President Barack Obama and Democrats in Congress have indicated they are willing to push the nation to the brink of what some in Washington have called a “fiscal cliff” in order to raise taxes on the highest-income earners in the nation, perpetuating a continual theme of the Obama presidency, that wealthy Americans aren’t paying their fair share. A “tax time bomb” is ticking down.
Their risky strategy is an attempt to force Republicans into an election-year showdown over the Bush-era tax cuts – first passed about a decade ago, extended in 2010 and now set to expire Jan. 1, 2013 – the same scheduled date as automatic cuts in government spending, including in military spending, a priority for Republicans. The cuts are fallout from the failure last year of the congressional “supercommittee” to reach agreement on reducing the federal deficit.
Because the state of the economy is so fragile and prone to react to headlines coming out of Washington, D.C., the president and his Democratic Party allies are playing a dangerous game of chicken that is already having negative economic repercussions that could be felt in November, and beyond.
In fact, as noted by Rebecca Berg, writing in the New York Times, “business leaders and policy makers are growing concerned that the tax increases and government spending cuts set to take effect at year’s end have already begun to cause companies to hold back on hiring and investments.”
Richard Rahn, a columnist, senior fellow at the libertarian Cato Institute and chairman of the Institute for Global Economic Growth, echoing sentiments from a report released by the Congressional Budget Office, said Friday that if action is not taken by the president and Congress, “we will have a recession in the first part of next year.”
Rahn took part in a panel discussion at FreedomFest, a three-day conference celebrating free markets and individual liberty, being held at the Bally’s hotel and casino.
Meanwhile, Bill Bleach, director of data analysis for the conservative Heritage Foundation, says the “crisis is already here.” That’s because companies are sitting on the sidelines waiting to see what will happen.
President Obama and Democrats in Congress agreed to a two-year extension of the Bush-era tax cuts – including breaks for the highest earners – something they now call a momentary lapse in judgment. The president and his party now promote another extension for Americans they call the middle class – people earning less than $250,000 – while refusing a further extension on incomes above that level. But, if it would help the economy to preserve lower taxes for the middle class, wouldn’t doing so for everyone have the same positive impact?
Remember the logic behind the tax cuts: If you put more money in the hands of Americans, they will spend it, thus stimulating the economy. If that works for one level of income earners it should also follow for others, including high-earners. But Democrats in Congress are starved for new stream of revenue as demonstrated by U.S. Sen. Mary Landrieu, D-La., when she said, “Republicans have been mindlessly lockstep against putting any new revenues on the table, and until they do, there will be no deal.”
In campaigning against “the richest Americans,” the president and congressional Democrats fighting to hold on to control of the Senate and take back the House must assume that they are telling most voters what they want to hear. There is reason to believe, however, that they are wrong.
Several recent polls show that Americans have a favorable view of the country’s rich and believe they mostly should be able to keep their wealth, according to a CNBC report Thursday written by Robert Frank. A GlobeScan survey found that “58 percent of Americans agree with the statement that ‘the rich deserve their wealth,’” an increase from 2008.
Also, recent Gallup polling cited by Frank shows that “the percentage of Americans who say the wealthy pay too little in taxes has actually declined since the 1990s.” If Frank’s analysis is correct, and the polls hold, President Obama’s us-versus-them narrative would cost him and fellow Democrats at the ballot box.
Business does not react well to uncertainty, and delaying action to head off the “tax time bomb” at year end is causing more uncertainty than much anything else. Such uncertainty will not only hurt America’s economy it may also end up being the unhinging of President Obama’s reelection bid.
(Brian Calle is a columnist and editorial writer for the Orange County Register and editor of CalWatchdog. Originally posted on his blog, Uncommon Ground.)