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Higher Taxes: The Definition Of Recklessness

Investor's Business Daily
October 9, 2010
By Ernest S. Christian and Gary A. Robbins

In a democracy, high-ranking public officials should at least be held to the same minimum standards of accountability as reckless drivers and other tort-feasors when, heedless of the consequences, they knowingly do things that are almost guaranteed to harm others.

For example, although the consequences of impairing the economy with a $700 billion tax increase starting in January are well-known and cruel - nearly a million more jobs will be lost and family incomes will shrink - President Obama and the Democrats in Congress are pertinaciously rushing headlong to do it anyway.

This is like driving the wrong way down a one-way street. When the inevitable crash occurs, the resulting mayhem is no accident; it's deliberate and the punishment should be suitably harsh.

In the president's case, he must surely know that the harm from his scheme to increase tax rates on the "rich" (couples making as much as $250,001) will fall heavily on the middle class and the working poor. The most famous academic work of the president's recently resigned chief economist (Christina Romer) tells him exactly how the poisonous effects of his high tax rates will spread throughout the economy to people at all income levels.

The Center for Data Analysis at the Heritage Foundation recently used a well-known nonpartisan econometric model to test the outcome of the president's tax-the-rich stratagem. Even when the analysts built in assumptions especially favorable to Obama, the results of his "rich only" tax increase are devastating to jobs and growth, hitting hard at everyone up and down the economic ladder - especially the middle class.

GDP will be made smaller by at least $1.1 trillion over the next decade, and more than 800,000 jobs will be lost by real people who will suffer real harm. They are not mere statistics. And keep in mind that these dour econometric projections are the "best case" example. The actual results experienced by millions of Americans are likely to be worse.

President Obama has been warned repeatedly about reckless taxation and other offenses. Former Treasury Secretary George P. Schulz, the most broad-gauged occupant of that office since Alexander Hamilton, recently took to the public square to instruct the president chapter and verse from the bible of common-sense economics.

He was joined by Professor Michael Boskin of Stanford University and a phalanx of other renowned experts in urging the president in no uncertain terms to stop endangering America's economic future with more taxes, heavy-handed regulations, runaway spending and record-setting deficits and debt.

Insofar as intent is concerned, the president must surely know in advance that he cannot tax his way out of the widely condemned deficit and debt crisis his excessive spending is creating.

Careful econometric analysis shows that, after taking into account the economic carnage wreaked by the higher tax rates the president proposes, the net additional tax revenue collected from the damaged economy will not be $700 billion as claimed - but, instead, will over the decade be only $270 billion greater than had tax rates not been increased.

Moreover, all but $21 billion of the total $270 billion net 10-year revenue gain will be offset by a $249 billion increase in spending for unemployment compensation and other income-linked welfare payments triggered by tax-induced joblessness and lower incomes. As a result, the econometric model projects that the public debt will in 2020 be only $21 billion less than had the purported $700 billion tax increase not occurred.

Contemplate the moral absurdity of a double shuffle that deliberately runs up federal spending to crisis levels, and then imposes a tax increase that does so much economic damage it barely raises enough additional revenue to pay for the increase in federal spending triggered by the economic decline caused by the tax increase.

And to what purpose is this destructive circularity? Spending will have been increased substantially, deficits and debt will continue to escalate and - here's the kicker - the stage will be set for additional tax (and spending) increases in a self-perpetuating spiral of government growth and economic decline.

These and other readily foreseeable tragic consequences of Obama's plan to increase tax rates are classic illustrations of the "spend-tax-destroy syndrome" that has so far defined his administration - and that has over the last 50 years increasingly become the dominant characteristic of the federal government in general.

Thus the Heritage econometric study and Christina Romer's research paper - plus the irrefutable testimony of experience and history - are Exhibit A in the People v. Big Government case now pending in the supreme court of public opinion.

- Christian, an attorney, was a deputy assistant secretary of the Treasury in the Ford administration.
- Robbins, an economist, served at the Treasury Department in the Reagan administration.

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