Obama's Obsession with the One Percent

On January 8 in "Stories behind the tax cuts," Kansas City Star columnist Dave Helling began his commentary thus:

Pop quiz: Who's the bigger tax cutter, Barack Obama or Ronald Reagan?

Answer: Obama. The fiscal cliff agreement, signed early this year, cuts expected federal income tax revenue by about $1.8 trillion over the next five years, while the famous supply-side Reagan tax cuts in 1981 cost the government about $1.5 trillion, in inflation-adjusted cash, over their first five years.

In a better world, Republicans would understand this and claim their fiscal cliff victory. Had a Republican president passed such a dramatic federal income tax reduction, he or she would be considered a supply-side saint, not a budget-busting socialist.

Regardless of whether or not Obama is a socialist, there can be no question that he is a "budget-buster." But there are several other things to look at here. First, Helling compares a projection with an historical fact. That hardly seems fair. We know what revenues were in those "first five years" after the 1981 rate cuts. But to say what revenue would have been without the cuts is to credit economic projections with more prescience than they deserve. Economic forecasts, especially those of the government, are often wrong. Else we wouldn't have so much economic turmoil.

Second, the 1981 bill that Reagan signed cut some tax rates that had been in effect since 1965, whereas the fiscal cliff bill that Obama signed on January 2, cut tax rates that had been in effect for less than two full days. Obama's entire first term (except for the final 20 days of it) operated under the "Bush tax rates." In the 2010 lame duck session, Obama himself temporarily extended those rates. And then he made them permanent for about 99 percent of Americans. To compare putting rates back to what they had been less than two days before to slashing rates that had been in effect for 16 years is a stretch. Indeed, the 1981 bill set the top personal income tax rate lower than it had been at any time since 1931. (Verify that at Tax Foundation here.)

As for income tax rates, Reagan was a revolutionary, while Obama is more of a status quo kind of guy, despite all the "change" rhetoric. For 99 percent of Americans, federal income tax rates are the same as they've been for the last ten years. But even though those Bush rates are now permanent, the lapdog media try to portray the fiscal cliff deal as a great victory for Obama.

And another thing, if Mr. Helling is going to judge "who's the bigger tax cutter," he might include the 1986 bill, which cut rates even more than in 1981.

Third, after claiming that with the fiscal cliff deal that Obama deprived the government of more revenue than Reagan had, we come to the third paragraph, which shows a serious misunderstanding of what supply-side economics is about. Supply-side is not about cutting tax revenue, it's about cutting tax rates. Supply-siders argue that cutting rates spurs the economy, which eventually brings in more revenue to the government. Even Obama may have glimpsed the truth of supply-side when he said that raising tax rates in a down economy is a bad idea.

On January 1, the day the Clinton-era tax rates automatically went back into effect, the headline of a report by Peter Schroeder at The Hill read: "CBO: 'Fiscal cliff' deal carries $4 trillion price tag over next decade." On January 4, the CBO reported that the estimated cost would be $600B higher due to debt service, i.e. interest payments. So the projected cost of the fiscal cliff deal over the next ten years is more like $4.6 trillion.

The "price tag" Schroeder referred to is the "lost" revenue that is mainly due to overriding the expiration of the "Bush tax cuts." Schroeder wrote: "The extension of lower tax rates for the bulk of the nation's taxpayers and the addition of a patch to the Alternative Minimum Tax would add roughly $3.6 trillion to the deficit over the next decade, the CBO said."

Lately, President Obama has been saying, ad nauseam, that the one percent at the top should pay "a little bit more." But if the Bush-era tax rates had been allowed to expire for everyone, instead of a measly $600B in new revenue over the next ten years, the feds would have raked in an additional $3.6T. Obama could have had six times the revenue had he included the bottom 99 percent of taxpayers. Having exempted everyone but the One Percent, the president leaves 83 percent of the money on the table, while the lapdogs declare him a master of negotiation and brinksmanship.

But now would be a particularly bad time to start draining an additional $360B per year out of the private sector. Unfortunately, tax hikes were part of the fiscal cliff deal. Not only are rates now higher for the One Percent, the payroll tax holiday wasn't renewed. So now all working Americans have less take-home pay. That can't be good for "aggregate demand," can it?

But it doesn't stop there. Despite having succeeded in confiscating more money from the One Percent through rate hikes, Obama now wants to eliminate their exemptions, which would raise their effective tax rates even higher. Obama wants to make "tax reform" into just another way to get more revenue. But for normal Americans, tax reform is all about simplification and equity, not raising revenue. Real tax reform must be revenue-neutral. (Read Charles Krauthammer on real tax reform at National Review.)

One thing Dave Helling got right is that Republicans should see the fiscal cliff deal as a victory. And the public seems to be siding with the GOP on sequestration, too. The hubbub over sequestration is an attempt by the Democrats to lay the predicate for blaming any downturn in the economy on spending cuts rather than the fiscal cliff tax hikes. Obama will make sequestration's spending cuts as painful as he can.

The One Percent is Obama's own Moby Dick. The very existence of the One Percent offends Obama; it "tasks" him, it "heaps" him. Obama will chase the One Percent round Good Hope, and round the Horn, and round the Norway Maelstrom, and to the Gates of Hell if need be. Obama will not be satisfied until he has once again harpooned the One Percent and flensed every last dollar from its godforsaken, putrefying corpse.

Obama senses that there's still money floating around out there that needs to be put to a higher purpose. And, gentlemen, he means to have that money. And if he doesn't get that money, the doors of the White House will be closed to the public forever.

Jon N. Hall is a programmer/analyst from Kansas City.


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