Economics

Obama's Tax Hikes

Why does the White House want to raise taxes during a recession?

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Leave it to President Obama. On September 8 he announced a $450 billion stimulus consisting of hundreds of millions of dollars in tax cuts. On September 19 he announced he wants a $1.5 trillion tax increase.

The president tried to ease the whiplash by dividing the tax cut and the tax increase into two separate speeches, and by separating them by 11 days. And to some degree the approach fits with Keynesian economic and political orthodoxy. The idea is that the economy needs a short-term boost to end the recession, but that longer-term the focus should be debt and deficit reduction.

This has the added political virtue for the president of giving voters a tax cut going into the 2012 election, while delaying any tax increase until after the election.

On Medicare cuts, the president takes this to the extreme of delaying certain savings until 2017. "Any savings that affect beneficiaries do not begin until 2017," a White House "fact" sheet declares. In other words, until after President Obama has safely completed his hoped-for second term. Convenient, isn't it? How else to explain why they picked 2017 instead of, say, 2016?

The quip about the alcoholic who prays, "Lord make me sober but not too soon" has been repeated by so many columnists that at this point it is a cliché. But as a wise old editor once told me, "They're clichés for a reason." In this case, the reason is that it so accurately describes the situation.

A rational voter might look at the hundreds of millions in proposed tax cuts announced on September 8 and the $1.5 trillion proposed tax increase announced on September 19 and say, you know what, this nets out as a huge tax increase. How about you just leave me alone?

At moments in his September 19 speech, Mr. Obama almost sounded like Steve Forbes, or some other free-market tax reformer. Mr. Obama mentioned that the tax code was more than 10,000 pages long, that the volumes stacked atop each other would be five feet tall, and that America's corporate tax rate is among the highest in the world. I half-expected, half-hoped that the next words out of Mr. Obama's mouth would be a Forbes-like plea to "kill it, drive a stake through its heart, bury it, and make sure it never rises again to terrorize the American people."

But if fundamental tax reform and simplification is the goal—and it's a worthy one—linking it to a $1.5 trillion tax increase is, alas, a sure way to kill it. If the tax reform grows the economy overall and government revenues then rise as a kind of unintended consequence, that's one thing. But listening to Mr. Obama drone on about what's a "fair share," one gets the sense he sees tax reform not as a worthy goal in itself but merely as cover for his big tax increase.

This was clear from Mr. Obama's insistence, in the September 19 speech, "This isn't class warfare." He had already, in the same speech, explained, "I reject the idea that asking a hedge fund manage to pay the same tax rate as a plumber or a teacher is class warfare." He went on, "Nobody wants to punish success in America."

Mr. Obama may want to ask himself why he keeps having to reassure Americans that he's not engaging in class warfare and that he doesn't want to punish success. I don't recall President Reagan or George W. Bush having to reassure Americans on those fronts. What will actually reassure Americans aren't more empty words from Mr. Obama but rather policies that let Americans keep more of what they earn and own long-term, not just until the next election.

Ira Stoll is editor of FutureOfCapitalism.com and author of Samuel Adams: A Life.

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  1. That photo- is he just about to shoot lightning from his fingers?

    1. Alt-text:

      “These are not the tax hikes you are looking for.”

    2. It’s a Tax!

  2. This is off-topic and I think covered in the Morning links, but this part just sounds weird:

    “Cryos’s stores have now reached their peak capacity of 70 litres of semen, and Mr Schou has a waiting list of 600 donors.”

    That is all.

    1. How is that off-topic?

  3. Just like he delayed the smog rules until 2013. Everything gets delayed until he is no longer up for election. The thought of him winning a second term makes my hair stand on end.

    1. maybe (his nomination) was also the moment the smog began to dissipate, along with the oceans receding and the rest of the planetary healing that was going to happen. The old Parkay ads were right – it’s not nice to fool with mother nature.

    2. this is the “kick the can down the road” era of politics. Obama seems to do it more than others.

  4. I would like to say something important here about taxes and deficits, etc. But I was distracted by the slut in the Bad Idea t-shirt ad on the page. I am smitten.

  5. But listening to Mr. Obama drone on about what’s a “fair share,” one gets the sense he sees tax reform not as a worthy goal in itself but merely as cover for his big tax increase.

    His whole presidency predicated on “hope and change” has been a cover to impose socialism. Why should he do something different this time?

    1. Im not taking pie from you…I’m giving pie to me.

    2. Dammit Tinker Bell! I need more Pixie Dust! And did you hide that Magic Wand again?

  6. Could we just spontaneously vote him out of office?

    1. It would be wildly entertaining if the Constitution contained a recall provision. The Tea Party would have launched one probably last fall. We would be having a recall election about now. God would that have been fun.

      1. One thing parlimentarians got right was the vote of no confidence.

        1. Nancy Pelosi would have been Prime Minister. Ponder that for a while.

    2. “Could we just spontaneously vote him out of office?”

      Uh… I’m no constitutional scholar, but I think you have to wait until election day for that.

      In the meantime, there’s always impeachment.

      1. I thought the majority could do anything it wanted under U.S. law.

        1. Well, Obama does “affect” interstate commerce. So maybe something could be worked out.

          1. If the government can violate the Constitution, why can’t We the People? After all, it was drafted to limit them, not us as individual citizens, minding our own business, tarring and feathering idiots in office.

            1. Hold a shadow recall election. That would be entertaining.

              1. That’s a good idea. Let’s do it here.

                Shall BARACK H. OBAMA be recalled (removed) from the Office of the President of the United States of America?

                __X__ YES
                _____ NO

                1. __X__ YES
                  _____ NO

                2. __X__ YES
                  _____ NO

                  1. We need a simpler ballot:

                    __X__ YES

                    Hey, it works in Cuba!

            2. __X__ YES
              _____ NO

                1. The recall election seems to be trending against the president, with 100% of those polled voting for his removal.

                  1. k who’s going to 1600 Pennsylvania to inform him? I vote not me, cause I don’t want to be interrogated.

            3. _____ YES
              _____ NO
              __X__ PRESENT

          2. Don’t forget he also affects the “general welfare” of the US. Think we might got a case?

            1. He’s also interfering with my pursuit of happiness.

  7. Mr. Obama may want to ask himself why he keeps having to reassure Americans that he’s not engaging in class warfare and that he doesn’t want to punish success.

    Perhaps because, deep in his soul, he already knows that Americans know he’s lying.

  8. Thanks to everyone who voted to have black skin as president. Skin color is no qualification for anything, especially office.

    1. In 2008, I was honestly hopeful that the country had made enough progress in race relations to reject this man based on the content of his character, rather than elect him because of the color of his skin.

      1. You’re a dreamer.

        1. You may say that.

        2. yeah, but is he the only one?

      2. this man was elected BECAUSE OF the color of his skin. Good grief, the entire Dem field in ’08 spent debate after debate pointing out the thinness of his resume.

        1. The 2008 election was about the desire for systemic change. The Obama Campaign tapped into that.

          They were able to do that _because_ of the thinness of his resume. If he any kind of record, it would have given people a reason to vote against him.

      3. A common human mental error is to foolishly conclude that the opposite of something bad is something good. I find that liberals do tend to exhibit this more than others.

        So, it’s BAD to disqualify someone based on race so therefore it’s GOOD to qualify them based on race.

        1. Or…He isn’t George Bush so theres no way he can be a bad president am I right?

        2. Or sex. See Obama’s Supreme Court nominees and Bill Clinton’s Attorney General nominees. White males need not apply.

  9. Did Mr. Obama really propose a “$450 stimulus”? Not that I’m a believer in ANY more government stimulus spending at this point, but I don’t think $450 goes as far as he thinks it does….

    1. I could like, totally vote for a $450 stimulus, I mean, like, totally.

    2. Yeah, I caught that too. Think he ment 450 billion dollar.

      1. Maybe he meant $450 per person.

        1. Not when green jobs are going for a couple hundred thou each.

    3. If you had perfect knowledge, you could spend that $450 in precisely the correct manner to usher in a boom economy.

      1. hookers and blow!

      2. hookers and blow!

        1. two nights of partying – thanks squirrels!

        2. HOOKERS AND BLOW,
          HOOKERS AND BLOW.
          EV’RYONE WISHES FOR
          HOOKERS AND BLOW.

          HOW DO YOU MEASURE ITS WORTH?
          JUST BY THE PLEASURE
          IT GIVES HERE ON EARTH.

        3. I want my own stimulus – with blackjack and hookers…ah, forget the stimulus…

          1. I like liquor and whores, liquor and whores…

      3. If you had perfect knowledge, you could spend that $450 in precisely the correct manner to usher in a boom economy. ~ Pro Libertate

        That’s it, exactly, Pro Libertate, the ultimate argument against Krugman Krugnuts and his the stimulus wasn’t big enough.

        Showing that with the Butterfly Effect and a mere handful of dollars, someone could apply the correct stimulus to cascade the economy into a boom, but because know one has universal comprehension, no one can know what amount of stimulus to apply, anywhere, anytime, even up to one monetary short of infinity.

        1. It seems to me that the obvious answer is to push spending decisions down all the way–to the individual.

        2. *…no one …

          *…one monetary unit…

        3. If we could just get all the butterflies in the world to flap their wings simultaneously, maybe it would disrupt the Earth’s orbit and send it spiraling into the sun. That would not only solve the problem but be more likely to succeed than another stimulus.

          1. I say we take the $800 billion and use it to send signals into space, asking superaliens for help.

            1. Well I heard that there was a hoard of space cash being kept by the government. I also heard this space cash can be recreate itself, AND CHECK THIS, not be subject to inflation. Bring on the space cash.

        4. Your argument can be reduced further: No one person can know exactly how to spend money for any other person, simply because that person’s economic situation is completely incomprehensible. It’s why Christmas shopping sucks so much, and why you always get shitty presents.

        5. Showing that with the Butterfly Effect and a mere handful of dollars, someone could apply the correct stimulus to cascade the economy into a boom…

          Hockey stick!

    4. It’d add 11 oz. of silver to your stash…

  10. “Why does the White House want to raise taxes during a recession?”

    I give up. Why?

    How ’bout this: Why do Americans keep voting for socialists and crony-capitalists?

  11. Taxes are so evil

  12. ‘The quip about the alcoholic who prays, “Lord make me sober but not too soon” has been repeated by so many columnists that at this point it is a clich?.’

    Yes, in fact for over 1600 years!

    Give me chastity and continence, but not yet.
    –Saint Augustine 354-430

  13. “I reject the idea that asking coercing a hedge fund manage to pay the same tax rate as a plumber or a teacher is class warfare.”

    Fixed it. If you have ever had the misfortune of receiving correspondence from the IRS, you know that it doesn’t ask for anything without the threat of expropriation, and behind that threat is the threat of violence.

    1. I’ve had the oh so enjoyable experience with the IRS and they were so pleasant!

      (note: preceding message was to ensure I’m not violently raped in the ass again by my government masters.)

      1. STEVE SMITH will be angered to hear this. The IRS is getting in his way. The might find that STEVE will not be deterred from his appointed rounds. This could become ‘uncomfortable’ for the IRS.

  14. “At moments in his September 19 speech, Mr. Obama almost sounded like Steve Forbes, or some other free-market tax reformer”

    Well that sort of thing has always been part of his bait and switch con game.

  15. I don’t think $450 goes as far as he thinks it does….

    MULTIPLIER MULTIPLIES!

  16. Shall BARACK H. OBAMA be recalled (removed) from the Office of the President of the United States of America?

    Attackwatch is watchin’ you.

    1. Just exercising my extraconstitutional rights. The president, of all people, should appreciate that.

  17. “Why does the White House want to raise taxes during a recession?”
    Because Obama is an idiot.

    1. and a liberal but that’s redundant.

  18. REASON MAGAZINE WANTS TO KNOW: “Why does the White House want to raise taxes during a recession?”

    ******************

    Uh, maybe because we are not in a “recession” and we have not been in a “recession” for more than a year?

    We are in a period of consistently-positive GDP growth and rock-bottom inflation but high unemployment, which the “job creators” show no interest in leveraging because:

    (i) demand is so low,

    ii) corporate profits are way up despite bad employment numbers and low demand and

    (iii) there is an endless sea of Third World subsistence wage labor across Asia to suck up any additional capital these “job creators” might come by from deficit-financed tax cuts or otherwise.

    So there’s your answer.

    1. Ill ignore the rest of your ignorant bullshit and hit:
      “(iii) there is an endless sea of Third World subsistence wage labor across Asia to suck up any additional capital these “job creators” might come by from deficit-financed tax cuts or otherwise.”

      “De tuk er JOBZ!”
      Got it.

      1. They didn’t “take” any jobs. The jobs were never here in the first place.

        How many factories did we ever have in this country making iPods or PS3s or clip-on web cams? None. Exactly.

        Here’s an idea for you, “sevo”: next time you say something, try having a point. Y’know, some idea or notion or observation; something with a slightly additive aspect to it in the context of an ongoing discussion. And no, “funny spelling” doesn’t count. You would be unwelcome in a third-grade school cafeteria with your lame attempts at humor. Next time, try something more sophisticated, like a fart-noise soundboard.

        1. “How many factories did we ever have in this country making iPods or PS3s or clip-on web cams? None. Exactly.”

          Wat? How many did we have making Nikes or boats, or heavy equipment?

          NOT none fuckwit. So your idiotic attempt at a point fails.

          Here’s a thought, the next time YOU say something, follow it up with painful suicide.

          1. How about you read what was said before you post moronic quips?

            OP said that any additional tax breaks to the “job creators” go to foreign investment, not domestic. This may lead to lower prices which is not a bad thing, but it’s clear that tax breaks alone won’t increase employment in the USA.

            He did not say “dem azns r tekkin r jawbs! durka derrr!”. Fallacious protectionism was nowhere near the table before you brought it up.

            Apparently your only tool in debating others is a thin book of talking points and strawmen. You could not comprehend the actual argument – two guesses lit up in your head (“…trade?”, “bad?”) so you jumped to the conclusion “Protectionist idiot!”.

            Also, what’s with the excessive insults? The OP is wittier than you, but acting like a hardass in response doesn’t raise your points.

            1. Damn, talk about pots and kettles. I should’ve read more carefully myself – I thought sevo and STFU were the same person.

              Never mind, my comments are reserved to both respectively.

        2. Looks like sevo hit a nerve.

          Cry more.

          1. I have no idea why yachts are no longer built in America.

    2. nope, wrong on all counts

    3. Rock bottom inflation?!? Obviously you grow your own food and ride a bike everywhere if you haven’t noticed any inflation in the last few years.

  19. “Why does the White House want to raise taxes during a recession?”

    Because the White House is stupid, and you can’t fix stupid.

    1. You can’t FIX stupid, but you can shoot it in the fucking head and throw it in the fucking gutter.

    2. I thought the White House was a building. You can fix those.

  20. Maybe I don’t understand economics well enough to make judgments like this, but I hate the plumbline libertarian arguments on taxes. If you think I’m wrong, but you’re respectful enough to not quote the first half of the first sentence and then add “You could have just stopped there”, then please edumacate me.

    Okay, let’s grant that taxes are immoral. I know most libertarians start from this whenever taxes are discussed.

    Does it follow from this that taxes on the very richest people* will invariably stifle growth and innovation? No, it doesn’t. We have empirical evidence to show otherwise – high-income taxes were extremely high from Eisenhower to Carter and the economy grew. Did the Bush tax cuts spur growth? No, they didn’t. They had little effect outside of increasing the deficit and allowing the “job creators” to invest more – abroad.

    I have never seen a libertarian address these liberal talking points satisfactorily. Philosophically libertarians swipe the floor with liberals in discussions about whether taxation is legitimate (it isn’t), but when they conflate ethical judgments (Taxes are wrong) with policy proposals** (streamlining the tax code, which includes tax hikes), they sound like supply-side zombies that think tax cuts are the solution to everything.

    *I know about the economic incidence of taxes – taxes on the rich might also hurt the middle class at least a little bit. But you’d have to be a moron to say taxing the gross income of the richest people is impossible.

    **Policy proposals in a statist paradigm may be fundamentally illegitimate, but still less harmful than their immediate alternatives. For example, if the government places a 10% tax on businesses but leaves one politically connected business untouched, thus allowing it to make more profits, I don’t think it would be an injustice to tax it equally, even if a tax rate of 0% on everyone would be even preferable.

    1. Okay, let’s grant that taxes are immoral. I know most libertarians start from this whenever taxes are discussed.

      Some on here may think that, but I don’t. However, if I’m going to be taxed, I damn well expect value for my money.

      Did the Bush tax cuts spur growth? No, they didn’t. They had little effect outside of increasing the deficit and allowing the “job creators” to invest more – abroad.

      The Clinton tax hikes didn’t spur growth either–like the housing bubble, the economy of the late 1990s was built on a speculative credit bubble that was going to pop eventually.

      We have empirical evidence to show otherwise – high-income taxes were extremely high from Eisenhower to Carter and the economy grew.

      What empirical evidence do you have that the economy grew during the 1970s? Even by the most basic of metrics, the economy experienced at least two recessions from 1973 to 1980, during Carter’s last year in office. That was also the decade the industrial economy began shutting down and moving overseas, and inflation finally reared its ugly head.

      Here’s the point–on an inflation-adjusted basis, the government is spending over 4.5 times what it was fifty years ago. On a per-capita basis, it’s nearly three times what it was fifty years ago. What sort of value are people getting for all that spending? According to Obama and the liberals, our national infrastructure is a shambles, the cost of healthcare has gone through the roof, college tuition costs have risen at an even faster rate than healthcare costs the last thirty years, and everywhere you look it’s not hard to find examples of government workers and government policies at every level wasting taxpayer dollars.

      Quite frankly, given the evidence, the liberals have a lot more to prove that their philosophy is the one that should be guiding the nation right now. If people were getting value for the $11,000+ per year the government was charging them (as opposed to the the $4000 they were being charged in 1960, inflation-adjusted), the Tea Party would have no credibility when its members said government spending was out of control.

      But when you have members of the SEC watching porn instead of nailing the Bernie Madoffs of the world, when you have the Department of the Interior signing off on the defective wellcap that led to a massive oil spill, when you have our courts draconianly enforcing eminent domain a la the Kelo decision, when the illegitimacy rate of blacks rises to 70% in forty years, then liberals should not be promoting the argument that the government should be taking care of everyone from the time they are born until the time they die.

      1. Our country would be so much better off without black people. Hate to say it, but alas, it’s true.

        1. If this is serious – you are fucked in the head. And a troll.

          If this is not serious – you are fucked in the head. And a troll.

    2. You do know that Bush did spend a huge amount of money on wars and other things, to blame tax cuts for budget holes when trillions were spent for war, makes you actually ignore all the facts.

      Another liberal “gotcha” that you assume is indefensible, businesses should be allowed to invest and move their business where they want, libertarians are not normally economic nationalists. Nobody owes you a job.

      1. Nobody owes you a tax cut.

    3. Unemployment was in the 4-5% range during most of the Bush Presidency. Something was spurring growth and employment.

  21. it should say 450 billion in first paragraph?

  22. If you don’t like taxes, leave. You’ve got to pay your fair share.

    1. Says who? The income tax is the greatest fraud ever.

  23. Those guys really do know what they are doing. Very well done indeed.

    http://www.anon-surfing.it.tc

  24. The founders specifically denied the federal government the right to tax income. They understood that taxing economic activity through duties and tariffs was moral and less destructive to the economy at large. Then the progressives f-ed that up with an amendment to the constitution. We need to overturn the 16th amendment.

    The direct election of Senators destroyed federalism. We need to overturn the 17th amendment.

    We also need to reduce the economic footprint of the federal government by 70%.

    This is getting lame.

    Where the fuck is the tooth fairy!?!

  25. The real questions are: Why do Republicans want to balance the budget in a time of recession, and why do they want to raise taxes on the middle class to do so?

    Obama is just offering the sane proposal that, if we’re going to talk about long-term deficits, obviously ending some of the huge tax cuts of the past decade is a painless first step.

    1. The problem is welfare and WIC

  26. Obama is just offering the sane proposal that, if we’re going to talk about long-term deficits, obviously ending some of the huge tax cuts of the past decade is a painless first step.

    A few percentage points is not “huge,” Tony–and the math doesn’t lie. Even bringing back the Clinton tax rates for just people making over $250K (because in ProgressiveLand, $250K = $1 million) would barely make a dent in the current deficit. Obama’s claim that this tax proposal would make more than a smidgeon of an impact can’t even be taken seriously. Any tax increase that would theoretically close the deficit would inevitably hit the middle class the hardest.

    And your claim that simply upping tax rates on the rich would be “painless” is laughable at best. It’s no wonder you’re allergic to spending cuts–you always expect someone else to pay for everything.

    1. You’re right that taxes would have to go up for the middle class to significantly impact the deficit. But gutting Medicare would have the same effect. I’m not as concerned with specifics as I am with the underlying problem, that the vast bulk of economic growth over the past 30 years has gone to the to 0.01% wealthiest, with the bottom 90% stagnating.

      And I’m concerned with the country-destroying conceit that taxes can never, ever go up, because whether the motive is to ruin the country and loot its wealth for the few hundred wealthiest people, that is the result.

      1. I’m not as concerned with specifics as I am with the underlying problem

        You can’t solve the problem without focusing on the specifics.

        And I’m concerned with the country-destroying conceit that taxes can never, ever go up

        And I’m concerned with the country-destroying conceit that spending can never, ever go down, because whether the motive is to ruin the country and loot its wealth for the Free Shit Army, that is the result.

      2. And just to drive the point home, the math doesn’t lie:

        Here’s the point–on an inflation-adjusted basis, the government is spending over 4.5 times what it was fifty years ago. On a per-capita basis, it’s nearly three times what it was fifty years ago. What sort of value are people getting for all that spending?

        If FDR could run the country on $160 billion, inflation-adjusted, then you better start outlining in detail why the current government can’t do the same thing.

  27. “Nobody wants to punish success in America.”

    Maybe, maybe not, but many – starting with Obama – sure as hell do want to milk it as much as possible to fund immoral Progressive social engineering projects.

  28. Why are people complaining about tax hikes?
    Suppose a family is deep in debt. What would you tell them to do? Cut spending and raise income. That’s just what Obama’s doing. It’s not really different…
    Besides, it’s not like the rich can’t afford the tax increase.
    And if any of you say “it’s not the money, it’s the principle,” I will lose all respect for this magazine and the people who read it.

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