The Republicans did their best to hamstring the economy. But it's looking the Democrats want to completely kill it off with 1) increasing taxation, 2) raising energy costs, 3) increased unionization and 4) universal health care. Do you think they can really do it? http://news.yahoo.com/s/realclearpolitics/20080827/cm_rcp/the_four_horsemen_of_economic The Four Horsemen of Economic Apocalypse Dick Arney Like most conservatives, I look at the looming November election with a certain sense of gloom. While Senator McCain has a good shot at taking the White House, Democrats look certain to expand their majorities in both the House and Senate by considerable margins. As the Democratic Party gathers in Denver this week, it will lay out an aggressive policy agenda worthy of Franklin Delano Roosevelt. The 111th Congress has the potential to pass legislation of the magnitude of the New Deal and Great Society; indeed, we may face a historic turning point in our economy in the wake of the 2008 election. Examining the legislative proposals laid out by Democrats for a potential Obama presidency, I see the four horsemen of the economic apocalypse gathering on our horizon. The first horseman will bring higher taxation, which, as students of Economics 101 learn, destroys incentives to save and invest, reducing economic growth. When Ronald Reagan was elected president, one of his top priorities was to fight the stagflation and economic lethargy that dominated the 1970s. Legislatively, this plan became the Economic Recovery Tax Act of 1981, an across the board 25 percent tax cut, and the 1986 Tax Reform Act. Together, these bills lowered the top marginal tax rate from 70 percent in 1980 down to 28 percent by 1988. The long term effect of the tax cuts is clear, with a surge in activity and investment in the private sector that ended the lethargy of the 1970s and unleashed three decades of record growth. Between 1980 and 1988, inflation dropped form the double digit levels to bellow 5 percent and unemployment levels tumbled from over 10 percent to 4.5 percent The economic benefits of the tax cuts were summarized by President Clinton's Council of Economic Advisers in its 1994 Economic Report: "It is undeniable that the sharp reduction in taxes in the early 1980s was a strong impetus to economic growth." By letting the tax cuts of 2001 and 2003 expire, Congress will foist a crippling $280 billion tax hike on the American economy. As if that tax hike is not enough, President Obama's 'solution' to the impending bankruptcy of Social Security is simple: raise payroll taxes. This proposed payroll tax hike would cost employers and employees $1 trillion over ten years. At a time when the economy is still reeling from the housing market meltdown, hundreds of billions of dollars in new taxes will pummel American families and businesses. Higher income taxes are only part of the story. American companies currently face the highest tax rates in the industrialized world--hardly an incentive to expand in the United States. Rather than tackling this taxation crisis, the 111th Congress will be busy passing a windfall profit tax on successful companies and increasing payroll taxes across the board. In an era when tax rates are falling across the globe, American families will bear a greater tax burden while American businesses will find it more difficult to compete. The second horseman, seen lurking Capitol Hill for nearly a decade, is energy regulation. In the past Congress has rejected energy restrictions like Al Gore's Btu tax, the Kyoto Protocol, and, more recently, the Warner-Lieberman cap and trade program because of the devastating effects on energy prices and the economy. But cap and trade energy restrictions will certainly be back in the 111th Congress. Should they pass, the government will be in the position of rationing energy through a complicated system of carbon 'allowances,' creating not a free market for carbon but an artificial market where politicians decide which industries live or die as revenues and carbon permits from a cap and trade program would be doled out as environmental pork. The effect on energy prices will be devastating, to say the least. Research by the Heritage Foundation estimated that the costs of a cap and trade program could reach $4.8 trillion by 2030. While consumers would not pay a direct tax, they will pay for cap and trade legislation through higher electric and gas prices, as well as more for goods that are energy intensive such as food, cars, airfare, and manufactured goods. The National Association of Manufactures and the American Council for Capital Formation estimate that if cap and trade legislation became law, in six years gas prices would rise an additional 13 to 50 percent, electricity rates would jump 13 percent, and natural gas prices would climb 20 percent. By 2014, higher energy costs would translate into 850,000 lost jobs. The Congressional Budget Office says even a mild, 15 percent reduction in emissions will cost the average family $1300 more per year in household energy costs. Union bosses have their own horseman and have invested heavily in seeing his success. The SEIU union alone has committed to spending $90 million to support the Democrats. We can expect the third horsemen to unleash a new wave of union building legislation in the 111th Congress, beginning with "card check," a plan to boost sagging union membership by eliminating the secret ballot when it comes to the important decision of whether workers want to unionize. The effect will be felt in all sectors of the economy, from hotels to retail to manufacturing. American businesses would lose their dynamism and ability to react quickly to changing market conditions, threatening jobs and weakening the economy. Introducing new rigidities in America's labor markets does little to help our competitiveness in an increasingly global marketplace. The fourth horseman first began to ride during the 1930s under President Roosevelt, and came of age during the Great Society. This horseman is government-run health care, and a new Congress provides the perfect opportunity to expand. Rather than harnessing the market and empowering individuals, expect to see policies that expand the role of government in the health care system, with more bureaucrats, more price controls, and more taxes to pay for it all. Our health care system is facing a crisis of spiraling costs, but what is lost in the rush to socialize medicine is that the federal government is already the largest buyer and provider of health care services. Much of the higher cost is driven by government mandates, as well as an expensive regulatory mandates open to abuse under the current system. Not to mention the Medicare Trustees Report estimates that Medicare alone has an unfunded liability of $48 trillion. Our economy rewards entrepreneurship and investment, allowing all Americans to benefit. The policies of the four horsemen share a top down, command-and-control philosophy that is out of step with global economic trends and costly for America's taxpayers and consumers. In fact, the four horsemen have the potential kill the goose that laid the golden egg, shackling an economy that has allowed generations of Americans to prosper. Is this the legacy, high taxes and a stagnant economy, we want to leave our children?
<IMG SRC=http://farm4.static.flickr.com/3132/2800778955_8fed37e8de.jpg?v=0> Propensity to consume is greater at the bottom of the economic spectrum than at the top. There is no reason to give the top any tax cuts whatsoever. And as Obama's economic advisor and University of Chicago economist, Austan Goolsbee said last night on Kudlow and Cronies, raising the tax rate on the top earners to 1990 levels wouldn't cause any economic tailspin. These people don't spend so what's the point in giving them a tax cut? The McCain plan will actually tax your health insurance as regular income. Are we going to get gas holiday's too? Tomorrow's taxpayers will be busy paying back the debt Reagan, Bush, Paulson (if he bails out the GSE's) and Bernanke, via his Bear Stearn's bailout, have created.
That's true that the bottom economic rungs consume more and invest less compared to the top rungs. So Obama's tax plan should be good for China's economy as more of their cheap goods are consumed in the U.S., since those who earn the least can't afford to buy anything made in the U.S. anymore (ever go to a Walmart and see what all the "Made in" labels say?). It's private enterprise investment that makes America competitive (not government subsidies). Kill off the incentive to invest by the most productive portion of our society (the high income earners) and you kill off what gives America a competitive edge in the world market.....and in the process killing off the economic engine to generate jobs to benefit those on the lower economic rungs of the ladder. You ignore the economic strength brought by the Reagan Revolution. I suppose you'd rather return to the economic malaise of the Carter years in the late 70s.....were you even born then? Your economic naivete indicates not.
Here goes a question to all the ET economist out there: Did lowering taxes as the Reagan Administration did REALLY improve economic growth in the US...or did lowering the Federal Funds rate do it? http://en.wikipedia.org/wiki/Federal_funds_rate#Historical_rates Because, based on the years from the OP's article, they happen to match up to the same years as MAJOR rate cuts, if I am reading this right... Not that I am for giving MORE tax dollars to a government hellbent on taking away rights and spending money like a drunken sailor with VD in Thailand, but I have heard arguments from both sides of this issue, and after watching what the FED has been doing lately, I am more inclined to lean in the direction that FFR had more to do with growth than the cut in taxes... Discuss!
Does Obama believe the upper 2% of earners are just willingly pay additional taxes. Obama says people making 3 million a year will pay 750k more under his tax program. People with earnings like that have control over their salaries. They know with Obama's tax graft program they will have to defer income. If they defer income, then no money for the lower income people
Didn't Clinton Raise tax rates on the highest levels in the 1990's. We had one of the best decades of economic growth then. How is that explained since rates were actually raised.
in '93 clinton raised taxes for the next two years the market and the economy were flat...look at a chart. It wasn't untill Gringrich and the republicans took over congress after 40 years did things change. This fundmental chage is crystal clear on the charts. Look at a Dow jones chart and you will see the move that starts after the election. Investors trusted Newt and the contract with america to limit spending, change welfare. And of course in 4 years we had a balence budget with record revenues
Absolutely true. What kills me is Clinton taking credit for balanced budgets when he was not a fan of doing so until it was forced upon him when Newt and Co swept into power. That was their PLATFORM. The republicans balanced the budget, not Clinton. This was not difficult actually due to the tech boom. Receipts went through the roof. As for tax rates. If you want to see something truly interesting, take a look at the charts of Gov receipts from cap gains in the years after rates were raised to 28%, and then again when they were lowered to 15%. Its absolutely dramatic what a negative correlation exists between rates and revenue.
Does anyone believe republican lies anymore? Odd how corporations can afford to pay ceos who lose 10 billion ,150 million dollar golden goodbyes. Odd those corporations cant afford to pay social security tax on that,,or the stock options they pass out like party favors. Isnt it odd that 2/3s of all corporations dont pay any corporate tax whatsoever. Wow they really are over taxed. Republicans cut taxes from 70% and now we have a ten trillion dollar debt. Back in the old days we use to take those funds to build things, like roads,,bridges, schools,invest in the future..Following republican principles we dont even have spacecraft any longer,,instead we pay the russians to give us a boost up to the space station. Yeh republicans are big on thinking. They just keep pounding there heads on the wall wondering why there wonderful theories just dont work. A republican would rather keep his free lunch and pass the check to the middle class,,like mccains tax increase on the poor,,pay a tax on your health care benefits even though most people have sizable deductibles. Yeh lets tax the poor to keep the tax cuts for those who live on stock dividends. Yeh republicans keep up your policy of the pesofication of the american dollar thank you so much.