President supports. The American people have still not seen any "spreadsheets" from the White House to corroborate their claims of having offered a deficit reduction plan.
While it's long past time for Washington "to get started now" on tackling our debt problems, President Obama has still not proposed a credible budget, and Senate Democrats have still not proposed any budget.
Debt Held by Public = $9.75 trillion
A commenter to my previous post writes:
Tax increases on the wealthiest would keep rates below Reagan era rates, and add some revenue.
No, they won't. Not even close. Here's why:
Tax Revenues as a Percentage of GDP by Year, 1933-2010
Now, this chart counts all tax revenues. Income taxes, xorporate taxes, excises, tariffs, etc. All of them. It includes the low income taxes of the 1930s, the 90% top tax brackets of the 40s and 50s, the Kennedy and Reagan rate cuts of the 60s and 80s…it's all there.
And what do we notice about this model? Well, a couple of things. First, the highest tax receipts as a percentage of GDP was 20.9%. That was in 1944. In 1945, the percentage was just north of 20%. I think I have a pretty solid–and obvious–explanation of why tax receipts jumped so high in those two years. Sadly, the Nazis are gone and the Japanese seem rather less interested in the Greater Southeast Asia Co-Prosperity Sphere project than they did back then, so a global conventional war seems out of the picture at the moment. Darn our luck!
But the other thing we notice when we look at this chart is that despite top marginal tax rates varying between 28% and 90% since 1945, tax revenues as a percentage of GDP seem to be locked in at about 18%. There is, in fact, only one explanation for the variations–minor as they are–in the revenue percentage since 1945, and that is economic expansion. Irrespective of the statutory tax rates, the single, overriding factor in increases or decreases in the revenue percentage has been economic growth. The percentage rises when the economy expands, and dips when it contracts.
As a practical matter, this chart shows us a very obvious, but little-understood phenomenon, namely, that 18% or thereabouts is the rate at which the electorate consents to be taxed. Think about that for a minute. Dwight D. Eisenhower presided over a system of steeply graduated tax rates with a top marginal tax rate of 90%. He got 18% of GDP in revenue. Ronald Reagan slashed tax rates, simplified the structure into three brackets, indexed for inflation, with a top marginal tax rate of 28%…and got 18% of GDP in revenue.
In the past couple of weeks, three different progrssive policy think tanks have released deficit reduction plans, all of which contained substantial tax increases, and which projected revenues as a percentage of GDP rising to over 23%.
Not. Gonna. Happen.
We know it won't happen, because the American people have told us repeatedly, over the past 60 years, exactly how much revenue they're willing to pay in taxes. You can jack around with tax rates all you want and you'll get 18%. Unless you grow the economy. When the jobs are plentiful and the money is rolling in, the American people get a bit more generous. They'll give you 19%. Maybe, if things are really going swell, 20%. But if the economy isn't rolling hard, you're gonna get your 18%–or less. Assuming you can lift 23% of GDP in tax revenues is just a fantasy.
Because here's the thing: You can't force people to make money. If they can make the same take-home pay working 35 hours per week under the new tax regime as they made in 40 hours per week under the old one, they'll just work 35 hours per week. The more you penalize income, the less desirable additional income becomes. It's almost as if people respond to incentives!
Bonus question 1: If the government collects about 18% in GDP irrespective of the statutory tax rates, what is the electorate telling you the desired statutory tax rate is?
Bonus question 2: If the main factor in increasing tax revenues is economic growth, would economic growth likely be greater or smaller under a regime of lower taxes?
Discuss among yourselves.
Sent from my iPad
Sent from my iPad
Sent from my iPad
Dozens of countries have "Independence Days." November 25th, for example: Independence Day in Suriname. In that instance as in most others, the designation signifies nothing more than transfer of de jure sovereignty and de facto operational control from a distant European capital to a more local regime. 1975 in Suriname's case. They had the first military coup seven years later.
But in America "Independence" seemed as much a statement about the character of a people as a designation of jurisdictional status. The first Americans were British subjects who had outgrown a British king as benign and enlightened as any ruler on the planet. They demanded "independence" not from foreign rulers of another ethnicity but from their own compatriots with whom they had a disagreement about the nature of government. Long before the Revolutionary War, small New England townships governed themselves to a degree no old England towns did. "Independence" is not about the replacement of a king in London with a president in Washington but about the republican virtues of a self-reliant citizenry free to exploit its own potential.
Please, no snickering. The self-reliant citizen? In the damning formulation of contemporary American vernacular, he's history — as in over and done with, fuhgeddabouttim. What's left of that founding vision on this less than Glorious Fourth of July 2011 in the Brokest Nation in History? "You go talk to your constituents," President Obama taunted Republicans on Wednesday, "and ask them, are they willing to compromise their kids' safety so that some corporate-jet owner continues to get a tax break?"
In the Republic of Brokistan, that's the choice, is it? Give me safe kids or give me corporate jets! No corporate aviation without safe kiddification! In his bizarre press conference on Wednesday, Obama made no fewer than six references to corporate-jet owners. Just for the record, the tax break for corporate jets was part of the "American Recovery and Reinvestment Act of 2009" — i.e., the stimulus. The Obama stimulus. The Obama-Pelosi-Reid stimulus. The Obama-Pelosi-Reid-Democratic-party stimulus that every single Republican House member and all but three Republican senators voted against. The Obama–Corporate Jet stimulus that some guy called Obama ostentatiously signed into law in Denver after jetting in to host an "economic forum."
Charles Krauthammer did the math. If you eliminate the Obama-Pelosi-Reid Corporate Jet Tax Break, you would save so much dough that, after 5,000 years, you would have clawed back enough money to cover one year of Obama's debt. Five thousand years is the year 7011. Boy, our kids'll really be safe by then. I see some leftie at MSNBC has just been suspended for characterizing the president's performance on Wednesday as that of a demotic synonym for the male reproductive organ. So I shall be more circumspect and say only that even being a hollow unprincipled demagogue requires a certain lightness of touch Obama can't seem to find.
Speaking of corporate jets, did the president fly commercial to Denver? Oh, but that's different! He's in "public service." A couple of weeks before he flew Air Force One to Denver, he flew Air Force One to Williamsburg, Va. From the White House (well, via Andrews Air Force Base). That's 150 miles, a 30-minute flight. He took a 747, a wide-bodied jet designed to carry 500 people to the other side of the planet, for a puddle-jump across the Potomac.
Oh, but it was for another "economic forum." This time with House Democrats — the ones who voted for the Obama Corporate Jet Tax Break. "Economic forums" are what we have instead of an economy these days.
Aside from the Sultan of Brunei and one or two similar potentates, no other head of state goes around like this. In a self-governing republic, it ought to be unbecoming. But in the Brokest Nation in History it's ridiculous. And the least the beneficiary of such decadence could do is not condescendingly lecture those who pay for their own transportation. America's debt is an existential crisis, and playing shell games with shriveled peas of demonizable irrelevancies only advertises your contempt for the citizenry.
By the way, one way to cut back on corporate jettage would be to restore civilized standards of behavior in American commercial flight. Two weeks ago, a wheelchair-bound 95-year-old woman at Northwest Florida Regional Airport flying to Michigan to be with her family for the final stage of her terminal leukemia was made to remove her adult diaper by the crack agents of the Transport Stupidity Administration. George III wouldn't have done this to her.
Oh, c'mon, do you want to compromise your kids' safety in order to give grope breaks to dying nonagenarians? A spokesgroper for the Transport Stupidity Administration explained that security procedures have to be "the same for everyone" — because it would be totally unreasonable to expect timeserving government bureaucrats to exercise individual human judgment. Oddly enough, it's not "the same for everyone" if you're Olajide Oluwaseun Noibi from Nigeria, who on June 24 got on a flight at JFK with a college ID and an expired boarding pass in somebody else's name. Why, that slippery devil! If only he'd been three-quarters of a century older, in a wheelchair, and dying of leukemia, we'd have got him! He was arrested upon landing at LAX, and we're now going to spend millions of dollars prosecuting him. Why? We should thank him for his invaluable exposé of America's revolting security theater, and make him head of the TSA.
What else isn't "the same for everyone"? A lot of things, these days. The president has a point about "tax breaks." We have too many. And on the scale of the present tax code that's a dagger at the heart of one of the most basic principles of free societies — equality before the law. But, of course, the president is not opposed to exemptions and exceptions and special privileges on principle: After all, he's issued — what is it now? — over a thousand "waivers" for his own Obamacare law. If you knew who to call in Washington, maybe you got one. If you didn't, tough.
But that's the point. Big Government on America's unprecedented money-no-object scale will always be profoundly wasteful (as on that Williamsburg flight), stupid (as at the TSA), and arbitrary (as in those waivers). But it's not republican in any sense the Founders would recognize. If (like Obama) you're a lifetime member of the government class, you can survive it. For the rest, it ought to be a source of shame to today's Americans that this will be the first generation in U.S. history to bequeath its children the certainty of poorer, meaner lives — if not a broader decay into a fetid swamp divided between a well-connected Latin American–style elite enjoying their waivers and a vast downwardly mobile morass. On Independence Day 2011, debt-ridden America is now dependent, not on far-off kings but on global bond and currency markets, which fulfill the same role the cliff edge does in a Wile E. Coyote cartoon. At some point, Wile looks down and realizes he's outrun solid ground. You know what happens next.
That's all, folks!