Our president is proudly, willfully ignorant of economics at even the most basic level.
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Moreover, exactly contrary to this misconceived rhetoric, Ryan’s budget would only return federal taxes to their long run, postwar, historical level relative to the economy over the past 60 years at 18% of GDP. What President Obama is proposing is to increase the level of federal taxes well beyond that to new record levels, as I explained last week.
Then, indicating that he doesn’t even understand his own tax proposals, President Obama told the Facebook audience, “Keep in mind, what we’re talking about is going back to the rates that existed when Bill Clinton was President.” Counting the end of the Bush tax cuts, Obama’s proposed phaseout of deductions, the new Obamacare tax on investment, and Obamacare’s increased Medicare payroll tax, the new top federal tax rate would be nearly 45%. State income taxes would put that over 50% in most states.
In his recent national budget speech, President Obama proposed adding another trillion dollars in increased taxes on the nation’s job creators, investors and small businesses. Then he proposed an automatic tax increase trigger that would raise taxes still further in 2014 if “our debt is not projected to fall as a share of the economy.” In his Virginia town hall on April 19, he raised the possibility of increasing the maximum taxable income for the Social Security payroll tax. All of these tax increases would leave the Clinton era tax rates in the dust.
A Tale of Two Budget Deals
Since President Obama doesn’t understand economic growth or taxes, he fundamentally misconceives sound budget policy as well. Restoring robust economic growth is the essential foundation for balancing the budget. As revenues boom along with the economy, government spending reductions would eliminate the deficit relatively rapidly within a few short years. Trying to chase consistently lower than expected revenues because of a weak economy would lead to a vicious circle — America’s downward spiral of deficits, debt, and stagnation.
The foundation for that economic growth is not increased government spending, but incentives for increased production. Those incentives arise from lower tax rates, which enable producers to keep a higher percentage of what they produce, promoting still further production. Reducing unnecessary regulatory costs and barriers further promotes incentives to produce by increasing the net reward for production.
This is why Paul Ryan’s reduced tax rates for both individuals and businesses promote a balanced budget, and lead ultimately to paying off the national debt entirely. In contrast, President Obama record increases in federal tax rates for virtually every major federal tax would have the opposite effect, on the economy and on the budget.
The contrast between the Ryan and Obama budgets is shown by the experience of the two budget deals of the 1990s. In 1990, then President Bush broke his famous “read my lips, no new taxes” pledge that won him the 1988 election, for a budget deal that supposedly reduced spending by $3 for every dollar of tax increases. But by 1992 the deficit, which had stabilized at around $150 billion in the late 1980s, almost doubled to $290 billion because the tax increases pushed the country into a brief recession. President Bush was booted out of office in the 1992 elections as a result.
This is exactly what President Obama is calling for today, only with much, much higher tax rates — an increase of $1 trillion in taxes and more on top of the already scheduled tax increases from terminating the Bush tax cuts, Obamacare, and his proposed 2012 budget tax increases.
But the 1995/1996 budget fight between the Gingrich-led Republicans and President Clinton resulted in a budget balanced much like Ryan has proposed, with all spending cuts and tax cuts to promote the economy. The booming growth as a result cut the 1995 deficit of $164 billion to $22 billion by 1997, followed by 4 consecutive years of surpluses totaling $560 billion. That was the biggest reduction in the national debt in world history.
Confusing the Faithful
But President Obama’s double talk was confusing even the faithful at the Facebook town hall. A very respectful, even worshipful Lauren Hale rose to ask the President:
“At the beginning of your term you spent a lot of time talking about job creation and the road to economic recovery, and one of the ways to do that would be substantially increasing federal investments in various areas as a way to fill the void left from consumer spending. Since then, we’ve seen the conversation shift from that of job creation and economic recovery to that of spending cuts and the deficit. So I would love to know your thoughts on how you’re going to balance the two going forward, or even potentially shift the conversation back.”
Now here is a student who has been paying careful attention to the Professor President. She has even adopted his language perversion of calling government spending investment. She thinks she has learned from the President’s prior lectures that government spending is what promotes economic growth and jobs. But now she is confused, for if that’s the case then why is he talking now about spending cuts and the deficit?
Her problem is Aristotelian logic. Under the new Marxian dialectic, you can both increase government spending to create jobs, until they show up some day, and cut government spending to close the deficit, if polls show that is what you need to do.
A man of faith in a godless age is hitting Americans where it hurts.
Mr. and Mrs. American Spectator Reader, let P.J. O’Rourke talk sense to your kids.
In Britain, defending your property can get you life.
The debacle of this president’s administration is both a cause and a symptom of the decline of American values. Unless Congress impeaches him, that decline will go on unchecked. An eminent jurist surveys the damage and assesses the chances for the recovery of our culture.
It won’t take long for conservatives to scratch this presidential wannabe off their 2008 scorecard.
The American Christmas, like the songs that celebrate it, makes room for everybody under the rainbow. Is that why so many people seem to be hostile to it?
Was the President done in by the economy, or by the politics of the economy?