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I’m still digesting Barack Obama’s recent interview with CNBC’s Maria Bartiromo.
Obama said he wants to build an economy that works for all of America, “not just a small sliver of America.” He wants to create a “climate for sustained economic growth.”
And how does he plan to do that?
Jack up the capital-gains tax rate. Raise the top marginal income-tax rate. Index the minimum wage to inflation. Renegotiate the North American Free Trade Agreement.
He hedged a bit. He said anything he would do would depend on the economic situation at the time. But obviously, there’s something wrong with this picture.
As Bartiromo pointedly observed, Obama would “put pressure on the companies and the people that are actually creating jobs, during a recession.” And his trade policy would undermine one of the few economic sectors — exports — that’s in excellent shape.
Obama replied that the only way for the economy to move forward is to make sure consumers have money in their pockets.
It was pure demand-side Keynesian economics, with a spritz of wealth-envy socialism. To heck with producers. Only consumers matter.
Of course, both matter, and Obama is not alone in his outlook, which is widely shared by many politicians. That’s especially true of those who have spent only limited time in the private sector, such as Obama. It’s the private sector that creates the wealth on which the non-profit and government sectors feed.
To many who share his view, the corporate world, the world of business, the movement of stock prices and financial markets, have little or nothing to do with the average person.
So they forget that the creation of every job in this country depended at one time or another on the willingness of an entrepreneur to assume a risk. They see little consequence in raising those taxes that retard growth by reducing the payoff from investment and risk-taking.
Obama breezily described how he was told by Warren Buffett and others that raising the capital-gains-tax rate from 15 percent to, oh, 25 or even 28 percent — a near-doubling — would have little distorting effect.
The Democrats are keen to wipe out the Bush tax cuts, which also lowered the tax on dividend income to 15 percent. Apprently, they believe that’s not something that affects the average Joe.
Really? Last Tuesday, the lead story in The Wall Street Journal reported on older workers forced to delay retirement, not only because of the subprime mortgage crisis, but because of the poor performance of the stock market, which has been supported the last few years by lower taxes on dividends and capital gains.
Union leaders often engage in rhetoric that suggests that large industrial corporations are evil incarnate, even though union pension funds are chock full of shares in large corporations, as well they should be. When business profits, share prices rise — and retirements and college funds held by average people are more secure.
Democrats repeatedly complain about “tax cuts for the wealthy,” as if the Bush tax cuts had squeezed middle-income households more than the rich. Not so: A recent Congressional Budget Office report noted that after 2001, the total effective tax rate paid by the middle fifth of households fell steadily to its lowest level since 1979.
Thanks to the Bush tax cuts, the tax burden has declined for all income groups, but lower income groups experienced more relief in terms of percentage-point reductions than did the wealthiest households. The effective rate for the top 1 percent has declined by less than one percentage point. For the middle and lowest, it fell by nearly 3.
Meanwhile, the share of the income tax paid by the top 1 percent has grown even as rates have fallen. In 2004, the top tier earned more than 16 percent of the national income, but those families paid nearly 37 percent of the nation’s income-tax bill.
What’s “unfair” about that? Jacking up rates to where they were before the Bush tax cuts, as so many Democrats advocate, would probably also return the share paid by the wealthy to where it was before those tax cuts — while saddling the rest of us with a lackluster economy.
Memo to Sen. Obama: If you want more jobs, encourage more risk-taking. You can’t do that that by jacking up the rates that punish investment and entrepreneurship.
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