Just Like Thelma and Louise

According to Michael D. Tanner of the CATO Institute, America isn’t just headed for a fiscal cliff – we flew off it long ago like Thelma and Louise thanks to our out-of-control spending habit. Tanner writes: “federal spending is set to rise to 46 percent of GDP by 2050. When you add in state and local spending, government at all levels will be consuming more than 60 percent of everything produced in this country.

We cannot long remain economically productive or personally free with a government of that size.”

That vast spending increase makes every “fiscally responsible” suggestion by President Obama into a laugh line.  Obama’s $1.6 trillion tax hikes wouldn’t cover even one fifth of the projected deficit; it won’t even cover his proposed spending increases.

As for Social Security and Medicare, which are massive unfunded liabilities, that cost clocks in at a hefty $78.5 trillion to $128.2 trillion. “You could confiscate – not tax but confiscate – every penny belonging to every millionaire and billionaire in America,” says Tanner, “and still not have anywhere near enough money to pay for all that we owe.” And all that assumes that Obama’s assumption that higher taxes create higher revenues is correct. Every time that’s tried, though, tax receipts end up dropping off.

We don’t have a taxation shortage. We have a spending problem. And Obama and the Democrats don’t want to admit it, just like any other addict.

Consider this headline from a Reuters article in The Huffington Post: “Raising Taxes on Rich Won’t Hurt Economic Growth, according to the CBO.   “Allowing income tax rates to rise for wealthy Americans would not hurt U.S. economic growth much (emphasis added) in 2013 …” The CBO did not say, as the headline suggests, that raising taxes on the rich has no negative economic effect. In fact, the CBO actually said that extending the Bush-era rates for all would increase economic growth by 1.5 percent. If, however, the Bush era rates expired for the rich — but were retained for everybody else — economic growth would still increase, but by 1.25 percent.

In other words, raising taxes would result in less economic activity, not more. Herein lies the key to understanding why the left wants higher taxes for “the rich.” To the rich-should-pay-more crowd, the question of whether raising taxes hurts economic growth is less important than the issue of “fairness.

Team Obama wants a gargantuan $1.6 trillion tax hike over the next ten years to finance larger government. And Keith Hennessey, former Bush advisor,  surmised  that the reason the president couched his language in terms of higher tax “revenues” rather than tax “rates” is that he essentially wants both. Raise the top rates and cap or eliminate a number of tax deductions for more revenues. This is going to be a big problem.

However, raising the two top rates would only produce about $440 billion, which is way below Obama’s $1.6 trillion number. So you can almost sense that the president is going to go for higher tax rates, strict limits on itemized deductions, a phase-out of the personal exemption, and tax-rate hikes on capital gains, dividends, and estates.  On top of all that, the Financial Times reports that Team Obama wants a $150 billion business tax hike over ten years.

None of this revenue transfer to the government is remotely pro-growth. And hiking taxes on capital gains and dividends is significantly anti-growth. With Obamacare taxes, the 15 percent cap-gains tax could run up to 23.8 percent and the 15 percent dividend rate could jump to 43.4 percent. And that doesn’t even include the integrated corporate tax rate.

By making capital less valuable and more expensive, you get less of it. And you can’t have entrepreneurial capitalism without capital.  Higher capital costs block business formation, productivity, jobs, and incomes.

Even the editors at the Wall Street Journal  said that  “The reality is that the fastest way to raise revenue is with faster economic growth,” they wrote in their house editorial.   “The feds rolled up another $1.1 trillion deficit for the year that ended September 30, which was the biggest deficit since World War II, except for each of the previous three years. President Obama can now proudly claim the four largest deficits in modern history.   As a share of GDP, the deficit fell to 7% last year, which was still above any single year of the Reagan Presidency, or any other year since Truman worked in the Oval Office.”   “Tax revenue kept climbing,  up 6.4% for the year overall, and at $2.45 trillion, it is now close to the historic high it reached in fiscal 2007 before the recession hit.   Mr. Obama won’t want you to know this, but this revenue increase is occurring under the Bush tax rates that he so desperately wants to raise in the name of getting what he says is merely ‘a little more in taxes.’  Individual income tax payments are now up $233 billion over the last two years, or 26%.”

It is most unfortunate and very telling of the state of our economy that more Americans  used food stamps to buy their Thanksgiving dinner this year than ever before, according to a new report from the nonprofit government watchdog group The Sunlight Foundation.

Usage of food stamps among low and no-income  families has spiked since the collapse of the U.S. financial system four  years ago. According to the U.S. Department of Agriculture, average  participation in the Supplemental Nutrition Assistance Program, or food stamp program, has increased 70 percent, reaching $72 billion last year according to the CBO and  economists have warned that usage of food stamps won’t go down until unemployment improves.

In start contrast to those suffering the pains of our failed economy,  the White House’s Thanksgiving dinner this year   started with the superfood of kale and ended with a glutton’s share of pie,  according to ObamaFoodarama, an independent blog that shares food and nutrition news from the White House.   The  Turkey Day menu—which also includes thyme-roasted turkey, cornbread  stuffing and honey-baked ham—appear to be a fusion of the First Lady’s commitment to healthful living and the president’s well-documented love of pie.

Liberalism breeds mediocrity.  In fact, it’s a requirement.  Perhaps that helps explain how the current occupant of the White House got re-elected.

 

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