Democrats Need a 12-Step Recovery Program on Taxes

Townhall.com ^ | June 29, 2011 | Larry Kudlow

[Kaslin]

Here's a question: Why is repealing the Bush tax cuts such a constant obsession for the Democratic Party? Especially the top rates for the most successful earners and small business entrepreneurs?

It seems this is the Democratic answer for every single issue, every problem, every debate.

This, of course, saddens me enormously.

And so, always ready to help, I am recommending a 12-Step program to help them overcome their anger, resentment, and obsession over the Bush tax cuts. Democrats really need a Higher Power on this.

First, when tax rates were lowered across-the-board in mid-2003, the incentive effect kicked in to jump-start the economy immediately. Over the next four and a half years, before the financial meltdown slammed the economy-- and that was a credit event, not a fiscal one—8.2 million jobs were created.

Jobs essentially rose for about fifty consecutive months.

Non-farm payrolls rose from just under 130 million to just over 138 million. Don’t believe me? You can look it up. This sort of job creation is exactly what President Obama would love to see happen now.

And, while jobs rose, the government took in more revenues. As a share of GDP, revenues rose from 16.2 percent to 18.5 percent. Simply put, supply-side tax cuts were the single best economic policy President Bush implemented.

Elsewhere, President Bush overspent and overregulated. And yes, the dollar collapsed on his watch. And from Fannie Mae to the Federal Reserve, the housing bubble was born.

But the tax cuts? They worked. And that's my point.

[SMARTY]

Liberals all have a needle hanging out of their arm. It’s called ‘the Government’.

[SuzyQue]

I usually agree with Larry, but in this case I think it’s obvious that each and every one of them needs to get out of “public servancy” and get a real job. They have violated the public trust, disregarded and shredded the law of the land, and should be booted out (with most of their Republican comrades.)

[556x45]

‘Here’s a question: Why is repealing the Bush tax cuts such a constant obsession for the Democratic Party?’

The author hints at the answer in the question...Bush derangement syndrome. I don’t think its much more complex than that. Then theres the fact that a RINO pres snookered a dem Congress in to pass the cuts. Im sure they’d love to undo that bit of history.

[iacovatx]

If you ever encounter someone who is adamant that taxes MUST be raised then offer these observations.

When money is paid in taxes, it slows down spending while the taxes are managed through a bureacratic system. This not only slows down economic activity but reduces tax collections because once the money is in government’s hands, it no longer creates sales, income or other taxes.

When money is paid in taxes it is allocated to past spending rather than new spending. This is because a portion of the taxes must be used to pay off debt and interest.

When money is paid in taxes, it is spent on consensus and compromise political projects. These projects are less effective in solving problems and slower at allocating funds than if the money were in private hands where quick action and more effective problem solutions are possible.

Liberals often use their own mismanagement of government spending as the reason they need to raise taxes. Decades of raising taxes as a solution to government budget shortfalls has not reduced shortfalls nor improved budget management. Ask a liberal why, after decades of evidence to the contrary, that raising taxes will reduce the debt, improve the economy, or improve government spending patterns? Why not put a limit on taxation? Ask and see what logic they have to offer—budgets are very rational and money doesn’t respond to emotional arguments.

[Falcon4.0]

This isn't just about the "Bush Tax Cuts".

They're still trying to repeal the "Reagan Tax Cuts".

[iacovatx]

This topic brings to mind the austerity protesters in Greece. The money is not available to pay for the demands of the protesters. It is just as if they were protesting the weather. You can complain but it is going to rain anyway. Because I suspect they they understand this, their real goal may simply be about political power.

[Old Teufel Hunden]

"It seems this is the Democratic answer for every single issue, every problem, every debate."

I would have to disagree. It's repeal the Bush era tax cuts AND pull the troops out of Iraq and Afghanistan. Those two steps are the solution to every problem we have.

[ex-snook]

Tax rates are at their lowest rate in 50 years but unemployment is at its highest. Why the paradox?

[bassmaner]

First of all, can we please stop letting the Left frame the debate by referring to the 'Bush tax cuts'? They are the Bush tax rates, as they have been in effect for almost a decade.

We should refer to any increase now as an 'Obama tax increase'.

[slowhandluke]

Tax rates are at their lowest rate in 50 years but unemployment is at its highest. Why the paradox?

There's no paradox. High tax rates aren't the only way to reduce employment levels.

If the banks won't lend, if the EPA shuts you down, if the ESA stops your building expansion, or the government gives your overseas competitor subsidies, you won't be able to hire.

Those techniques are what Cass Sunstein was employed to find and use to grind down the USA.

[iacovatx]

You could view this from various perspectives but lack of projected demand from a demand-pull perspective offers one explanation. Note also that investment capital costs and debt servicing rates are very low right now in relative historic terms. Despite that, business expansion rates are not high enough to greatly lower unemployment in most places in the US. Generally, businesses do not face sufficient, long-term and predictable demand growth to require increased hiring. Tax rates in the global economic system are not relatively low in the US but labor costs are relatively high. Even more importantly, future tax rates and labor costs in the US face upward pressure, discouraging the long-term commitment to new employees.

I am not criticizing anyone’s perspective here and perhaps an economist can offer more accurate or insightful interpretations.

[citizen]

We don’t have the time to wait on a 12-step program. The Dims are gonna have to go cold turkey.

[WOSG]

This isn't just about the "Bush Tax Cuts". They're still trying to repeal the "Reagan Tax Cuts".

DING DING DING ... we have a winner!

In 1986, the Democrats only agreed to cut the top tax rate in exchange for gutting deductions and raising the capital gains tax rate.

Then they turned around and demanded a 'fix' to increase the top rate so those under the top didnt have to pay higher marginal tax rates due to deduction phase out.

THEN they cajoled Bush, GHWBush, to break his no new taxes pledge, in 1990, for a bogus budget deal (we will cut spending tomorrow if you raise taxes today).

THEN in 1993, they raised the rates AGAIN, as part of Clinton's tax hikes... that also massively hike EITC welfare payments.

THEN in 1995 and 1997, the Republicans came in, made some fixes to the taxes including a bigger child care credit and cut cap gains taxes. Economy boomed.

THEN in 2001 and 2003, the Democrat opposed Bush's middle class tax cuts, calling it "taxcutsfortherich" ... using Goebbels Big Lie technique to say it again and again until it becomes 'reality'.

Then in 2007 and beyond the Democrats got their chance... winning Congress meant the GOP could not extend the Bush tax cuts and the Democrats would not do it. So they would repeal the Bush tax cuts. In 2009, they decided to punt and let the tax cuts expire as the economy was weak and they would go away at end of 2010 anyway. It was thanks to the weak economy that the Republicans got the last-minute 2-year extention.

Since then, they have bashed the Bush rates, because they do NOT want to lose this fight, and are desperate to keep the taxes higher and the rich punished, so they attack these not-very-low-rates ... WHICH FOR THE TOP EARNERS ARE STILL HIGHER THAN THE RATES IN 1992 ... as somehow a terrible and dangerous thing.

But lets be clear: The money involved is not great unless you also tax the middle class because there are more of them, and also, once the Democrats get this, they will move on to their next target: Big Oil, rich, corporations, etc. etc. They will raise the limit on payroll taxes, end all deductions but keep rates high, close 'loopholes' that keep people employed, etc.

They will keep bashing anyone and everyone who has money in their pockets until they are shaken down and robbed of it to feed their insatiable desire for bigger government. How to save the economy from insane policies like that? Democrats Delenda Est.

[WOSG]

3 key points:
1. The future tax increases is a problem both of uncertainty and of expectation of higher costs.
2. “Even more importantly, future tax rates and labor costs in the US face upward pressure, discouraging the long-term commitment to new employees.” Translation: Govt spending implies future tax and debt burdens, discouraging assessment of the future economic returns.
3. We should NOT underestimate the much heavier burden of regulation and in particular Obamacare on the labor market.

I am not an economist but I can see the obvious. Govt regulation and spending is dampening private sector initiative.

[MasterGunner01]

To believe the Donkeys will give up their “all tax increases, all the time” mantra is silly. Taxing everything in sight is part of a Donkey’s DNA. You cannot change them. They cannot be salvaged.