The Democrats argue that those making over $250,000 can afford to have their taxes raised. They claim that taxing them at rates similar to what they paid in the Clinton years would bring billions of dollars into the treasury and help reduce the deficit.
Republicans argue that the way to reduce the deficit is to cut spending, not raise taxes. Raising taxes on those making over $250,000 would mean raising costs on many small businesses and doing so would force them to layoff workers and/or not hire new employees. Unemployment would go up, fewer people working would mean fewer people paying taxes, and thus not only would there be no appreciable increase in revenue to the government, economic growth would be suppressed.
This difference between the parties is really the fundamental difference between economic liberals and economic conservatives. Liberals favor higher taxes, conservatives favor less spending. Liberals desire big government with lots of programs and high taxes to pay for them. Conservatives believe we should live within our means, that high taxes stifle economic growth, and that workers and employers should be permitted to keep as much of the money they earn as possible.
With this background in mind this column by economist Robert Samuelson, who writes for both Newsweek and The Washington Post, both of which are liberal journals, is interesting. Samuelson thinks that the extravagant spending of the last two years of the Bush administration and the meteoric increase in spending of the first two years of the Obama administration, did, in fact, keep us from falling into an economic depression. But there's something else deep in the column that bears upon what we said above.
First, though, here's what he says about Bush's TARP and Obama's Stimulus:
When Obama took office in early 2009, the economy and financial markets were in virtual free-fall. By summer, they were not. Only a rabid partisan can think that Obama's policies had nothing to do with the reversal. His forcefulness helped calmed the prevailing hysteria.
True, many recovery policies came from the Federal Reserve, and others -- notably, the unpopular Troubled Assets Relief Program (TARP) -- began under the Bush administration. Obama's contributions included the "stimulus program," a rescue of the auto industry and a "stress test" for 19 large banks. The stress test explored whether banks needed big infusions of capital. Most didn't.
The process was messy, and, although many details can be questioned, the overall impact was huge. Without government's aggressive response, gross domestic product would have dropped 12 percent instead of 4 percent and 16.6 million jobs would have been lost instead of 8.4 million, estimate economists Alan Blinder of Princeton and Mark Zandi of Moody's Analytics. Unemployment would have hit 16 percent. These numbers, too, can be disputed (they seem high to me), but the direction is certainly correct.So, Samuelson believes both TARP and the Stimulus were bungee cords tied around the waist of a plunging economy, but, and here's the crucial point relating to taxes, Obama's proposal to eliminate the Bush tax cuts on those making over $250,000 will be catastrophic:
The right's sweeping indictment of Obama is wildly exaggerated. It is not, however, entirely misplaced.
Confidence is crucial to stimulating consumer spending and business investment, and Obama constantly subverts confidence. In the past year, he's undone some of the good of his first months. He loves to pick fights with Wall Street bankers, oil companies, multinational firms, health insurers and others. He thinks that he can separate policies that claim to promote recovery from those that appeal to his liberal "base," even when the partisan policies raise business costs, stymie job creation or augment uncertainty -- and, thereby, undermine recovery. His health-care "reform" will make hiring more expensive to employers by mandating insurance coverage. The moratorium on deep-water oil drilling kills jobs; the administration's estimate of employment loss is up to 12,000.
Obama's proposal to increase taxes on personal incomes exceeding $250,000 ($200,000 for singles) is the latest example of his delusional approach. It satisfies the liberal itch to "get the rich." Well, the rich and most other taxpayers will ultimately have to pay higher taxes to help close budget deficits. But not now.
Raising taxes in a weak economy doesn't make sense. Just consider this astonishing fact: These affluent households represent almost a quarter of all consumer spending, according to Zandi. Increasing their taxes, he estimates, would cost 770,000 jobs by mid-2012. Richard Curtin, director of the University of Michigan's Survey of Consumers, says his data suggest that uncertainty about the extension of the Bush tax cuts has already caused affluent buyers to cut their spending.
Some small businesses would also be affected, because many (sole proprietorships, partnerships and subchapter S corporations) file their taxes on personal returns. Higher taxes would discourage hiring and expansion. No one knows by how much, but the Tax Policy Center estimates that higher business taxes would affect 725,000 returns with about $400 billion of business income. Some of these are partnerships of doctors, lawyers and accountants. Others are contractors, restaurant owners, florists and plumbers.If this is a sober assessment of Obamanomics and its effects I wonder how bad the Republican critique is that makes it "wildly exagerrated." I don't know how it can be any more of an indictment than this.
Anyway, the Democrats who control Congress have made the uncertainty Samuelson mentions even worse by delaying a vote on whether to extend the tax cuts until after the November election, presumably so that congresspersons running for reelection wouldn't pay a price for their vote at the polls and others who are defeated in the election would not be reluctant to vote for the tax increase in a lame-duck session.
This is why Americans despise government. Congress has time to call Stephen Colbert to "testify" in a hearing, wasting taxpayer money and making a mockery of the process, they have time to adjourn early so they can get back to their districts and campaign, but they don't have time to let businessmen know whether they'll be paying higher taxes next year. With that uncertainty looming over them businesses are not going to be hiring any time soon, so if you're looking for a job and can't find one, thank your local Democratic congressman. Better yet, just vote for his or her opponent on November 2nd.
