President Barack Obama (D), addressing the need for members of Congress to compromise on raising the federal debt limit, says we need to “pull off the Band-Aid” and “eat our peas” . . . whatever that means. Tortured metaphors notwithstanding, what I’d really like from the president is some competent leadership on our economic policy. Even if we can’t have that, I’d at least like some consistency. Obama’s economic doctrine so far can be best-described as schizophrenic.
Let us review.
When campaigning for the Presidency in 2008, Obama continually painted President George W. Bush (R) and the Republicans as reckless deficit spenders . . . and that epitaph was well-deserved. There is no question that the Republican president and Republican Congress in the first decade of the 2000’s ran up record-breaking deficits and failed to control the growth of government. Fiscal conservatives like myself criticized them for this at the time, and only continued voting for them because we felt they were nominally better than the available alternatives. We were right on that, at least. Obama’s annual deficits—which make Bush’s astronomical deficits look positively tiny—prove that he is not the Clintonesque balanced-budget Democrat he made himself out to be. He campaigned on one thing, and we clearly got another.
In 2006, then Senator Barack Obama (D-IL) made a principled stand against raising the federal debt limit. Congress imposes a statutory debt limit on our government in an effort to keep our federal debt under control, a system that has been in-place since 1939. When Bush wanted the already-astronomical limit increased, Obama described the situation perfectly:
The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure. It is a sign that the U.S. Government can’t pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government’s reckless fiscal policies. (Emphasis added.)
Obama voted against the bill that would increase the limit, which was the right decision. We needed to get our national debt under control, though not as critically then as we need to now. It is a shame that Obama, once a champion for fiscal responsibility and limiting the growth of our national debt, now demands an increase in the debt limit and declares it to be critical to our national survival. No, Mr. President; it is even more imperative now than it was in 2006 to not take on more debt.
Meanwhile, Obama has rejected a Republican proposal to implement $2.5 trillion in necessary cuts to federal programs as a condition for increasing the limit. According to the president, cuts must go hand-in-hand with ‘revenue’—in other words, he wants to increase taxes. He tries to mitigate the political harm of a pro-tax platform by targeting those increases on the ‘rich,’ who he characterizes as millionaires and billionaires but (if you read the fine print) really includes any family making over $250,000 annually. It’s easy to punish the ‘rich’ with punitive taxation, as we already do with our ‘progressive’ tax bracket system that requires people with higher incomes to give up a higher percentage of their money (which the definition of unequal protection under the law, folks, but that’s a discussion for another day). The question is, what impact would those tax increases have in the midst of a bad recession?
Well, tax increases in recessions basically always prolong and deepen them . . . and, it wasn’t that long ago that Obama agreed with this basic economic truth. Elkhart, Indiana, resident Scott Ferguson (no relation to my late uncle of the same name) asked the president in August 2009 to “Explain how raising taxes on anyone during a deep recession is going to help with the economy,” reminding Obama that he had promised tax increases on the ‘wealthiest’ Americans. The president replied:
First of all, he’s right. Normally, you don’t raise taxes in a recession, which is why we haven’t and why we’ve instead cut taxes. So I guess what I’d say to Scott is—his economics are right. You don’t raise taxes in a recession. We haven’t raised taxes in a recession. . . .
We have not proposed a tax hike for the wealthy that would take effect in the middle of a recession. Even the proposals that have come out of Congress—which by the way were different from the proposals I put forward—still wouldn’t kick in until after the recession was over. So he’s absolutely right, the last thing you want to do is raise taxes in the middle of a recession because that would just suck up—take more demand out of the economy and put business further in a hole. (Emphasis added.)
So, some have asked what I think should be done about the debt limit and our overall economic mess. I agree with Barack Obama (2006 version): raising the debt limit is unnecessary and counterproductive, and the fact that we’re even discussing it is a sign of ‘leadership failure.’ I agree with Barack Obama (2008 version): the worst possible thing we can do for our economy right now is raise taxes, even if it only hits the ‘wealthy.’
It is so obvious that I would think everybody would see it, but sadly it bears repeating: We do not have a revenue problem; we have a spending problem. Our government’s fiscal house will be righted when it realigns its spending with its revenue, as President Bill Clinton (D) did in the late 1990’s (while cutting, not raising, taxes on the ‘rich’). Increasing the federal tax burden on any of our citizens is not the solution. Proposing to increase taxes only for the ‘rich’ might seem more palatable, but it is a selfish cop-out; the ‘rich’ already give up a higher percentage of their income than you or I do.
Consider this. As of 2008, the top 10 percent of wage earners paid over 69 percent of all federal taxes; the other 90 percent (myself included) paid less than 31 percent of the total. In fact, the poorest 50 percent of wage earners only paid a minuscule 2.7 percent of federal taxes. We already ask the ‘rich’ to carry much more than their fair share of the cost of government; how dare we ask them to pay even more while the vast majority of our citizens are asked to sacrifice nothing? If we are going to ask anybody to pay more taxes, it is only fair that we ask everybody to pay more taxes. I am not endorsing this idea, because I do not believe any increase in taxes is actually necessary, but we are all in this mess together, and ‘there ain’t no such thing as a free lunch.’ Either we all share in the absurdly high cost of our government, or none of us do—we are all equal under the law.
As to the greater issue of righting our whole national economy, the best thing the government can do is stop injecting uncertainty into the markets. Businesses are holding on hiring right now because they have no way of knowing whether they will be able to afford to pay those new employees in six or nine months. They do not know if the federal government will be significantly increasing their payroll taxes as part of a debt limit compromise. They do not know if our Treasury Department will default on its obligations to our creditors instead of paying them first after the possible debt-limit-pocalypse in August. They fear that, depending on the outcome of this debacle, the Federal Reserve will take its subtle inflation policy to its next logical step and openly devalue the dollar to reduce the real value of our standing debt.
Clear, logical, sound, predicable economic policy from our government will go a long way toward laying the groundwork for a real recovery. Stimulus plans that don’t seem to have successfully stimulated anything but Anthony Weiner, ‘QE’ money-printing schemes from the Fed. that have done nothing but force inflation near 10 percent (according to honest, unofficial measures), and a president who can’t decide whether he’s for or against raising taxes from month-to-month . . . these are undermining any possible recovery before it can begin. Businesses are unlikely to invest in growth when our government seems intent on spending itself into oblivion. Companies are unlikely to increase staffing and salaries when they have no reason to believe that their profit margins won’t be halved (or worse) in six-months by punitive taxation policies combined with irrational, inflationist monetary policies.
Given the situation, it is no surprise that. What is surprising is that Obama, who campaigned on a platform of fiscal responsibility against the poor economic policies of his predecessor, has failed to see that nearly three years of accelerating his predecessor’s policies has made things worse, not better.
We have had enough ‘leadership failure,’ Mr. President. Engaging in class-warfare against the ‘rich’ and refusing to make the hard choices and difficult cuts in the name of fiscal responsibility will get us nowhere. It is time for sound economic policies with some basis in reality. It is time for a government that lives within its means, even if it is difficult at first, and even if it takes time for us to get used to it. No more blaming your predecessors. No more demagoguery and misrepresentation. No more uncertainty and confusion. No more schizophrenic flip-flopping on the fundamentals of economic theory in an effort to please your party’s hard-left wing. It is time to lead, Mr. President—and it would be nice if you stopped trying to lead us into a fiscal abyss.