Perpetual increases in government spending is all that he has on his agenda.
President Obama told the nation in his June 14 economic policy address in Cleveland that his economic policy plans for a second term would “create strong sustained growth;…pay down our long term debt; and most of all…generate good, middle-class jobs….” He then spent almost an hour describing policies that would do just the opposite.
He did not begin the speech with much credibility on how to achieve those goals. He has been President for almost four years, and has done nothing to generate strong sustained growth, pay down our long term debt, and most of all generate good middle class jobs.
And what he proposed in the speech as all sides bemoaned was just more of the same. But apparently he thinks we are too stupid to recognize that these are the same left-wing extremist policies that have failed us throughout his presidency, and, indeed, throughout world history. Certainly that seems to be true of his continued supporters.
No. 1: Raise Tax Rates
Under President Obama’s plan, on January 1 the top tax rates of virtually every major federal tax will increase sharply, as he has already enacted under current law. That is because the tax increases of Obamacare would go into effect, and the Bush tax cuts would expire, which Obama refuses to renew for singles making over $200,000 a year, and couples making over $250,000. The English translation of that target for the tax increases is the nation’s small businesses, job creators and investors.
As a result, with the Bush tax cuts just expiring for these targeted taxpayers, the top 2 income tax rates would jump by nearly 20%, the capital gains tax rate would soar by nearly 60%, the tax rate on dividends would nearly triple, the Medicare payroll tax rate would skyrocket by 62% for the above disfavored taxpayers, and the top death tax rate would rise from the grave to 55%.
That is all on top of the highest corporate tax rate in the industrialized world at nearly 40%, counting the federal corporate rate of 35% and state corporate rates on average. But under Obama, there is no relief in sight. Instead, Obama is pushing still more tax increases. Under his proposed Buffett rule, the capital gains tax rate would increase by 100%, and would be the fourth highest rate in the industrialized world. Many OECD countries, in fact, impose no capital gains tax at all because it is just another layer of taxation on capital income on top of the corporate and individual income taxes. All of this would leave American businesses uncompetitive in the global economy.
How is this going to produce strong sustained growth and generate good middle class jobs? It is going to do just the opposite, as the multiple tax rate increases would only sharply reduce the incentive for productive activities, such as savings, investment, business expansion, business start-ups, and job creation. That will only encourage even more capital flight from America, and a continued capital strike by the capital that remains.
But in his Cleveland speech, Obama argued that it was the Bush tax rate cuts that caused the recession somehow. He said, “We were told that huge tax cuts — especially for the wealthiest Americans — would lead to faster job growth….So how did this economic theory work out?”
So let’s review how it did work out. Bush cut the top income tax rate by 11.6%, from 39.6% to 35%, and the second highest rate by about 8%, from 36% to 33%. But he cut the lower rates by higher percentages, including slashing the bottom rate by 33%, from 15% to 10%. Then in 2003, he cut the tax rates on capital, reducing the capital gains tax rate by 25% from 20% to 15%, and the tax rate on corporate dividends to 15% as well.
These tax rate cuts first quickly ended the 2001 recession, despite the contractionary economic impacts of 9/11, and the economy continued to grow for another 73 months. After the rate cuts were all fully implemented in 2003, the economy created 7.8 million new jobs over the next 4 years and the unemployment rate fell from over 6% to 4.4%. Real economic growth over the next 3 years doubled from the average for the prior 3 years, to 3.5%.
In response to the rate cuts, business investment spending, which had declined for 9 straight quarters, reversed and increased 6.7% per quarter. That is where the jobs came from. Manufacturing output soared to its highest level in 20 years. The stock market revived, creating almost $7 trillion in new shareholder wealth. From 2003 to 2007, the S&P 500 almost doubled. Capital gains tax revenues had doubledby 2005, despite the 25% rate cut!
There is no economic theory under which the tax rate cuts could cause recession. Even Keynesian economics considers tax rate cuts pro-growth. America cannot afford a President who is this confused and deluded.
But in his speech in Cleveland, Obama even opposed tax reform lowering rates in return for closing loopholes. He said it would be a tax increase on the middle class. But no serious tax reform proposal has ever involved a net tax increase on the middle class, because it would be dead before it even got out of the box.
Indeed, Obama is so ideologically opposed to lower rates that, perversely, what he has done throughout his presidency is the opposite of tax reform. He has expanded the loopholes and increased rates. Those loopholes have included new and expanded welfare tax credits and corporate welfare like his green energy handouts. When his own Simpson-Bowles Commission recommended real tax reform closing loopholes in return for reducing rates, Obama only paid lip service to it, but didn’t lift a finger to advance the proposals.
But higher tax rates with more loopholes reduces economic growth, jobs, and prosperity. The higher rates discourage critical job creating, pro-growth investment, and the loopholes distort markets and promote inefficiency and waste, which is a further drag on growth. Tax reform with lower rates and fewer loopholes, by sharp contrast, promotes powerful pro-growth incentives while reducing the inefficient drag of market distorting loopholes. That is why the bipartisan tax reform of 1986 under President Reagan, when America was under adult supervision, was so powerful in fueling the generation-long, 25-year Reagan boom from 1982 to 2007.
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?