- The Washington Times - Thursday, January 26, 2012

ANALYSIS/OPINION:

There was very little that was really new in President Obama’s agenda-setting State of the Union address to the nation Tuesday. Since when is it new for Mr. Obama to call for higher taxes on our economy?

He had little to say about the government’s $15 trillion debt or about the yearly trillion-dollar-plus budget deficits he’s piling up - even though a Gallup poll says the voters place these issues among their top three concerns, along with the economy and jobs.

Nor did he have much to say about the serious troubles millions of Americans still face in the oppressive Obama economy: 14 million unemployed and millions and millions underemployed; real family incomes declining; mortgage foreclosures rising while home values are falling along with home sales; and poverty rates and homelessness increasing stunningly.

Instead, his speech was dripping with a lot of flimflam political bromides and shameless class warfare against the wealthiest Americans. It was red meat for his cheering political base, but not for the much broader electorate that thinks rich people aren’t to blame for Mr. Obama’s weak high-unemployment economy. His anti-growth economic policies are the problem.

“There are 1.7 million fewer jobs in the country than when Obama took office, according to government data,” The Washington Post reported earlier this month.

But now in the fitful fourth year of his failed presidency, Mr. Obama is still campaigning around the country, bashing the wealthy for all of the economy’s troubles, saying the rich are not paying their “fair” share in taxes.

The Internal Revenue Service (IRS) and nonpartisan Congressional Budget Office have figures that show this is not true. The top 20 percent pay the lion’s share of all federal income taxes.

The group that was the chief target of Mr. Obama’s original class-warfare attacks during his first two years were singles making $200,000 and married couples earning $250,000 and up. But that kind of attack didn’t resonate very well. Too many small businesses would be severely hurt by his tax increase, which also threatened their employees with layoffs. A lot of Americans do not consider such incomes rich anymore.

So New York Sen. Charles E. Schumer, the Democrats’ hatchet man, came up with the idea that Mr. Obama should shift his political line of attack against “millionaires and billionaires.” Such is the level of desperation in a White House that has run out of new ideas about how to accelerate an economy that barely grew in the third quarter of 2011.

Mr. Obama bought it and threw out the first pitch in a packed House chamber Tuesday night: The IRS would impose a surcharge on any millionaire whose effective federal tax rate dropped below 30 percent. It would do that by ending all tax deductions and exemptions for such taxpayers, except charitable contributions.

The president is obsessed by what the White House calls the Buffett rule, which the Wall Street Journal says “is rooted in the fairy tale that taxes on the wealthy are lower than on the middle class.”

In fact, the Congressional Budget Office says the effective federal tax rate for the top 1 percent of incomes is around 29.5 percent. That’s double the 15.1 percent paid by middle-class families, CBO says.

The reason billionaire stock picker Warren Buffett pays just 15 percent on most if not all of his earnings - a lower rate than his secretary, he says - is because virtually all of his income comes from capital gains and dividends, which are taxed at a lower rate for a number of good reasons.

The government wants to encourage investment, the mother’s milk of a growing economy, and there is a long, bipartisan tradition of cutting capital gains/dividend rates to do that - with much success.

President Clinton cut it down to 20 percent, and tax revenue from an investment-led employment boom ended up balancing the budget, with a surplus to boot. President George W. Bush cut it further to the present 15 percent rate.

But Mr. Obama isn’t interested in growing the economic pie through tax incentives for increased investment, business expansion and wealth creation. He says he’s interested only in “fairness,” his word for slicing up the existing pie into smaller pieces and redistributing the money to those who have less.

This is a painful prescription for slower economic growth and the severe unemployment levels we are still enduring, about which the president has little or nothing to say.

If you think the Obama economy is going to get a lot better in the coming year, listen to the bearish signal the Federal Reserve Board sent on Wednesday.

After a very lengthy examination of the economy’s grim prospects, the Fed voted nearly unanimously to keep its nearly zero interest rates in place through 2014 because it expects the unemployment rate to remain quite high for the next three years.

Fed forecasters said the jobless rate will stay around 8.5 percent for much of this year and won’t decline to between 6.7 percent and 7.6 percent until the end of 2014. The national unemployment rate is a few tenths of 1 percent below 9 percent, with nearly a dozen states struggling between 10 percent and 13 percent.

So there was Mr. Obama at the House podium on Tuesday night, with no big ideas about how to get the U.S. jobs machine running at full throttle except to call for more spending on infrastructure and vow that he’s not going to back down from his failed, financially challenged clean-energy projects.

OK, the last project at the Solyndra solar-panel plant went bankrupt and cost taxpayers $535 million, but these “investments” will pay off in the decades to come, he says. Sure.

He also called for more public-works spending and even punitive tax increases on manufacturers that he said will boost U.S. manufacturing. But a week earlier, he killed the Keystone XL oil pipeline, which would have put 20,000 Americans to work. Washington Post economic columnist Robert J. Samuelson called Mr. Obama’s decision “an act of national insanity.”

Donald Lambro is a syndicated columnist and former chief political correspondent for The Washington Times.

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