- The Washington Times - Thursday, December 6, 2012


President Obama often boils down the issues around his plan to raise income taxes by saying it’s all about the “math,” a subject he doesn’t seem to know much about.

No doubt the White House would argue the last point, but the uncomfortable fact remains that after Mr. Obama’s first four years in office, the unemployment rate remains painfully high and economic growth is slowing. The president’s math clearly isn’t working well, and neither are 23 million Americans who want full-time jobs.

Even a cursory analysis of the mathematical issues at the center of the battle over the “fiscal cliff” raises some fundamental numbers that Mr. Obama doesn’t acknowledge.

One has to do with the political makeup of the House of Representatives, the other with the dreary, subpar growth rate of the recession-leaning Obama economy.

The immovable mathematical reality in the House is that Republicans control it by a decisive margin: 241-191, with two vacancies to be decided.

In the early jockeying over a compromise to break the impasse, the numbers suggest that Mr. Obama’s proposal doesn’t stand a snowball’s chance in what the Founding Fathers called the people’s chamber.

House Speaker John A. Boehner of Ohio has told the president repeatedly that his plan to raise the 28 percent income tax rate to 36 percent and the 35 percent top rate to 39.6 percent “cannot pass the House.”

Mr. Obama has convinced a majority of the voters that Republicans irrationally refuse to raise taxes on people who earn $200,000 or more in order to protect wealthy Americans.

But for Republicans, this isn’t about class or protecting the rich (the top 25 percent of income earners already pay 87.3 percent of all income taxes), and it isn’t about politics. It is all about growth economics — something Mr. Obama and the national news media in general do not understand.

Lower tax rates in general result in stronger economic growth, increased investment, more business formation and more job opportunities. That results in tax revenue growth and deficit reduction.

That was what happened after the Kennedy tax cuts in the 1960s, the Reagan tax cuts in the 1980s, and even in Bill Clinton’s second term when the economy took off after he cut the capital-gains tax rate, fueling the high-tech job boom.

The bitter political polarization that is self-evident in this battle is one we have fought many times. Mr. Obama’s retro-economic ideology comes right out of the New Deal of the 1930s and the Great Depression: higher taxes and government spending for public-works jobs.

It didn’t work then, and it’s not working now.

In 1937, with the economy flat on its back and one-fourth of the nation still out of work, Franklin D. Roosevelt sharply raised tax rates in an effort to bring down budget deficits, the worst medicine for a job-starved economy. We didn’t really begin climbing out of the Depression until World War II and a massive industrialization for the war effort.

The second math equation Mr. Obama doesn’t understand — or even want to acknowledge — is the economy’s weakened condition under his failed public-works spending programs.

It is rarely mentioned in any of the reporting about the fiscal cliff debate, but at the end of 2010, Mr. Obama signed legislation to preserve and extend all of the George W. Bush-era tax cuts for two more years, including the top two rates he wants to raise now.

Even though he won election on a vow to raise income-tax rates for the wealthiest Americans, he agreed to lay aside that idea because the economy was not out of the woods, the unemployment rate remained high and even some in his party said, “This is no time to be raising taxes.”

Politics played a role in his decision, too. Republicans decisively defeated Democrats in the midterm elections, taking control of the House and making major gains in the Senate.

The economy was the underlying reason not to raise taxes at that point. Mr. Obama’s $831 billion stimulus wasn’t working, the claim of “a recovery summer” turned out to be an unfulfilled dream, and he had run out of ideas for creating jobs.

Now, with his re-election under his belt, Mr. Obama is trying again, even though the economy isn’t much better than it was at the end of 2010. In fact, it is weaker in many ways. The economic growth rate was running at about 3 percent in 2010 as Mr. Obama borrowed and spent as if there were no tomorrow, but it has slowed since then in a number of critical respects.

Job creation, never robust to begin with, clearly has weakened as the economy has crept along at an average annual rate of little more than 2 percent over the past four years. Economists now think the rate has slowed further, to a snail’s pace of 1.5 percent in the fourth quarter.

“Labor force participation is lower today than when Obama took office and the recovery began, and factoring in discouraged adults and others working part-time that would prefer full-time work, the unemployment rate is 14.6 percent,” said University of Maryland business economist Peter Morici.

The economy’s declining health is irrelevant at this point to Mr. Obama and his top economic advisers, who are yielding no substantive ground on raising taxes on small-business employers, investors and other high-income sectors that contribute to our economy.

Absent an agreement to do just that, he is “absolutely” ready to take the economy over the fiscal cliff, Treasury Secretary Timothy F. Geithner told CNBC on Wednesday.

However, calmer heads are telling the White House and Democrats on Capitol Hill that they should consider what higher taxes would do to the economy’s precarious health.

“Democrats have to think about what matters more — getting people employed sooner or immediately raising rates,” economist and Obama supporter Joseph Gagnon at the Peterson Institute for International Economics told The Washington Post. “Are they willing to have hundreds of thousands more people linger in unemployment just out of a desire to punish the rich?”

Mr. Obama apparently is willing to do just that, no matter how weak the economy becomes under his presidency or how much pain he inflicts on American workers.

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

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