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  • Obama May Finally "Get It" on Economy – We Can Still Hope

    President Barack Obama

    Barack Obama made a big deal throughout the campaign and after that he wanted to raise income taxes on the rich by reversing the reductions in upper rates enacted under President Bush in 2001. Lower rate advocates have argued all along that lower rates are better for the economy, whereas raising the individual income tax rates again from 35 percent (which is already too high) to 39.6 percent or higher would hurt the economy. By proposing higher tax rates, Obama and his allies explicitly discounted the economic effects. Rumors in Washington suggest the President, facing persistently high unemployment, may have been mugged by reality in the immortal words of Irving Kristol. Obama may have come around to a more conservative position in favor of lower rates, at least for now.

    Last year my colleague, Bill Beach, and I argued for a pro-growth alternative to ineffective, debt-laden fiscal stimulus. Senator Jim DeMint (R-SC) led the fight in the Congress for stimulus that would work, but congressional leadership and Obama chose instead to pass a $787 billion debt hike masquerading as stimulus. The centerpiece of any effective pro-growth proposal was obviously to delay for some number of years the increase in tax rates that would otherwise occur with the expiration of the 2001 tax relief.

    The best solution, of course, is to make the tax rate relief permanent, but that’s a debate better left to another day years from now. The immediate task is to delay the rate hikes. If the rumors of the President’s epiphany are true and he is willing to delay the rate hikes, that would be real progress.

    The broad consensus appears to be that if the economy can avoid any more disastrous shocks, then the unemployment rate ending 2010 is likely to be about where it is today, at 10 percent. Obama should demand a delay in raising tax rates until the economy is materially stronger, say until the unemployment rate dips below 6 or 7 percent. If he were to do so, following the advice we gave at the start of 2009, it would provide the economy with a needed boost on at least three counts:

    1. It eliminates a threat to the economy from Washington as highlighted in a recent Chamber of Commerce report;
    2. It would delay the vitality draining effects of higher rates on capital formation and entrepreneurship in America; and
    3. It would suggest the President finally is starting to “get it”, that higher tax rates are bad for the economy as we’ve said all along.
    Posted in Economics [slideshow_deploy]

    9 Responses to Obama May Finally "Get It" on Economy – We Can Still Hope

    1. Mark, Wauwatosa WI says:

      I believe that President Obama is doing what he is doing with — and to –

      our economy for the sole purpose of making us all economically

      dependent upon Washington so as to guarantee a huge super-state

      to exist in perpetuity. If we are all dependent upon the government,

      no one will challenge the resultant status quo with proposing a return

      to free market-based economics and restored personal responsibility

      for our sustenance. Thus, few would ever vote for a conservative or

      libertarian candidate for any public office. I discuss these and other

      matters pertaining to economic and political liberty in my own blog,

      "Peasant With A Pitchfork" (http://peasantwithapitchfork.blogspot.com).
      Come visit my blog anytime! I post commentary weekly.

    2. stirling, Pennsylvan says:

      His "words" mean absolutely nothing, without actually doing something to prove it. As I see it this could just be annother "PR" spin to apear to be "listening" when if fact it's just a hollow promise. In business terms "you are only as good as your word", and so far from the campaign to now he's shown that his word/promises for "change" is not worth buying.

    3. Emily, Maine says:

      I don't agree with this article at all. First of all, those individuals who earn $100,000 and over are not overly taxed. Think of the person earning just $1000 a month who must pay taxes; the person who earns $8,000 a month and pays less than half of taxes, leaving them with over $4,000 a month compared to the person who earns $1000 a month and some of that is taken away. How the heck is someone who earns just $1000 a month supposed to make it? I challenge all of you who say that taxes are too high, just try living on the equivalent of $1000 a month in earnings–say only Medicare/SS taxes are taken out, that's about $930 a month you have for food, housing, transportation, medical care, telephone.

      What we need is real reform where people living in complete poverty–say under $1000 a month–pay no federal or state income taxes, only sales taxes, and have access to all of the preventive and urgent medical care that they need. I do think people have some responsibility to keep themselves healthy and avoid medical problems. But I also think in today's economy, we need to work harder to create more Americorps type positions across the country to keep our youth from losing hope and resorting to desperation. Also we could have a Professional Americorps for those with advanced degrees/ technical skills which pays slightly more, since there are people with families to support who have no income whatsoever but do have skills that our country needs to come out of this recession and build a better future.

    4. Pingback: Applying Payroll Tax to Investments Will Slow Recovery and Hurt Seniors | The Foundry: Conservative Policy News.

    5. Paul Terry Stone, Su says:

      As previously stated, words don't mean much until actions follow. President Obama is great with words but poor when it comes to actions that back them up.

    6. CowboyBob, Montana says:

      This statement seems counter to the entire premise of the article: "Obama should demand a delay in raising tax rates until the economy is materially stronger, say until the unemployment rate dips below 6 or 7 percent." On one instance you argue against raising taxes, but here say, well at least delay it until….that is a mixed message if I ever heard one. LOWER TAXES PERMANENTLY and leave the economy alone.

      A truly free market cannot continue to exist in this current environment. But Emily from Maine doesn't seem to care about that. And herein lies the problem with the electorate today. With the rapidly approaching threshold of over 50% of the populace not paying income tax, there remains NO incentive for that group of people to vote for anything resembling fiscal constraint. We're getting a huge dose of that at the moment. Obama and his DNC cronies are spending like drunken sailors, pork and corruption is rampant, and the future of the country is being mortgaged to the hilt. I don't want someone making a minimum subsistence wage to pay a tax that hurts. But they should pay $1 or some token amount just so they see that it is the GOVERNMENT TAKING THEIR MONEY and that all these wonderful programs (not delineated in the constitution) ARE NOT FREE. These things are not created from thin air…EVERY dollar spent by the government is eventually taken from the tax payer. Why is that so hard for the majority of people to understand…oh wait, I forgot about the Dept of Education and there sterling efforts at mediocrity the last 30 years…thank you Jimma Carter.

      Lastly, please remind Emily and friends that "rich" small business owners still create the greatest number of jobs in this country (although this government is trying hard to alter that). Raising taxes causes FEWER jobs to be available and lowers the wage that can be paid on those jobs that remain. And let's not confuse people with the reverse effect of the minimum wage on job creation and wage increases.

    7. John, New Jersey says:

      Emily – when does a person making $1,000 monthly pay taxes – never. 50% of americans don't pay taxes now. try living in New Jersey or New York. Property taxes are anywhere from $8-20,000 p/yr. If you own a small business in NJ the tax is 10%.as opposed to 3%. The state has $37 billion in debt – $37 bn!!!! An education system that produces horrendous results.There is a reason why the middle class rose up and throw Corzine out and voted Republican.

      The tax burden is already on a small amount of people in this country. Fix the educational system and produce higher quality graduates so we can compete or Brazil, Russia, India and China will clean our clock eventually. Fix the welfare and unemployment system – have out of work Americans line up for all those jobs that illegal immigrants take.

      Americans need to wake up soon and elect people who have the brains and intestinal fortitude to buck the status quo and fix the country.

    8. Jeanne Stotler, Wood says:

      Just watched him talk about Haiti, or should I say read a comment on Haiti, when you read someone elses words it's hard to remember what you said. His staff is using him as a pupet, we really need to know who's running things from the side wings. Let's face it, those who voted for him were duped, we are in big trouble, someone is in charge and it's not Obama.

    9. Pingback: Applying Payroll Tax to Investments Will Slow Recovery and Hurt Seniors | Fix Health Care Policy

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