At the heart of Barack Obama's economic proposals -- those that he has promised to deliver if he becomes President -- is the expiration of the Bush Tax Cuts. He promises to "restore fairness to the tax code", and provide middle class tax relief. While we can all applaud the objective of more tax relief, Obama plans on 'paying' for this by allowing the Bush Tax cuts to expire - a punitive measure against the 'rich'.
Republicans, now that Lincoln Chafee is out of the Party, need a unified and strong message against such a stupid move. They were handed one earlier today in the form of an interview with the Nobel prize winning economist Robert Mundell in the Wall Street Journal: An Economist Who Matters. Mundell, Professor of Economics at Columbia University in New York, has served as an adviser to the United Nations, the IMF, the World Bank, the European Commission, several governments in Latin America and Europe, the Federal Reserve Board, the US Treasury and the Government of Canada. He is considered to be the father of the euro - first proposing a common currency in Europe in the 70s -- and won his Nobel Prize in Economic Science in 1999. His world-wide credentials are impeccable.
His interview with the Wall Street Journal's Kyle Wingfield this morning is fascinating. For our purposes, let's focus on what he views as the biggest threat to the world economy at the moment - allowing the Bush Tax Cuts to expire:
Back in America, there's an election going on. There's also been a spate of financial problems, not the least of which is a weak dollar. But Mr. Mundell says "the big issue economically . . . is what's going to happen to taxes."
Democratic nominee Barack Obama regularly professes disdain for the Bush tax cuts, suggesting that those growth-spurring measures may be scrapped. "If that happens," Mr. Mundell predicts, "the U.S. will go into a big recession, a nosedive."
One of the original "supply-side" economists, he has long preached the link between tax rates and economic growth. "It's a lethal thing to suddenly raise taxes," he explains. "This would be devastating to the world economy, to the United States, and it would be, I think, political suicide" in a general election.
..."the most important thing that could be done with respect to tax rates now is to make the Bush tax cuts permanent. Eliminating that uncertainty would be more important than pushing for a further cut -- in the income tax rates, anyway."
To a media and a general public that views the bestowing of a Nobel Prize as the ultimate in credibility, this is pretty hard stuff. Are we to believe what Nobel winner Al Gore tells us, but ignore Nobel winner Mundell?
The interview is full of other interesting observations. Mundell feels that the optimum top tax rate in the United States should be 30%, and that the corporate tax rate should be 25%. He also believes that exchange rates should be fixed, much like they were fixed under Breton Woods until Nixon. He would like to see the EU and the Federal Reserve come to some sort of an agreement to keep the euro (whose idea he originated over three decades ago) between $0.90 and $1.30. Mundell also favors making the dollar the dominant currency against which all other currency would be fixed (he feels that the euro is vastly overvalued at present).
But it's his message on the expiration of the Bush Tax cuts which is most important to us, and to the nation. It's a message that all Republicans, and anyone else interested in our economy, should offer as a constant repeated message:
"The world's pre-eminent Nobel Prize winner in Economics has just told us that if we allow the Bush Tax cuts to expire, it will immediately plunge us into a deep recession - much worse that the situation we are currently slowly crawling out of - and will be disastrous to the world's economy for years to come. That world-wide economic disaster is precisely what Barack Obama has proposed."
Obama's populist message to tax the so-called rich and cut the taxes of the middle class relies solely on age-old class envy. But his dirty little secret is that he's smart enough to know that if the so-called 'rich' don't do well, the middle class doesn't get paid -- and everyone suffers. The GOP must ask people to sit back and think for a moment. To go after the 'rich' in order to punish them, be it people who make $100K, $250K, or a million dollars a year, always hurts the people whose lives depend on those 'rich' people. Those other lives consist of the middle-class people that are directly employed by the 'rich', and middle-class people who are employed by the companies that the 'rich' buy goods or services from. And how about the elderly who rely on the income from retirement funds or stock sales to live, and to help their families? They would be hurt by Obama's so-called "fairness" as well.
Obama's populist claptrap is easy to poke holes it. But the press is going to protect him as much as they can. The GOP must have a unified, consistent, and loud message on issues like taxes. That is the only way that the Republicans are going to be heard above the media by the American people.