Let Me Be Clear
Excuse me for borrowing one of the President's oft-repeated phrases. The only difference with my usage is that I WILL actually be clear—and accurate.
There are only a handful of simple facts you need to know to understand the absurdity of Obama's position on the debt ceiling negotiation.
In 2007, the deficit for the entire year was $161 billion dollars. Since Obama took office, he has taken spending from its historical average of around 18% - 20% of GDP to almost 25% in 2009 and north of 24% (estimated) in 2011.
Revenue, despite the President's continual claims, is NOT increased via tax hikes, particularly coming out of a major downturn. Obama's call for such "enhancers" is antithetical to our experiences from major recessions in the 60's, 70's, and 80's (and others, too). To boost taxes now would only further stunt economic growth and therefore lower total receipts to the government.
Post every major downturn since WWII (except this one), pro-growth policies (i.e. tax cuts/reform and other incentives to the jobs-creating class) have driven prolonged periods of robust economic expansion—typically upwards of 10% for a couple years (which then became the new baseline).
In a $15T economy, two years of 8% growth (an attainable level given such a protracted period of repressed activity and pent-up demand) would deliver nearly $2.5T (times the weighted average tax rate) to the U.S. Treasury.
Before even touching one entitlement we could quickly be back to budget surpluses with two simple moves—1) ratcheting spending back down to 20% of GDP (the high end of the historical range). That will save north of $.75T a year. 2) Reforming the tax code to lower rates across the board for individuals and corporations (ideally a single corporate rate of 25% or less and a two-rate structure for individuals somewhere in the neighborhood of 10% and $25%). Additionally, broaden the base further by killing virtually all deductions (you know...the ones Dems say only benefit the rich).
The resultant boost in economic activity would likely swell government coffers by well over $1.25T per year for the succeeding two years, and set a new revenue baseline going forward. The combination of the two could bring about sustained balanced budgets or even surpluses.
So, next time you hear Obama yammering on about raising taxes on the "wealthy" or closing the budget gap by eliminating tax breaks to the oil and gas industry and corporate jet owners (which incidently amount, in total, to less than 10 days of current Obama deficit spending—and could be removed as part of comprehensive tax reform), you'll appreciate the fallaciousness of his argument.
Under President Obama, revenues have collapsed to $14.8 of GDP, well below our historical average of 18.1%. That is no coincidence. It's the direct result of his government-expansionist and growth-inhibiting policies.
The historical blueprint is clear. Will Obama follow it or continue to push an agenda proven time and time again to be a recipe for disaster.
Ironically, his life preserver (i.e. a fighting chance in 2012) is the Republican plan. Clinton was smart enough to recognize that if he wanted to live to fight another day, he needed to co-opt the GOP agenda for a period of time.
So far, Obama has not demonstrated similar survival instincts.
Get him a swiss army knife and some duct tape, stat!
There are only a handful of simple facts you need to know to understand the absurdity of Obama's position on the debt ceiling negotiation.
In 2007, the deficit for the entire year was $161 billion dollars. Since Obama took office, he has taken spending from its historical average of around 18% - 20% of GDP to almost 25% in 2009 and north of 24% (estimated) in 2011.
Revenue, despite the President's continual claims, is NOT increased via tax hikes, particularly coming out of a major downturn. Obama's call for such "enhancers" is antithetical to our experiences from major recessions in the 60's, 70's, and 80's (and others, too). To boost taxes now would only further stunt economic growth and therefore lower total receipts to the government.
Post every major downturn since WWII (except this one), pro-growth policies (i.e. tax cuts/reform and other incentives to the jobs-creating class) have driven prolonged periods of robust economic expansion—typically upwards of 10% for a couple years (which then became the new baseline).
In a $15T economy, two years of 8% growth (an attainable level given such a protracted period of repressed activity and pent-up demand) would deliver nearly $2.5T (times the weighted average tax rate) to the U.S. Treasury.
Before even touching one entitlement we could quickly be back to budget surpluses with two simple moves—1) ratcheting spending back down to 20% of GDP (the high end of the historical range). That will save north of $.75T a year. 2) Reforming the tax code to lower rates across the board for individuals and corporations (ideally a single corporate rate of 25% or less and a two-rate structure for individuals somewhere in the neighborhood of 10% and $25%). Additionally, broaden the base further by killing virtually all deductions (you know...the ones Dems say only benefit the rich).
The resultant boost in economic activity would likely swell government coffers by well over $1.25T per year for the succeeding two years, and set a new revenue baseline going forward. The combination of the two could bring about sustained balanced budgets or even surpluses.
So, next time you hear Obama yammering on about raising taxes on the "wealthy" or closing the budget gap by eliminating tax breaks to the oil and gas industry and corporate jet owners (which incidently amount, in total, to less than 10 days of current Obama deficit spending—and could be removed as part of comprehensive tax reform), you'll appreciate the fallaciousness of his argument.
Under President Obama, revenues have collapsed to $14.8 of GDP, well below our historical average of 18.1%. That is no coincidence. It's the direct result of his government-expansionist and growth-inhibiting policies.
The historical blueprint is clear. Will Obama follow it or continue to push an agenda proven time and time again to be a recipe for disaster.
Ironically, his life preserver (i.e. a fighting chance in 2012) is the Republican plan. Clinton was smart enough to recognize that if he wanted to live to fight another day, he needed to co-opt the GOP agenda for a period of time.
So far, Obama has not demonstrated similar survival instincts.
Get him a swiss army knife and some duct tape, stat!
Posted by Chuck Dietrick at 7/11/2011 2:20 PM 
Categories: Deficit, Obama Performance, Big Government, Economy, 2012 Campaign, Budget
Categories: Deficit, Obama Performance, Big Government, Economy, 2012 Campaign, Budget
think the thing that irks me the most is all of Obama's yammering about the corporate jet tax break that he put in place via the stimulius bill!
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Our president is caught between a rock and a hard place. Surely he has reached the point where he realizes that his spend, spend, spend policy hasn't worked??? Or if he hasn't come to that conclusion on his own, surely he has at least one adviser smart enough to explain reality to him. So what does he do now? Admit failure and buy into the Republican way of thinking? Or refuse to admit publically that his policies haven't worked and continue the ruse? Seems to me he would be able to save face simply by implementing your suggestion about going back to spending levels that we were at 3 years ago. Republicans would be happy....Democrats can still blame all the problems on the Bush administration. Sounds like a good compromise to me!
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Amazing slight of hand; isn't it?
Remember years ago when the Dems placed an enormous tax on the yacht (boat) industry? It almost immediately killed the entire industry. Production dropped to nearly zero and over 80% of all the jobs were lost. So, in their zeal to stick it to the "fat cats" they forgot about all the regular people that make a living by building and servicing those yachts/boats.
There was negligible to no impact on the wealthy. They either had their boats built off-shore, bought used ones, or decided to hold off completely.
A year or two of enacting the luxury boat tax, it had to be repealed to save the industry. Immediately after repeal the industry rebounded and all the workers were rehired.
Simple lesson.
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Cutting spending is an important part of the equation, but stimulating growth via tax reform is another critical piece of the puzzle. The final piece is longer term cost certainty that could be achieved via responsible entitlement reform.
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