Waiting For Congress to Increase Taxes Again

Right From the Start

Time is running out for the so-called congressional super-committee. The hang-up continues to be tax increases – Democrats want them, Republicans don’t. The Democrats, led by Sens. Patti Murray (D-WA) and Charles Schumer (D-NY), have said that they won’t consider cuts to entitlement spending unless Republicans are prepared to accept a $1.3 Trillion tax increase. Republicans have said that it is time to bite the bullet and begin to consider wholesale changes in the entire entitlement process.

Let’s be clear. The Democrats do not want to raise taxes as a means to reduce the deficit; they want to raise taxes so that they can spend more. The proof lies in their own actions.

First, President Barack Obama has proposed a $3 Trillion deficit reduction program. That’s $3 Trillion over ten years – mostly back end loaded. Half of that is a $1.5 Trillion tax increases. $1 Trillion of that comes from eliminating our presence in Iraq and Afghanistan – a number that can only be calculated by assuming that our presence in both countries will continue at current levels (increased by inflation) for the next ten years. The numbers are bogus because Mr. Obama has already announced the complete withdrawal of troops from Iraq by the end of December. He has also announced a substantial draw down of 33,000 troops by next July and a complete withdrawal by 2014. That means that the “savings” are already included in budget projections and that Mr. Obama is “double counting.” The final $500 Billion comes from Medicare cuts – cuts that are in addition to the $500 Billion Mr. Obama has already embedded in his Obamacare program. If Mr. Obama manages to actually effect $1 Trillion in Medicare cuts, the net result will be that the best physicians will simply stop providing services to Medicare patients (in Oregon that number is already near 50%) and senior citizens will be left to the mercies of the barely able.

Oh, then there is that pesky $450 Billion that Mr. Obama wants to spend on “Stimulus II.” Mr. Obama justifies it by saying that it will preserve jobs for teachers and public safety workers. He said the same thing for his first stimulus program but in reality it simply gave raises and increased benefits to existing teachers and public safety workers. Mr. Obama simply imposed a recurring cost increase from a one-time stimulus payment and subjected cash-strapped states to higher costs with declining revenues. That is always the case when funding recurring costs with one-time revenues. And now Mr. Obama wants to make a bad situation even worse by once again increasing recurring costs (salaries and benefits for public employees) with yet another one-time cash infusion.

Mr. Obama and his fellow Democrats know that in doing so, they are then positioned to argue in the next fiscal year that taxes must be raised to “avoid layoffs” when in fact the potential layoffs are solely the result of artificially inflated salaries and benefits. That being the case, Mr. Obama’s $450 Billion “Stimulus II” becomes a recurring cost – one that equals close to $5 Trillion over the next ten years. Sorry, Mr. Obama – there’s no deficit reduction in your program – just an opportunity to increase the size and cost of government. So the net effect of Mr. Obama’s deficit reduction plan is to raise taxes by $1.5 Trillion and raise expenditures by $5 Trillion.

Second, Congressional Democrats have steadfastly refused to accept spending caps in exchange for revenue increases. The net effect of that is that they want to be free to spend the increased revenue on recurring programs instead of deficit reduction. The illusory deficit reduction program that Democrats proposed is only as good as its first year. Thereafter they are free to continue spending increases just as they did when they regained control of Congress in 2007.

All of this is played out against the penchant of Mr. Obama and his fellow Democrats to engage in class warfare. His demand that “millionaires and billionaires should pay a little more” to help the country in a time of need is hypocritical. Wall Street traders and megabank executives who supported Mr. Obama in the last election and are lining up to do it again this election have made more money under Mr. Obama than they ever did under President Bush. It is as hypocritical as Mr. Obama’s recent admonitions to the Europeans over the dangers of deficit spending and increased deficit. Mr. Obama might be mindful of Michael Jackson’s ode that change begins with the man in the mirror.

As a conservative, I am adamantly opposed to giving politicians even more money to waste. But because of the stalemate and hypocritical posturing that is going on in our nation’s capitol, I am prepared to accept a “surtax on the wealthiest Americans” – those making more than $1 Million a year. But it comes with strings.

First, the revenue derived from the “surtax” would be used solely for retiring the principle of the existing deficit – no portion would be available for paying the interest or funding new debt.

And second, the deficit would be capped at the current level of $14.3 Trillion and thereafter be reduced by the amount of principle retired by the surtax. This would continue until the deficit was reduced to fifty percent of Gross Domestic Product (GDP) or the budget was balanced for two years in a row. In either of such events, the surtax would sunset. Unless you cap and reduce the debt, Congress would be free to simply replace old debt with new debt – that’s what is happening in Greece even under the Eurozone bailout plan and ensures the eventual downfall of Greece.

While I am quite certain that Mr. Obama and his fellow Democrats would never accept the fiscal discipline required in this proposal, this would be one instance in which a tax increase might produce a salutary long term benefit for a short term inequity.

Unfortunately, the more likely scenario is that a handful of Congressional Republicans will cave in to the Democrats and increase taxes without any concessions as to real long term deficit reductions.