Update: An earlier draft of this post was adapted by The Daily Caller. You can find that article here.
“Lower rates of taxation will stimulateeconomic activity and so raise the levels of personal and corporate income as to yield within a few years an increased – not a reduced – flow of revenues to the federal government.” –John F. Kennedy
“We believe small businesses are the engine of economic growth in this country.” –Barack Obama
The U.S. Treasury Department announced yesterday that the federal budget deficit for the month of October 2012 was $120 billion.
For some fun perspective, Greece, Spain, and Italy produced deficits of about $9 billion, $29 billion, and $87 billion, respectively, in 2011. Read that again. In a single month, the U.S. government accumulated debt nigh tantamount to the entire annual deficits of three precariously recessive Eurozone countries. Of all the countries on Earth, only four—Japan, Britain, France, and Mexico—ran deficits in all of 2011 that exceeded Washington’s shortfall last month alone. Of all the annual surpluses of 2011—from Brazil to Sweden to Saudi Arabia—not one reaches $82 billion, let alone the $120 billion the U.S. spent by Halloween. Of course, these countries all have much smaller GDP, but it still makes for amusing comparison.
By now, you have already heard ad nauseam that Barack Obama has added more than half as much debt as he inherited. You also know that spending is at the highest levels since the Second World War, and yet Millennials are still, in a word, screwed. With the election behind us and the status quo ante more or less entrenched, we should expect the president will finally offer a real, centrist proposal to subdue the debt and unburden a drowning economy in way both sides can agree.
A week past the election, however, President Obama remains obsessed with effecting higher tax rates, which his allies are insisting do not matter. Before the election, the president campaigned on the need to lower corporate taxes in order to spur growth and create jobs. Now freed from the oversight of the electorate, Obama has reneged on this oft–repeated promise and literally doubled down on plans to sap resources from what he has agreed are the engines of our economy. Either the president has “evolved” on the question of private enterprise or he places a minimal premium on political and economic integrity.
Just as edible chemicals are not interchangeable for bodily health, not all forms of revenue have equivalent effect on the economy. Put simply, taxes retard growth, but certain types do so more than others—hence the once bipartisan agreement that corporate taxes should be cut and the fact of different rates for different kinds of income. (By the way, Great State of Illinois, sin taxes are terribly regressive.) As it happens—income taxes, which have already risen at the state level—are particularly associated with lower economic growth than other kinds of revenue, and the U.S. already has an unusually progressive tax system relative to the rest of the developed world. Hence, Republicans have long admitted and embraced the need for more revenue while insisting only that tax rates not be increased. From an economic standpoint, and contrary to the administration’s demagoguery, this makes sense.
We all know that President Obama won the election, and the Democrats gained seats in Congress. The Party of gracious victors was magnanimous enough to remind everyone of this fact, ad infinitum, in case we forgot. It was really very thoughtful of them. But now that the campaign is over, we need our elected officials to get serious about fixing this economy.
Equating Bill Kristol’s musing that the country would survive a tax hike with an endorsement of the idea is not serious. You could survive an amputation, if the party in power insists on it, and we may have to negotiate an arm down to a finger because they have won the upper hand (ahem). But that doesn’t change the fact that the powers that be are obdurately committed to hurting you, and we need to discuss ways that will actually solve problems.
At the end of the day, America still has a spending problem that can never be matched by revenue, and entitlements will start to go insolvent in the next decade. I would love to see the President of the United States reckon with the reality of the mess, and I expect the Republicans in Congress, however weakened, will continue to insist that he do so.