The liberal left is completely outraged that the president would break one of his campaign promises (to them) and compromise with the GOP on extending the current tax rates without raising taxes on high-income earners. For a picture of this outrage, see today’s featured video of Keith Olbermann doing his best impression of anger.
Those media outlets that haven’t completely tossed Obama overboard are making excuses for him. The New York Times wrote of the president regarding the tax deal that it “was not a compromise he could relish.” Fair enough, compromises don’t always give us what we wanted. What retirees and investors can’t relish is the idea that the estate tax has been reintroduced and any money over $5 million (think family business here) that they have when they expire will be taxed at 35%. In some that wealth may have already been taxed at the highest marginal rate twice! Apparently the third time’s the charm in liberals’ eyes.
Even the compromise plan will hurt America’s competitive ability. As James Taranto writes for the Wall Street Journal, “the deal creates incentives to avoid work and to die quickly.” That’s unfortunately true. America needs major tax reform of the kind represented by the Fair Tax or a flat tax. The current system, riddles with special interest giveaways and loopholes galore is so complicated that the middle class is getting hammered. If you don’t make any money, the IRS will pay you. If you make enough, you can probably hide most of your income from Uncle Sam’s clutches, but if you fall in the middle the 1040 will rob you blind. A fairer system can be devised where everyone pays at least a little to provide for the common defense, the justice system and the roads and bridges on which everyone relies.
Perhaps the biggest takeaway from the tax debate is that the president has admitted that lower taxes will help the economy through the trough it is in today. That’s an admission that has power. So far the president has acted as though raising taxes on Americans would somehow benefit the country’s lagging economy. This new admission blows that to pieces. There is no stepping back on taxes now. What will the president do in two years when he is running for reelection and the tax rates are set to increase yet again?
The admission will surely put the president in a bind come campaign season when he will most need to appeal to his liberal base. They surely don’t believe that lower taxes will allow for increased revenue or expanded economy, in fact it seems as if they believe that taxes have no effect at all on corporate decision-making or the competitiveness of American business. The New York Times is even spreading the rumor that the president may see a challenge from the left-wing of his party. The Times says that any primary challenger won’t have to actually win, but could force the president to move back to the left to defend his base. Though, the Times notes, this could weaken Obama so much that he loses his bid for reelection.
Such protests candidates don’t have to win more than a state or two to have an impact; they merely have to show up and sow division. It probably isn’t coincidental that none of the last four American presidents to face primaries while seeking re-election — Johnson, Gerald R. Ford, Carter and George H. W. Bush — survived to serve another term.
Conservatives hope that to be true. With government spending soaring beyond any previous figure, inflation and higher taxes are imminent threats. No one in the small-business owner camp wants to see that. The federal government is being aided by Ben Bernanke and the Federal Reserve.
Bernanke persists on telling Americans that inflation is low, and everything is fine. If that were so, what’s going on in commodities markets? Have you seen the price of cotton?