To What End, Taxes?

President Obama’s twofold plan to cut the deficit and create jobs appears to have a different goal entirely.

by Cody Hensarling

In case you haven’t noticed, the outlook for the US economy is not particularly bright. If you happen to have investments in the stock market, you’ve noticed, as this is recognized as one of the worst weeks in stock market performance history. For fans of President Obama’s economic policies, this has to come as a surprise, as the President just recently revealed a “3.1 trillion dollar deficit reduction plan” in conjunction with his much-hyped American Jobs Act. Typically, the markets respond positively to plans designed to boost the economy, regardless of their details. This is certainly an exception to this general rule, and leads one to believe that most investors view this “deficit reduction” and “jobs” plan as something that will not lead to much-needed economic growth.

Rather than lambast President Obama for proposing what looks to be an ineffective (or worse) plan, it is worth considering the alternative proposition: that these two plans have a very different objective than economic growth. To be fair, one could argue that the small likelihood that either of these initiatives passes implies that the motive on the part of the President is purely political. However, it is important to consider what the effects would have if passed, as stranger reversals of prognostication have occurred on the part of our duly-elected Congressional representation.

As far as what the goal of the plans is, Dr. Charles Krauthammer suggested an interesting theory today, while examining remarks from the President’s past. In a 2008 debate, Charlie Gibson asked Barack Obama about his support for raising capital-gains taxes, given the historical record of government losing net revenue as a result. Obama persevered: “Well, Charlie, what I’ve said is that I would look at raising the capital-gains tax for purposes of fairness.” (http://www.nationalreview.com/articles/278065/return-real-obama-charles-krauthammer)

Fairness? Is Krauthammer’s suggestion that President Obama would be willing to sacrifice economic growth to pursue punitive policies on a certain class of Americans founded? Well, the Washington Post opinion desk seems to think that it is and is entirely justified. “The GOP and its upper-crust patrons have been waging an undeclared but devastating war against middle-class, working-class and poor Americans for decades,” Washington Post Opinion writer Eugene Robinson writes. (http://www.washingtonpost.com/opinions/obamas-tax-plan-is-common-sense-not-class-warfare/2011/09/19/gIQA5N2sfK_story.html?hpid=z3) Ah, so these plans could be designed to punish the wealthy and Republicans, who have “waged war” on the rest of America.

This idea might explain why Obama’s plan to save money is so underwhelming. A closer examination of President Obama’s deficit reduction plan includes savings from “ending participation in the conflicts in Iraq & Afghanistan”, which is pretty much the definition of a cut that isn’t a cut. Also, the President thinks over $240 billion dollars can be saved by “reducing Medicare overpayments”. (http://www.washingtonpost.com/business/economy/breaking-down-obamas-debt-plan/2011/09/19/gIQARsFyfK_graphic.html) Have you ever known a bureaucracy to be particularly effective at identifying and eliminating waste? Furthermore, if the overpayments are known and documented, why would it take a specific plan to end them? If these “savings” weren’t enough, don’t worry, because it gets better. You see, the President wants to end tax cuts; but only for the “wealthy”. The idea of punishment rears its ugly head once again. The” wealthy” must pay more, even though that includes small businesses, which surely will be unable to expand their businesses due to the higher tax burden. This is supposed to lead to an increase of jobs?

Even staunch Democrat and traditional Obama supporter Former President Bill Clinton says Obama’s approach to taming the federal deficit “is a little confusing” and suggests that raising taxes would blockade any efforts to revive the stale U.S. economy.Clinton has conceded that he was somewhat baffled with President Obama’s newly-announced tax plan — the “Buffett Rule” — which would raise taxes on individuals earning over $1 million (http://www.thenewamerican.com/economy/commentary-mainmenu-43/9089-bill-clinton-rejects-obamas-millionaire-tax-plan) When even the so-called “Patriarch of the Democratic Party” finds your economic plan not worth publicly supporting, it has to be hard to swallow.

Here’s the bottom line: when government uses its function to collect taxes as a tool to punish success and inflame divisions among the citizenry, nobody wins. Those punished keep less of their money, and those whose fortune looks rosier don’t directly benefit either, as the Federal Government is perhaps the least efficient entity in modern history when it comes to utilizing tax revenue. The size of government grows, the size of the economy shrinks, and the quality of life decreases for all.

At the Grassroot Institute of Hawaii, we believe that the opinion that the government is entitled to whatever revenue is “fair” by changing tax rates redistribute wealth ignores the basic fact that the money is NOT the governments. What someone makes is theirs. Taxes must be paid to support essential government functions, but this money that is used to pay the tax is the property of the citizen, not the government. When class warfare-inspiring rhetoric is used to say that the government “will let people have more money” through massaging tax rates, remember that this is entirely backwards. Taxes are not the government’s money that they deny citizens, but rather money that is given by citizens to the government. It is an important distinction, and one completely lost on President Obama.

Cody Hensarling is an intern at the Grassroot Institute of Hawaii.

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