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Time To Get Serious, Mr. President   June 30th, 2011
Forget tax increases, it's time to cut spending       

 
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While Obama asks why Congress can't be more like his daughters, I would ask why Obama can't be more like a leader.

Republicans and Democrats have been trying to reach an agreement on how to reduce the deficit as a prerequisite for raising the debt ceiling. Last week it was announced that President Obama would become involved to try to break the logjam. I joked, on Facebook: "Obama's getting involved? Debt crisis for sure. I'm only somewhat kidding. After all, has Obama ever entered a partisan dispute and actually made things better?"

I shouldn't have joked.

Republicans have proposed cutting spending. Democrats have suggested increasing spending and raising taxes. As a bipartisan compromise, Obama has suggested increasing spending and raising taxes. In all seriousness, that's apparently Obama's idea of compromise.

And that means trimming the defense budget, while still meeting our security needs. It means we'll have to tackle entitlements, as long as we keep faith with seniors and children with disabilities by maintaining the fundamental security that Medicare and Medicaid provide. And, yes, we're going to have to tackle spending in the tax code.


In other words, he's suggesting we're all going to have to sacrifice--but without pain. In his vision, the only pain will be burdened by the wealthy.

But that's not reality and we all know it. There's going to be sacrifice, and it's not just going to be on the part of the wealthy. The out-of-control spending has guaranteed that everyone--including the middle class and below--will be participating in the pain and sacrifice. To say otherwise is dishonest.

And please, Mr. President, please stop insulting us with "spending in the tax code." Everyone knows that means "tax hikes" and you insult our intelligence--and make a mockery of yourself--every time you repeat that nonsense phrase that just makes people laugh.

Time to Get serious - Taxes Aren't Going Up

Raising taxes is a non-starter for several reasons:

  1. Raising taxes cannot make a meaningful dent in the deficit.

    The reality is that even if taxes on the wealthy are increased massively, there's not enough money there to make a significant dent in the deficit. It's simply not mathematically possible to get anywhere near covering the government's out-of-control spending by increasing taxes only on the wealthy or on corporations and oil companies.

    The only way a tax increase would have any serious impact on the deficit is if the tax increases were significant and reached deeply into the middle-class. But that's not what Democrats are talking about.

    As long as Democrats are talking about raising taxes only on the wealthy and corporations, we know they're not serious about the deficit--not even using their preferred tool (taxes). At least if they were out there saying, "We need to raise taxes on everybody, even the middle class" then at least, theoretically, the math would add up enough to suggest that they're willing to make difficult political decisions to fix the deficit. But they're not. They want to increase taxes only on the wealthy. There's very little political risk in that proposal but also very little impact on the deficit. It's just for political show and to incite class warfare.

    If Democrats are going to run on the "let's raise taxes during a recession" angle, they should at least have the political courage to propose raising them enough on everybody to actually approach a solution to the problem.

    But raising taxes on the wealthy won't solve the problem. Not even close. It's just an election-cycle class-warfare smoke screen, and an excuse to be stubborn on the debt ceiling.

  2. Raising taxes will hurt the economy.

    Raising taxes on anyone during a recession with such high unemployment would be very destructive to the economy.

    If taxes are raised on the wealthy and corporations, that amounts to raising taxes on the private sector. It's not reasonable to take more money from the private sector and expect it to respond by creating more private sector jobs. If more of their money is being taken by the government, less of it will be available to hire employees.

    If taxes are raised on the middle-class, that amounts to raising taxes directly on consumers. It's not possible to take more money from consumers and expect them to consume more (which would in turn lead to jobs). Rather if you increase taxes on consumers, they will consume less and there will be fewer jobs.

    Regardless of whether Democrats propose punitive taxes on the wealthy (with no mathematical expectation of seriously reducing the deficit) or wish to significantly increase taxes on the middle-class (the only way a tax increase could feasibly come close to addressing the deficit), the outcome will be an even worse economy that would almost certainly generate less GDP, lower tax revenue, and fewer jobs.

    We can't tax our way out of a recession, and that's true whether the taxes are imposed on the wealthy or the middle class.

  3. The votes aren't there.

    Aside from the mathematical fact that raising taxes won't solve our deficit problem and will harm the economy, the simple political reality is that the votes aren't there in Congress to raise taxes. They just aren't there.

    Even if all the arguments made by Democrats were absolutely right (and they're not), there aren't the votes in Congress to raise taxes. So stop wasting valuable time.

We Don't Need to Raise Taxes

Claims by Democrats that we need to raise taxes (on the wealthy or anyone else) are without merit.

It's not like we lowered taxes last year and our deficit spiked. We lowered tax rates a decade ago. From the time tax rates were cut until the recession, federal revenue went up every year but one--even with the lower tax rates. Even though taxes were cut in 2001, revenue increased $530 billion from FY2001 to FY2008.

The problem is that spending increased over twice as much by $1,120 billion.

So the problem isn't too little taxes. The problem is too much spending. Our deficit isn't caused by tax breaks for the wealthy. The problem is that government spending is just completely out of control. It's offensive to suggest that anyone--wealthy or not--should be asked to sacrifice for such a wasteful and proliferate government that can't live within its means.

Cutting Spending Should be Bipartisan

For decades, increasing spending and the size of government has been a bipartisan endeavor. Republicans and Democrats in the presidency, U.S. House, and U.S. Senate have all done it. No-one is innocent of increasing spending and increasing the size of government. The difference is that now Republicans have realized that it's necessary to make difficult and unpopular decisions in regards to cutting spending.

Republicans have had the guts to present ideas and budgets that touch programs that are politically dangerous. Republicans are not proposing tough medicine out of some self-abusive desire to provoke electoral anger at themselves leading into a presidential election. They're not doing it because they want to open themselves to petty political attacks by Democrats.

Republicans are doing it because it's necessary. Someone has to be the adults in the room to actually lead and make tough decisions. And it's painfully obvious that neither President Obama nor Democrats in Congress are going to do it.

Democrats are closing their eyes and pretending that politics as usual will get the job done. It won't. They're focused on typical election-cycle posturing while Republicans are offering substantive solutions to actually address our problems. Democrats are engaging in the same kind of class warfare nonsense that sometimes succeeds at getting them elected, but which has no chance of fixing our precarious fiscal situation.

Obama and Democrats are drawing a line in the sand--demanding tax increases--that will not have any significant impact on our fiscal situation even if they are successful... but which most definitely could cause a dangerous impasse on the debt ceiling debate.

Thanks, Obama, You Just Made it Harder

As I mentioned above, I joked last week about Obama's entrance into the debate guaranteeing a debt crisis. I shouldn't have joked. It might not yet be guaranteed, but Obama made it more likely with his press conference yesterday.

Once again the country awaited some useful input from the president. The country hoped for some leadership and enlightenment from this supposedly brilliant man to broker a difficult bipartisan compromise. Instead, the president helped the Democrats dig in on their position.

Republicans asked Obama to get involved to help address the problem of spending and his participation has now made this an overt battle over tax increases.

Once again, Obama has made a solution even less likely. Not only has he increased uncertainty over the debt ceiling, he has increased uncertainty for job creators trying to determine what their future costs will be and decide whether it makes sense to hire people. Without a tax policy they can count on, job creators will be less likely to hire people.

So I once again must ask whether Obama wants this crisis? I asked this question back in April when he invited Rep. Paul Ryan to his budget speech only to rip him apart. And once again he has inserted himself into a partisan disagreement and only increased the partisanship with class warfare.

Lines have been drawn in the sand. Republicans want spending cuts. Democrats want tax increases. Republicans can't budge on increasing taxes without killing their electoral prospects and Democrats and Obama can't fail to increase taxes without killing theirs.

This has the potential to be an epic disagreement. Both sides disagree on the economic merits of the decision and both sides are politically compelled not to compromise. And the deadline is just over a month away.

Everything is set for a historical political and economic confrontation that may lead to a debt crisis.

And, thanks again to President Obama, we've moved further away from a solution.

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