This column by ACRU General Counsel and Senior Fellow for the Carleson Center for Public Policy (CCPP) Peter Ferrara was published December 8, 2011 on Forbes.com.
On Tuesday, President Obama went to Osawatomie High School in Kansas to deliver an address framing the economic issues for the 2012 election. He was following in the footsteps of turn of the century “progressive” Teddy Roosevelt, who spoke at that same site 100 years ago to rail against big corporations and the privileged, while calling for “fair play” for ordinary Americans.
But the speech only showed why Obama can’t lead America on the economy. Instead of leading us forward into the modern economics of the 21st century, he keeps reaching back into the economics and politics of old – the failed Keynesian economics of Franklin Roosevelt in the 1930s, the disastrous stagflation of Jimmy Carter in the 1970s, and the supposed promise of progressivism 100 years ago, before the demonstrated failures of Marxism worldwide in the 20th century.
He drew a picture of America as a struggling third world nation, saying at stake today “is whether this will be a country where working people can earn enough to raise a family, build a modest savings, own a home, and secure a retirement.” He explained America before his coming as “Those at the very top grew wealthier from their incomes and investments than ever before. But everyone else struggled with costs that were growing and paychecks that weren’t.”
This sounds more like Indonesia, or Venezuela, or Nicaragua. But it is not America “long before the recession hit.”
He explained the roots of the problem as,
Over the last few decades, huge advances in technology have allowed businesses to do more with less, and made it easier for them to set up shop and hire workers anywhere in the world….Steel mills that needed 1,000 employees are now able to do the same work with 100, so that layoffs were too often permanent, not just a temporary part of the business cycle….If you were a bank teller or a phone operator or a travel agent, you saw many in your profession replaced by ATMs or the Internet.
This Luddite analysis fundamentally misconceives the role of technology in a modern economy. Such advancing technology increases worker productivity, and hence wages and standards of living. Technological progress over the decades is why the average American worker in 2000 enjoyed 7 times the standard of living of the average American worker in 1900.
He identifies the solution in the speech as increased government spending as the foundation for rising prosperity. He says,
Today, manufacturers and other companies are setting up shop in places with the best infrastructure to ship their products, move their workers, and communicate with the rest of the world. That’s why the over one million construction workers who lost their jobs when the housing market collapsed shouldn’t be sitting at home with nothing to do. They should be rebuilding our roads and bridges; laying down faster railroads and broadband; modernizing our schools – all the things other countries are doing to attract good jobs and businesses to their shores.
Before Barack Obama as President, the rest of the world looked to America as the example for the economic model that works to achieve prosperity. But today Obama tells America “It doesn’t work. It’s never worked. It didn’t work when it was tried in the decade before the Great Depression. It’s not what led to the incredible postwar boom of the 50s and 60s. And it didn’t work when we tried it during the last decade.”
Instead he tells us to look at the basic infrastructure spending of other countries as the model that works. But American economic growth is not suffering because of a lack of basic infrastructure like a third world country. It is suffering because Obama is so doggedly pursuing the opposite of every policy that would free the economy to produce and boom. Under such Obamanomics, soon enough America will be suffering from the lack of a reliable energy grid like a third world country.
And of course, essential to that essential infrastructure spending, Obama tutors us, is to increase tax rates on the nation’s investors and job creators. He said in Kansas on Tuesday,
But we don’t have unlimited resources. And so we have to set priorities. If we want a strong middle class, then our tax code must reflect our values. We have to make choices….Do we want to make the investments we need in things like education, and research, and high-tech manufacturing? Or do we want to keep in place the tax breaks for the wealthiest Americans in our country? Because we can’t afford to do both. That’s not politics. That’s just math.
So there you have the Obama formula for an economic growth. After the greatest runaway spending spree in American history during the Obama Administration, the answer is for government to increase spending even more, financed by increasing tax rates even more on the very investors and job creators that produce the jobs for the middle class and working people in America’s economic system. That is a perfect prescription for another recession, not the long, long overdue recovery America is still waiting for under Obamanomics.
Obama tells us, “It is wrong that in the United States of America, a teacher or a nurse or a construction worker who earns $50,000 should pay a higher tax rate than somebody pulling in $50 million.” That would be wrong if it was true. But it is not.
What Obama is peddling to America on tax policy is only the ugliest example of his well-established rhetorical style of calculated deception. It is based on what he thinks the average voter does not know and will not know, and can be manipulated to believe to Obama’s political advantage. For the picture he is painting of the rich getting away without paying their fair share while working people bear most of the tax burden is the opposite of reality.
Even before Obama was elected, under those “failed policies of the past,” the top 1% of income earners in 2007 paid 40% of federal income taxes, while the CBO just reported that they earned that year 17% of the income. Moreover, that 40% of federal income taxes paid by the top 1% was more than paid by the bottom 95% combined, according to official IRS data. While the top 1% paid 40% of federal income taxes, the bottom 40% paid no federal income taxes as a group on net. Today 47% pay no federal income taxes.
Yet, Obama has already enacted under current law further tax increases on the nation’s job creators, investors and small businesses going into effect in 2013, when the tax increases of Obamacare become effective and the Bush tax cuts expire. Consequently, that year the top two income tax rates would rise by close to 20%, the capital gains tax would soar by nearly 60%, the tax on dividends would nearly triple, and the Medicare payroll tax would rocket up by 62% for these disfavored taxpayers. This alone would take us well beyond the Clinton tax rates, despite Obama’s outdated talking point that he is still repeating from 2008.
This is in addition to America suffering with virtually the highest corporate tax rate in the industrialized world at nearly 40% on average, counting state corporate rates. As I have previously noted, even China imposes only a 25% rate, with the rate in the EU even less on average. Our Canadian neighbors next year, now booming while America lags under Obama, will enjoy a 15% rate next year.
Yet, Obama barnstorms America calling for still more tax increases on American business, large and small, and the job creators and investors on which jobs and prosperity for working people depend. Th
e galloping regulatory burdens he is now imposing effectively involve still further tax increases stifling production. It all adds up to a brew for another recession in 2013, unless the American people force a change in course in 2012.