But the Conquered, or their Children, have no Court, no Arbitrator on Earth to appeal to. Then they may appeal, as Jephtha did, to Heaven, and repeat their Appeal, till they have recovered the native Right of their Ancestors, which was to have such a Legislative over them, as the Majority should approve, and freely acquiesce in.
-John Locke

Sunday, July 10, 2011

US Default Watch, Part 3

Yesterday, House Speaker Boehner rejected the President's plan to reduce the deficit.  Boehner cited the proposed tax hikes as one his main reasons.
“The White House will not pursue a bigger debt reduction agreement without tax hikes,” the Ohio Republican said in a statement released Saturday night. “I believe the best approach may be to focus on producing a smaller measure, based on the cuts identified in the Biden-led negotiations, that still meets our call for spending reforms and cuts greater than the amount of any debt limit increase.”
The President's plan was to attempt to reduce the deficit by $4 trillion over the next ten years by relying largly on tax increases to do so.  Boehner is pushing for a plan in which the deficit is reduced by $2 trillion but achieves this without increasing taxes, which is to say, it would be achieved through cuts and through reducing taxes but expanding the tax base.

One philosophical issue that the President's plan raises is what happens when we achieve the $4 trillion reduction, and what will occur during that ten years.  First, will taxes then be reduced?  Hard to say - depends on who is in power then.  We can count on a few things, though - Obama will have put the hard decisions off to another, future set of leaders but will take credit for his attempts to tackle the deficit.  What we don't know is what effect higher taxes will have moving forward.  We are in a recession TODAY.  50% of households pay zero taxes TODAY.  So, we would be thrusting this burden onto the backs of the wealthy, as well as onto the backs of those who are in the unfortunate position of being too rich to avoid taxes but too poor to weather a decade of higher taxes.  History tells us what tax hikes during a recession does to the economy, and it ain't good.  So, how do we count on the revenue from those tax increases to actually materialize?  Also, isn't the worst thing we can do is allow the government to have MORE of our money?  I mean, look at the mess they've created with what we've already given them.

James Pethokoukis has a terrific take on the proposal. He quotes a source with this insight:
Their fierce insistence on higher taxes is beyond bizarre. After months of demanding ‘clean’ increase to avert economic calamity (default), WH threatens economic calamity (default) unless they get economic calamity (trillions in tax hikes). No wonder these guys are governing over an economic calamity (9.2% & growth malaise), w/ an economic calamity on the horizon (debt explosion as mapped out in president’s budget). The bipartisan consensus on tax reform (broader base & lower rates) was championed by President’s fiscal commission, and yet now is being rebuked by the President. Lowering top rates that would help make America more competitive was too large a leap for a true class warrior.


No comments:

Post a Comment