Free Markets, Free People

Daily Archives: April 14, 2011

Kristof–America needs higher taxes

Needs?  America needs higher taxes?   Really?  According to Nicholas Kristof, that’s exactly right:

President Obama in his speech on Wednesday confronted a topic that is harder to address seriously in public than sex or flatulence: America needs higher taxes.

Maybe I get hung up on the meaning of words to darn much but “needs” isn’t one I’d link with “more taxes”. 

What America needs is a profligate government to cut spending – dramatically.  That’s its primary need right now.

Oh, and check out this bit of lazy and fallacious “correlation is causation” nonsense Kristof runs at those ignorant enough to buy it:

There is no single reason for today’s budget mess, but it’s worth remembering that the last time our budget was in the black was in the Clinton administration. That’s a broad hint that one sensible way to overcome our difficulties would be to revert to tax rates more or less as they were under President Clinton. That single step would solve three-quarters of the deficit for the next five years or so.

The last time our budget was in balance was because a Republican Congress put some budgets together that actually ended up giving us a surplus.  What Clinton did was sign the bill.  Secondly – it wasn’t because he had high tax rates that the surplus happened.  It was because revenue was up from a booming economy.

Kristof goes off into some pretty bizarre thinking out  loud in his piece .  And he tries to address three “fallacies” used in the discussion today, thinking he bolsters his claim that America needs tax increases (he uses the discredited “Medicare is cheaper to administer than private insurance”.  Yeah?  And it also has waste, fraud and abuse in the $60 billion range each year – so how cheap is it really?). 

My favorite:

Low tax rates are essential to create incentives for economic growth: a tax increase would stifle the economy.

It’s true that, in general, higher taxes tend to reduce incentives. But this seems a weak effect, often overwhelmed by other factors.

Were Americans really lazier in the 1950s, when marginal tax rates peaked at more than 90 percent? Are people in high-tax states like Massachusetts more lackadaisical than folks in a state like Florida that has no personal income tax at all?

Tax increases can also send a message of prudence that stimulates economic growth. The Clinton tax increase of 1993 was followed by a golden period of high growth, while the Bush tax cuts were followed by an anemic economy.

Back to correlation is causation.  High taxes = high growth, low taxes = low growth just because the economic cycles happened to coincide with those particular policies?  Of course there are any number of instances when the opposite is true.   Again, the Clinton tax hikes were in the middle of a booming economy, so people succeeded despite the government raising taxes.   We also know that we were spiraling down economically when the Bush tax rates were enacted.  But in neither case did the increase or decrease in taxes have much to do with the overall economy.

As for the “lackadaisical” riff, you’ll have to ask Kristof about that, but here’s a guess – if someone was looking at establishing a business in either MA or FL, given the tax rates, which state do you suppose would find favor (among other considerations) on the pro side of “taxes?”

You have to love the waive off of his initial “it’s true that … higher taxes tend to reduce incentives”.  Well, duh!  And if taxes are too high people do what?  Look elsewhere where the incentives are more positive.  So given that which is “true”, tell me again why America “needs” more taxes?



Obama’s speech on deficit reduction–we can have our cake and eat it too (and the rich will fund it)

I’ll skip right to the bottom line – Obama’s speech yesterday was an uninspiring restatement of the classic liberal tax and spend ideology that essentially says government is good and big government is better.

Once again to give his “4 trillion in deficit reduction” context “the chart” is offered:

original deficit


4 trillion still leaves trillions in deficit spending over the next 10 plus years.   And notice the trend as we head toward ‘19.  That’s right – the impact of ObamaCare.  I don’t remember a word about that particular program being on the table.  4 trillion in deficit reduction doesn’t answer the mail as far as I’m concerned because it means we continue to do more deficit spending and roll up more staggering debt.  Had he talked about 4 trillion in debt reduction I might have taken him more seriously.

Essentially Obama said the same thing every other big government liberal has said for the decades it has taken us to get in this shape – let us raise taxes to pay for this mess we’ve gotten ourselves into and we promise to make it better. Trust us.

How many times must we hear this before we finally wake up to the fact that it isn’t going to happen that way?  Raising the taxes on the rich isn’t going to curb spending.  Only curbing spending does that.  And while I saw a whole bunch of hand waiving about that in the speech, I’ve seen that in countless other speeches by politicians who claim the same.

Obama’s speech also was an attack on the GOP plan, and an establishment of the “granny will be eating cat food if they get their way” narrative again.  Only the left can be compassionate in the proper way.  The right?  It hates you and wants to kill you.

He even went as far as to call the recent plan by Paul Ryan “unserious”.  Obama additionally was completely disingenuous at one point, pretending that the only thing that Republicans were interested in cutting was spending in the “12% discretionary spending” side of things.   Of course, as I’ve been telling you, these CRs only address that sector of spending, the rest – entitlements – running on automatic until each are addressed separately. 

Obama wants us to believe we can afford everything at about the same level as we have it now if we’ll just tax the rich and “eliminate waste”.  Of course his tax the rich plan would add about $32 billion in revenue a year to projected budgets and deficits in the trillions.  If you’ve never been a fan of fuzzy math, then don’t take a deep look at Obama’s numbers.

Obama wants to you to believe that we can afford everything.  That’s utter nonsense, but what it does is a) establish the ideological basis for the size of government and b) claim that size of government we have now is necessary. 

For instance:

A 70% cut to clean energy.  A 25% cut in education.  A 30% cut in transportation.  Cuts in college Pell Grants that will grow to more than $1,000 per year.  That’s what they’re proposing.  These aren’t the kind of cuts you make when you’re trying to get rid of some waste or find extra savings in the budget.  These aren’t the kind of cuts that Republicans and Democrats on the Fiscal Commission proposed.  These are the kind of cuts that tell us we can’t afford the America we believe in.  And they paint a vision of our future that’s deeply pessimistic.

Deeply pessimistic or startlingly realistic?  I see it as the latter.  Let’s just take one issue he mentions above.  Education.  A “Constitutional” role of government?  Not that I know of.  And, here’s the reality:


What you see charted there is utter failure.  But the cost?  Through the roof.  We can’t afford a “return on investment” like that – yet Obama is ready to tax the rich and throw even more money down the federal education rat hole.  Want to cut the deficit?  Cut the Department of Education and leave the schools to the states and local communities.  We. Can’t. Afford.  It.  And obviously big brother hasn’t a clue.

Obama mentions tax reform.  But not as you or I would understand it.   When most speak of tax reform they’re talking about lowering the rates and broadening the base.  That’s not at all what Obama is talking about.  Tim Carney analyzes that:

For Obama, there are no rate cuts — in fact, there are rate increases. But more revealing, the only "loopholes" he wants to kill are those with which he disagrees.

Obama has created dozens of tax credits and tax deductions aimed at shaping the economy in his image. Obama’s supposedly "serious" talk about the deficit never proposed to eliminate his own tax credits. He also never touches other tax credits that reward the behaviors he likes, even at the expense of the economy and tax revenue — like the ethanol-blending credit.

Obama clearly sees the tax code not simply as a way to collect revenue, but as a way to modify behavior. The only "loophole closing" he has proposed in recent months is even more discriminatory than the loophole itself: Obama doesn’t want to end the "production tax credit" that applies to coal mining, manufacturing, forestry, and oil and gas drilling — he just wants to kick oil companies out of the club that benefits from this tax credit.

He certainly isn’t proposing an end to tax credits for wind and solar energy or electric cars. These are the "investments" that will help us "win the future."

Maintaining and expanding such favoritism in the tax code — and he’s certain to insist on new and extended tax credits next year — is the opposite of "reform." But using words to mean something they’ve never meant before is standard fare for this administration.

On that score, Obama deliberately conflated spending and tax breaks Wednesday. He called for us to "reduce spending in the tax code."

While "spending in the tax code" might sound odd, it actually exists. For instance, the "Investment Tax Credit" for renewable energy is available to corporations even if they owe no taxes, and is often paid in the form of a check from the U.S. Treasury to those companies that are doing what Obama wants them to do. The Earned Income Tax Credit is the poor-man’s version of this — a welfare payment from the Internal Revenue Service.

But Obama wasn’t talking about eliminating these "tax expenditures." When he spoke of lowering "spending in the tax code," it was in the context of his desire to raise rates for upper-income Americans. Under Bill Clinton, the top tax rate was 39.6 percent, but today it’s 35 percent. That extra 4.6 percent of income that a successful American gets to keep — to Obama that counts as "spending" by the government.

The only way to understand the continued attack on the rich by this administration is found in Carney’s last line – “Obama … counts that as “spending” by the government”.   It’s a premise as old as autocratic rulers everywhere – everything belongs to the sovereign (king, state, dictator) and you’re allowed to keep what the sovereign allows you to keep by his or her grace and benevolence.

Taxes should fill a single function – provide the revenue necessary to fund a Constitutional government.  What it shouldn’t be is a method of granting favors or “modify behavior”.  But that’s precisely what ours has become.  Obama is fine with that.

That brings me to the throw away line of the entire speech:

More than citizens of any other country, we are rugged individualists, a self-reliant people with a healthy skepticism of too much government.

Not if this guy and the left have anything to do with it.  In fact Obama spends the entire speech telling us why we’re not self-reliant and need government to save us from ourselves and help us throughout our lives.

It is the usual double-talk combined with classic liberal ideology that says government should play a major role in all our lives and we must make the sacrifices necessary (and collectively) to enable the vision the anointed have set out for us.

Anything else is, well, “un-American”.