Barack Obama — from his successful campaign for the presidency, to his time in the White House — has established himself as the most prominent advocate for redistributionist economic and tax policy in modern times. And when it came to the tax rates that George W. Bush implemented, Obama was an absolutist. Tax cuts for “the wealthy” had to be repealed. He must have said so on the campaign trail at least a hundred times.
Of course, the big news this week was that Obama capitulated on his promise to raise the tax rates established by George W. Bush. But, Obama insists — as do his dwindling defenders – that he is still dedicated to instituting punitive, redistributionist tax rates on “the wealthy” who don’t “deserve” to keep more of what they earn.
Obama told NPR yesterday:
The issue here is not whether I think that the tax cuts for the wealthy are a good or smart thing to do. I’ve said repeatedly that I think they’re not a smart thing to do, particularly because we’ve got to borrow money, essentially, to pay for them. … [E]ither I allow the recovery that we’re on to be endangered or we make a compromise now.
First, it must be said: The federal government has no money that it does not confiscate from the people. So, as Obama sort-of admits with his use of the word “essentially” in the quote above, the federal government only has to “borrow money” if its unwilling to adhere to fiscal reality. Every family and business (and a few state governments, such as New Jersey) find budget items to cut when revenue is lean. Obama finds that a struggle.
But, as every supply-side economist knows, if you lower tax rates — especially on those who have the highest incomes — you tend to increase revenues to the federal treasury. Abe Greenwald of the Contentions blog notes that this theory has been proven sound in the administrations of presidents Coolidge, Kennedy, Reagan, and Bush (43).
We also learn, as Abe points out, that Obama also believes in supply-side economics. Check out what The New York Times reported Thursday (emphasis mine):
President Obama is considering whether to push early next year for an overhaul of the income tax code to lower rates and raise revenues in what would be his first major effort to begin addressing the long-term growth of the national debt.
Wow! As Abe wrote: “Did you catch that? ‘[To] lower rates and raise revenues.’ ” Yeah. We caught it. As crazy as it sounds to socialists, lowering tax rates will help address the “long-term growth of the national debt.”
Add that nugget from The New York Times to Obama’s quote above to a friendly NPR reporter — that he won’t “allow the recovery that we’re on to be endangered” by raising tax rates on “the wealthy” — and we’re left with only a couple of options to make sense of the matter:
1. Obama knows that allowing “the wealthy” (and everyone else) to keep more of what they earn is essential to economic growth, yet;
2. He would love to punish “the wealthy” and, through government management, redistribute their ill-gotten gains to others who didn’t earn it. But he can’t do it now because the economy tanked — which requires letting those who have earned wealth, and want to create more of it, invest in job-creating and economy-stimulating private-sector endeavors.
Tough luck, Mr. President. You inherited an economy no longer flush enough for your schemes.
This reminds me of one of Margaret Thatcher’s best quotes:
The problem with socialism is that eventually you run out of other people’s money.
Obama, it seems has discovered that “eventually” has arrived.
UPDATE, 11:50 CST: Rick Richman at the Contentions blog writes that Obama is being pushed in a more pragmatist direction from some sensible liberals on tax policy. As Richman writes: “We’ll see” if that comes to pass for the long-term.
Rhetorically, Obama has boxed-in himself something good.