Free Markets, Free People

Daily Archives: August 23, 2011


Destroying the “taxing the rich is the solution” myth

If you listen to Democrats, all we need to do to solve the debt and deficit problem is to let the Bush era tax rates expire and raise the tax rate on the rich.  We’ve had Warren Buffet, among others, saying “hey, tax me more, I can afford it”.  And, of course, those standing their ground on principle saying revenue isn’t the problem and tax increases aren’t the solution are roundly condemned for being greedy and protecting the rich.

Well what if we increased the taxes on the rich?  What if we increased them dramatically?  Is our deficit problem likely to be solved?  The answer, of course, is “no”.  And here are the numbers:

“Even taking every last penny from every individual making more than $10 million per year would only reduce the nation’s deficit by 12 percent and the debt by 2 percent,” the non-partisan Tax Foundation’s David Logan writes.

“There’s simply not enough wealth in the community of the rich to erase this country’s problems by waving some magic tax wand,” said Logan.

Rest assured you’d only get one shot at all the money as well.  The  next year the majority of the rich — and that most likely would include Warren Buffet — would find ways to hide their income from such a level of taxation.  Human Nature 101.

So 12% of the deficit and 2% of the debt with 100% taxation.  Sound like a solution to you?  Of course not.   How about raising taxes in general,  good idea right now?

If you said, “no”, you’re in good company:

The majority of economists surveyed by the National Association for Business Economics believe that the federal deficit should be reduced only or primarily through spending cuts.

The survey out Monday found that 56 percent of the NABE members surveyed felt that way, while 37 percent said they favor equal parts spending cuts and tax increases. The remaining 7 percent believe it should be done only or mostly through tax increases.

Whether the president likes to admit it, we’re in danger of a double-dip recession, and one way to guarantee it is to raise taxes during such an unstable time as now.  Obviously if taxes are increased on the rich, it won’t be 100%, so the impact on the debt and deficit are likely to be minimal at best.  And it would be an action counter to what economists believe to be the best approach to avoiding a double-dip.

That most likely means that Democrats will continue to pursue such an increase with a single-minded purpose.  Or, in short, they still don’t get it — it’s the spending, stupid.

~McQ

Twitter: @McQandO


4 Trillion in debt added under Obama’s term

Deficit spending has risen faster under Barack Obama than any other president in history.  That’s not to say other presidents weren’t in the red during their administrations, but in the case of Obama, its over 4 trillion dollars in less than a single term

The latest posting by the Treasury Department shows the national debt has now increased $4 trillion on President Obama’s watch.

The debt was $10.626 trillion on the day Mr. Obama took office. The latest calculation from Treasury shows the debt has now hit $14.639 trillion.

It’s the most rapid increase in the debt under any U.S. president.

The national debt increased $4.9 trillion during the eight-year presidency of George W. Bush. The debt now is rising at a pace to surpass that amount during Mr. Obama’s four-year term.

The immediate problem isn’t about taxes or revenues, “it’s the spending, stupid!”  Byron York echoes the point:

It’s conventional wisdom in Washington to blame the federal government’s dire financial outlook on runaway entitlement spending. Unless we rein in Social Security, Medicare and Medicaid, the conventional wisdom goes, the federal government is headed for disaster.

That’s true in the long run. But what is causing massive deficits now? . . . The bottom line is that with baby boomers aging, entitlements will one day be a major budget problem. But today’s deficit crisis is not one of entitlements. It was created by out-of-control spending on everything other than entitlements. The recent debt-ceiling agreement is supposed to put the brakes on that kind of spending, but leaders have so far been maddeningly vague on how they’ll do it.

Precisely.  When treating a badly wounded person the immediate need is to stop the bleeding, not treat them for heart disease.  Once the bleeding is stopped, then you can worry about their heart and future treatments.

The spending has to stop.   And President Obama is not the man to do that.  He blames his spending on everyone but himself which indicates to many that he has no intention of slowing it down:

Mr. Obama blames policies inherited from his predecessor’s administration for the soaring debt. He singles out:

  • "two wars we didn’t pay for"
  • "a prescription drug program for seniors…we didn’t pay for."
  • "tax cuts in 2001 and 2003 that were not paid for."

While there is some truth to what he points too, the last is nonsense unless you believe the government has first claim to your earnings.  Those aren’t tax cuts, they’re tax rates.  They’ve been in place for almost 10 years for the first and eight for the second.  Tax rates are changed all the time, but until recently they’ve never been referred too as “tax cuts … that were not paid for”.  Also not mentioned in Mr. Obama’s litany is TARP – something he voted for – and the trillion dollar stimulus bill, not to mention the new health care law which analysis now shows bends the cost curve up.

Just as this economy is all his, so is the 4 trillion in borrowed money he’s spent during his term to little or no effect during his term.  And the budget he submitted to Congress this year, the budget that was rejected 97-0, indicated he still doesn’t understand the spending has to stop.

Our debt now stands at 97.6% of our GDP.  That’s default territory.  Yet there are those who have attacked Standard and Poors for downgrading their rating to reflect that reality.   This is serious business that effects or will effect everyone if it isn’t stopped.   GOP candidates need to concentrate on the immediate problem and announce and run on their plan to stop the bleeding.

~McQ

Twitter: @McQandO