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Obama: Tax ‘The Rich’ — Again

Obama has to get the nation moving again or he’s going to join the 9.1 percent of Americans looking for a job in about eighteen months.

by
Peter Roff

Bio

July 2, 2011 - 12:02 am

During the 2008 presidential campaign the Republicans attempted on more than one occasion to make something out of the seemingly large number of times Barack Obama voted “present” while a member of the Illinois state Senate.

The argument never really took root — but it certainly helps explain the president’s behavior, if that’s what you can call it, over the course of the impeding crisis over the debt ceiling.

Obama has failed to take charge, refused — until earlier this week — to use “the bully pulpit,” and has, instead, been something of an invisible man, preferring to leave the whole messing business to surrogates like Vice President Joseph Biden and Treasury Secretary Tim Geithner.

It’s not like he wasn’t warned well in advance that something needed to happen. As Rich Galen points out in his invaluable Mullings.com cyber column, “The Treasury Secretary had warned us last January that the world was going to end far in advance of the conclusion of the Mayan calendar when the U.S. hit the debt ceiling on March 31 of this year. … Except Geithner couldn’t keep his mouth shut and said he could juggle the books to keep paying on the $14 trillion debt until August 2.”

Well, August 2 is rapidly approaching — with both sides digging in.

The sticking point, almost everyone agrees, is the issue of new taxes. Obama and the Democrats say they have to be part of any deal on the debt limit. The Republican position on that is a firm “No.”

As this isn’t a television game show, where you get a hearty “thanks for playing” and a lovely consolation prize — including a version of our home game — when you lose. Someone is going to have to move. Right now the GOP is betting heavily that it’s going to be Obama.

A group of them have gotten behind the Cut, Cap and Balance Pledge as a precondition of any vote in favor of an increase in the debt ceiling. The pressure they’ve applied has been enough to force the leadership in both the House and Senate to commit to the first votes in over a decade on a balanced budget amendment to the U.S. Constitution.

Right now, the idea of Cut, Cap and Balance is driving the train. All the White House and congressional Democrats have to offer in response is the suggestion, the argument, the plea that what America really needs is more revenue flowing into the federal coffers.

Admittedly they are trying to be clever. Obama and his cohorts are, for example, talking about closing so-called corporate loopholes without a corresponding reduction in rates which, to them, isn’t a tax increase. In fact, it’s only a tax increase to the people who pay taxes (note to Tim Geithner: call your office).

In his Thursday press conference, Obama talked about eliminating the tax deductibility of corporate jets — no fewer than six times, says the Wall Street Journal’s James Taranto — in an obvious appeal to the “hate and envy crowd” that you see at, say, your local Democratic committee precinct workers’ meeting.

To Obama, it’s the tax deductibility of corporate jets or grandma’s Social Security check. “Okay Republicans, now choose.” They think it’s a winning argument, except that it isn’t.

First of all, Obama said he wants $300 billion in new revenue over ten years as part of any deal on the debt limit. Leaving aside that it makes little sense to hand that much money to the guy that already bungled the trillion dollar stimulus — remember “I guess things weren’t as shovel-ready as we thought”? — eliminating the deduction for corporate jets would bring in, according to Bloomberg, less than one-tenth of one percent of that. And that’s probably a ceiling rather than a floor.

Here’s why. If corporate jets are no longer deductible then a lot of companies who currently use them — because they are more convenient than flying commercial — might get rid of them. Which in turn means the pilots, co-pilots, air hosts and hostesses, mechanics, and other assorted personnel needed to operate them get the “big adios” rather than a Christmas bonus for providing good service throughout the year. Not to mention the impact on the providers of aviation fuel and the people who work in the factories that make the kinds of jets corporations use — err, used to use before they got too expensive to operate, buy, or replace because Obama took away their tax deductibility without reducing the corporate rate.

This is why taxing the rich is not a rational basis upon which to develop public policy. The only way Obama can makes the federal books move back in the direction of being balanced without starting a civil war on his side of the aisle, however, is to push for just that very thing.

He’s already surrendered once on the issue, when he agreed at the 11th hour to a temporary extension of the so-called Bush tax cuts, despite the fact that his left was screaming.

He has to get the economy moving again or he’s going to join the 9.1 percent of Americans looking for a job in about eighteen months. And the only way to do that is to rein in the size of the federal government and stop the flood of red ink.

“The budget cannot be balanced by tax increases,” says Americans for Prosperity’s Phil Kerpen. “The historical record is unambiguous that, even at very high tax rates, our tax system will not bear more than about 19 percent of GDP in revenues. With spending soaring to 25 percent of GDP, the solution must be where the problem is: on the spending side. The only other alternative to serious spending  cuts would be a new broad-based tax, like the VAT, layered on top of our  existing taxes as a major new revenue source, but that would be an  economically-disastrous recipe for a slow-growth, Europe-like economy.”

Kerpen says, “We can do better. We need to cut spending now.” This appears to be the same conclusion the American people have reached — which may also be why Tim Geithner, according to some recent reports, is looking for the nearest exit.

Peter Roff is a contributing editor at U.S. News & World Report. A former senior political writer for United Press International, he is currently a senior fellow at the Institute for Liberty and at Let Freedom Ring, a non-partisan public policy organization.
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