“And if you’re not really serious about lowering our taxes in the first place, well then shame on you for promising you would.”
Monday, September 29, 2008
There are taxes, and then there are taxes. To be more precise, there are sales and income taxes that we pay as individuals, and then there are other ways in which the spending power of our income can be reduced. These “other ways” are related to inflation, such as higher prices for food and gas, for the energy we need to light and heat or air condition our homes, and for prescriptions and medical care. The higher those prices relative to our income, the less of those items and other goods and services we can afford. It doesn’t do us any good to lower our income taxes on one hand, while reducing the buying power of our disposable income – and the quality of our lives – on the other. And if you’re not really serious about lowering our taxes in the first place, well then shame on you for promising you would.
No question about it. As far as I can tell, Senator Obama has promised to reduce taxes for most middle and lower income Americans. He’s done this, not because it makes any sense, but because he wants to be elected President, and he doesn’t have the nerve, the integrity or the respect for the American electorate to tell us the truth. Bold talk on my part, I know. But then I can prove it. I can prove that he’s not being straightforward with us by appealing to your intelligence and objectivity with the following simple argument. Here goes…
As of today, our national debt is approximately $9.85 trillion.* Of this total, $5.67 trillion is held by the American public. The other $4.18 trillion, by the governments of other nations. Needless to say, $9.85 trillion is a huge number. To date, in the first 11 months of this federal government fiscal year, we have paid over $431 billion of interest on this debt. It’s breathtaking.
The inflationary impact of our national debt is particularly insidious for its relatively subtle effects on our economy which impact our middle and lower income citizens more dramatically than higher income families – which is almost always the case. The higher income your family, the more easily you can suffer the impact of any adverse economic situation, and the more effectively you can pass through those costs to protect your disposable income. Interest we pay on the national debt reduces our government’s disposable income, reducing the level of all manner of government services we can afford. Not incidentally, the more we borrow, the greater the upward pressure on the cost of money our people and businesses borrow.
Our Congress is getting ready to approve the expenditure of $700 billion to resolve an economic crisis which may not be real and/or may already be in the process of resolving itself without the need for government assistance. Add this $700 billion to the national debt, because we don’t have the money.
On top of all this debt, Senator Obama has proposed lower taxes to middle and lower income families – which will, of course, reduce government revenues. One estimate is that the income tax reductions he’s proposed for 2009 alone will reduce government revenues by $448 billion, $5.87 trillion over the next 10 years.**
At the same time, he has proposed an exceptionally liberal-minded array of programs. Basically, he’s promised everything to everyone almost without regard to the cost of providing those services.
Okay, here’s the question. You answer it, and then let me know if you still believe Barack Obama is going to lower taxes for 90% of America’s families, while providing all new programs and services he’s promised us. How is he… No, to be fair, how are we going to pay for all this? For the $700 billion to bail out our financial sector, for all the programs Senator Obama has promised us, and for the reduced taxes to 90% of our families? Here are our choices:
Charge it to the national debt, but that’s not good for the reasons I’ve already mentioned.
Increase taxes on higher income families. These are the professionals and small business owners who make six figure incomes, but you know what? Many of these people are just going to pass through those higher taxes to the consumers they serve, directly or indirectly, by raising the prices of the services they provide and the products they produce. If they don’t, their disposable income and profits will be reduced, as will their levels of consumption and investment with negative consequences for employment and the economy overall.
Increase taxes on corporate profits. Same problem. Those taxes will be passed through to the same middle and lower income families Senator Obama is promising to help. It may be easier to get votes telling people you’ll lower their taxes at the expense of higher income families and businesses, but it’s nonsense. Who’s he kidding? Someone’s going to eat the effect of those higher taxes.
Why not just reduce the level of new programs and other government services Senator Obama is promising? Of course. Unfortunately, it’s a topic on which Senator Obama has been strikingly vague, because telling us, for example, that we can’t afford to do universal healthcare isn’t what his supporters and the undecided want to hear.
So what does that leave? Well, for one thing, he can save $448 billion next year alone by not lowering middle and lower income taxes. And if he’s sincerely concerned about stimulating the economy, he can keep constant or even reduce taxes on higher income families and businesses, especially small businesses which need all the help they can get just to maintain their current levels of employment and growth.
On several occasions, Senator Obama, when pressured by interviewers, has admitted that he’ll be re-evaluating all his positions – including on spending and tax relief – depending upon economic conditions after he’s elected. From his March 27, 2008 interview with CNBC’s Maria Bartiromo, “Well, look, there’s no doubt that anything I do is going to be premised on what the economic situation is when I take office.”*** Of course it will, and we want the President to be flexible, but let me translate for you: “None of those lower taxes and the endless array of government services I’ve been promising are chiseled in stone. I don’t have the experience or the time to really figure all this out right now, and there’s no way I’m giving you any bad news, however real. Give me a break. I’m just a little more than month from realizing a dream I’ve had ever since I was a kid. Why blow it now with the truth?”
*TreasuryDirect.gov… The Extent of Our National Debt.
**TaxPolicyCenter.org… The Tax Effect of Senator Obama’s Program, compiled from various sources they cite.
***See the complete interview at CNBC.com… Maria Bartiromo’s Interview With Barack Obama.