... We are beginning to sense the debate is not about “stimulus” (politicians did not even read the various bills that they rammed through and care little about the fiscal impact from them). Rather, we are witnessing an inversion of Reagan’s sort of playing chicken, once called “starve the beast” (which I thought was a wrong notion), a philosophy of cutting taxes to cut revenue to starve the federal government’s excessive spending in the face of spiraling deficits.
Under Obama’s “gorge the beast” version, America will simply write so many bounced checks, run up such an enormous $10 trillion debt, that taxes will have to rise on “them”– and wasn’t this really the point of it all anyway: to “spread the wealth around” and “never let a crisis go to waste”? Since new programs never shrink, but, like Johnson grass, grow with impunity, and since Democrats, even more so than wasteful Republicans, don’t worry about deficits, taxes must escalate to avoid catastrophe.
The Bad Guys
Ponder a simple fact: The Obama administration is dispersing income lavishly to those who do not pay taxes and it will have to be paid for by those who do. For all the talk of that awful percentile who make over $200,000, this administration has not distinguished the hyper-rich 1% that make untold money (e.g., the Buffets, Soroses, Turners, Gateses, Kerrys, Gores, etc), from the much more demonized, larger 5% of the population whose income does not come from investments and insider influence and deal-making, but rather from providing more tangible goods and services — the family doctor, the plumbing contractor, the small lumber company owner, the car dealer, the local family-held insurance company, the airline pilot, the car-leasing firm, the patent attorney, etc.
“Their Fair Share”
Last fall we heard that this percentile was unpatriotic, did not wish to spread the wealth around, and had made off like bandits under Bush. But the fact is, to quote Mayor Gavin Newsome’s “like it or not,” they are precisely those who decide most dynamically whether to hire, fire, expand, contract, buy/sell goods, etc.
And the results of the Obama war against them are threefold: 1) in major key states, the productive minority’s state income taxes will near or exceed 10%; their federal rates will go to 40%; the abolition of caps on FICA will ensure 15% plus of most of their income will go for new Medicare and Social Security bites; and they may well be eligible for a newly proposed punitive health-care surcharge tax of 4-6%.
Add It Up
If one were to add all that up (forget rises in sales taxes, inheritance taxes, luxury taxes, etc.), then one can get to 70% of one’s income. So right this minute, the electrical contractor is thinking:
“I made $412,000 last year due to Saturday jobs, overtime, risky bidding, gambles on new equipment, and new lines of credit, but under Obama I will pay maybe $50-80,000 more of my income to the government. In other words the cost of, say, hiring two more entry-level electricians, or the cost of outfitting an entire new van with boom and equipment, or what I cleared every Saturday last year — all that will go to the government.”
Ripples of Doubt
And that means rippling throughout this key sector of the economy — even before these taxes have been enacted — are hesitation, stasis, and ultimately constriction — at first for psychological reasons, soon confirmed by the actual facts of less money. In short, very bright people will be thinking how to hide income, how to barter, how to slow down and not produce goods and services, rather than blast full speed ahead and enrich angry others. ...
Read it all here.