Special Report

Thelma and Louise Economics

Patty "Thelma" Murray and Barack "Louise" Obama prepare to drive their country and party over a cliff.

By 7.18.12

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Things didn't end all that well for Thelma and Louise, in the eponymous 1991 Ridley Scott film, as they drove off a cliff in a desperate effort to evade legal and moral responsibility for having transformed themselves from non-descript mediocrities into common criminals. An alarmingly similar political saga, starring Democrats in Washington, D.C., is playing out today -- although, unlike Thelma and Louise's crimes, plundering citizens is, unfortunately, only illegal if you were not elected to do so.

Given President Obama's deep love for Hollywood (or at least the money of its residents), one would think that he would be aware of the impact, if you will pardon the obvious pun, of driving off a cliff.

Yet Barack "Louise" Obama along with Senator Patty "Thelma" Murray (D-WA) seem hell-bent on taking the economic version of that same road trip, as if they've never seen the end of the movie and aren't smart enough to figure it out.

In a speech at the Brookings Institution on Monday, Murray, the second-ranking Democrat on the do-nothing Senate Budget Committee and Chairwoman of the Democratic Senatorial Campaign Committee, put her foot on the accelerator of the Democrats' doomed joy-ride, saying that her intent is to prevent any tax rate policy deal in Congress that does not include raising taxes on the "wealthy." By wealthy, Thelma and Louise mean individuals making over $200,000 per year or families earning over $250,000, a standard that Chuck Schumer (D-NY) and a handful of electorally vulnerable Senate Democrats dislike, but one they will go along with when the time comes to cast a vote.

Raising taxes on the two percent of Americans who already pay about half of all federal income taxes is what strikes Democrats as "balanced": "[I]f we can't get a good deal -- a balanced deal that calls on the wealthy to pay their fair share -- then I will absolutely continue this debate into 2013, rather than lock in a long-term deal this year that throws middle-class families under the bus," said Thelma.

It takes a particular sort of mind to argue that not raising taxes on Mrs. Smith represents throwing Mr. Jones under the bus. It takes a particular sort of mind to claim that the "wealthy" do not pay their "fair share" when the top one percent of earners pay more in federal income taxes than do the bottom 90 percent. Read that again; it is not a typo.

And it takes a charlatan to imply to voters that this tax hike will have a significant impact on the federal debt and deficit: Even the White House's own notoriously optimistic assumptions anticipate that the additional revenue due to raising the top two marginal income rates will represent less than seven percent of the coming decade's cumulative deficits.

It is unlikely to do even that.

As the Cato Institute's Dan Mitchell puts it, "Behind closed doors, Obama's people must realize that their class-warfare proposal won't generate as much revenue as projected. Surely they are familiar with the evidence from the 1980s, and they must know that upper-income people have considerable control over the timing, level, and composition of their income." Perhaps Dan, despite being as cynical about politicians of both parties as anybody I know, nevertheless gives Democrats too much credit: Part of the left's "fatal conceit" is their deep belief that history is irrelevant against the force of their wills, their wisdom, and their claims of good intentions.

While noting Thelma Murray's weasel words, "long-term," which would give her a face-saving way to jam on the brakes and accept a several-month deal to allow the debate to be had during the next Congress rather than in the lame duck session, it's safe to say Democrats are playing a dangerous game. Are the brakes on the economic automobile, which is speeding toward the fiscal cliff, strong enough to stop it from going over the edge if Democrats keep their foot on the gas until the last possible moment?

When repeating his tax-hiking goal recently, Louise Obama said, "I'm not proposing anything radical here," but then the definition of "radical" probably has a different meaning to a disciple of Jeremiah Wright and Saul Alinsky than it does to most Americans.

Or does it?

Our elected Thelma and Louise, and other Democratic leaders -- a term I use very loosely -- believe that Republicans will feel so much political pressure from being perceived as defending the "rich," will be so bloodied by the slings and arrows of class warfare, that they will cave.

House and Senate Republicans, to their credit, show no sign of weakening. Nevertheless, guided as Democrats are by polls their view is understandable. In what can best be thought of as a damning indictment of Americans' economic literacy, recent surveys by Rasmussen and Pew suggest that a plurality of our countrymen support the soak-the-rich, beggar-thy-neighbor views of Thelma Murray and Louise Obama, believing that raising taxes on the "rich" would benefit both the economy and "tax fairness." Thelma and Louise economics, however, will do to your job (unless you work in foreclosures) what the movie characters did to their car.

Republicans make a sound argument about the economic impact of raising taxes, particularly on job creation. But they haven't made the argument frequently or well enough, nor are they addressing the "fairness" claim, one that fewer Americans would buy into if they had even the most basic understanding of the true structure of our tax code.

Unlike the issue of Obamacare, where opinion among Independent voters is much closer to the views of Republicans than to those of Democrats, on this issue, Independents -- who are, as you are undoubtedly tired of hearing, the key to winning every major election in America -- fall between members of the two major parties in their view of the Democrats' proposed tax hikes. Unfortunately, and, I repeat, representing an utter failure of Republicans, the media, and our educational system, Independents currently think, by more than a 2-to-1 margin, that soaking the "rich" will make the economy better and the tax system fairer.

The goal for Republicans must be to address this group, giving them a few bite-size pieces of fundamental information, with more focus on the economy than on "fairness." After all, worrying about fairness is a luxury reserved for those who have a job, or those limousine liberals who don't need one.

Regarding fairness, Republicans should make the points that the two percent of Americans whose taxes Democrats want to raise already pay the half of federal income taxes and that most Americans aspire to be in that two percent (or higher); it is outside the character of most Americans to be jealous of our neighbors. Furthermore, tax hikes included in Obamacare are already poised to dramatically impact upper-income earners -- as well as anyone with a pension plan or retirement account that is invested in individual stocks or stock mutual funds.

Or, to put it in sound bites: Are you so sure that the American Dream is dead that you're willing to raise tax rates on upper-middle class people, as if those rates will never impact you? And is it fair to raise the rates on those few Americans who already pay most of the taxes while nearly half of the nation pays zero federal income tax yet are still protected by our military and served by the federal government?

But it is regarding the actual economic impact of Democrats' proposed tax hikes where the GOP must correct Independents' ignorance and remind voters that Thelma and Louise is not a romantic story of unappreciated idealism, but rather a tale of recklessness leading to unnecessary death and destruction.

Even Barack Obama recognized -- back in 2009, when he wasn't so desperate to run on anything but his record, because he didn't have one -- that "you don't raise taxes during a recession" and that doing so would "put businesses in a further hole." Does he now believe that the weakest "recovery" in modern American history is so different from a recession, or that we are so safe from the chances of going into another recession, that raising taxes will actually help the economy?

Or, to put it in a sound-bite: Even Barack Obama knows that you don't raise taxes when the economy is bad. Is your job is safe enough to risk Obama's tax hikes?

A new paper by Drs. Robert Carroll and Gerald Prante of Ernst & Young finds that the higher marginal tax rates being proposed by Thelma Murray and Louis Obama combined with the higher taxes included in Obamacare "result in a smaller economy, fewer jobs, less investment, and lower wages."

Highlights of the paper's findings:

  • "Lower individual tax rates were found to increase the probability of entrepreneurs hiring workers and, for those with employees, the total amount of a firm's wages."
  • While the CBO expects the massive tax hikes to reduce the deficit (though history shows that marginal income tax hikes never generate the expected revenue), "This fiscal shock is projected to result in 2013 real GDP growth of 0.5%, whereas in the absence of this fiscal shock, real GDP growth is estimated at 4.4%. CBO projects that under current law policies, the economy will contract by 1.3% in the first half of 2013 before growing by 2.3% in the second half of 2013, meeting the standard textbook definition of a recession of two consecutive quarters of negative economic growth."
  • "In today's economy these changes would translate into a decline in GDP of $200 billion and employment by roughly 710,000 jobs. Investment, the capital stock (net worth) and real after-tax wages would also fall."

Getting out a strong, effective message that Thelma and Louise economic policy is bad for all Americans is particularly important in the context of Gallup's recent conclusion that "Mitt Romney does not seem to be benefiting from Americans' declining economic confidence." After all, if Mitt Romney cannot sell his economic message, what can he sell -- and what would we want to buy?

Clearly, the Romney team recognizes this, and in a must-watch speech given in Irwin, Pennsylvania on Tuesday, we witnessed a more aggressive, combative Mitt Romney, a Mitt Romney who torpedoed Thelma and Louise economics, a Mitt Romney who caused conservative pundit Michelle Malkin to comment, "I believed in what he was selling: A vision for restoring American greatness and defending success."

Romney told the assembled crowd, regarding Barack Obama's recent words denying that entrepreneurs are responsible for their own accomplishments, that "President Obama attacks success and therefore under President Obama we have less success. And I will change that. I don't think anyone could have said what he said who had ever started a business or been in a business.… This election is to a great degree about the soul of America. Do we believe in an America that is great because of government or do we believe in America that is great because of free people allowed to pursue their dreams and build their futures?" Can I get a "hallelujah!"?

Our very own Thelma and Louise should at long last be worried that there's a new sheriff in town.

When I first saw Thelma and Louise, I was more concerned about the destruction of their car (a 1966 Ford Thunderbird convertible) than about what happened to its passengers who had earned and chosen their fate. I feel similarly today, unconcerned (to put it politely) about what happens to the political careers of Barack Obama, Patty Murray, and their friends, but extremely worried about the havoc to be wreaked on our economy while leftist ideologues, desperate to win re-election in the face of years of publicly-recognized fecklessness, step on the gas as we approach the fiscal cliff.

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About the Author
Ross Kaminsky is a self-employed trader and investor and is a senior fellow of the Heartland Institute. He is the host of The Ross Kaminsky Show on Denver's NewsRadio 850 KOA on Saturday mornings from 6 AM to 9 AM. You can reach Ross by e-mail at rossputin(at)rossputin(dot)com.