This column by ACRU General Counsel Peter Ferrara was published on March 10, 2014 on Forbes.com.
In promoting his economic program in the early 1960s, President Kennedy told the American people,
“It is a paradoxical truth that tax rates are too high today, and tax revenues are too low and the soundest way to raise the revenues in the long run is to cut the tax rates….[A]n economy constrained by high tax rates will never produce enough revenue to balance the budget, just as it will never create enough jobs or enough profits.”
“Our true choice is not between tax reduction, on the one hand, and the avoidance of large federal deficits on the other….It is between two kinds of deficits – a chronic deficit of inertia, as the unwanted result of inadequate revenues and a restricted economy – or a temporary deficit of transition, resulting from a tax cut designed to boost the economy, produce revenues, and achieve a future budget surplus.”
Kennedy explained further that the best way to promote economic growth, “is to reduce the burden on private income and the deterrents to private initiative which are imposed by our present tax system – and this administration is pledged to an across-the-board reduction in personal and corporate income tax rates.”
Kennedy actually proposed and campaigned on an income tax rate cut of roughly 30% across the board, at all income levels. That served as the model for the tax rate cuts promoted by Jack Kemp in the late 1970s, which were adopted by Reagan in the 1980 campaign, and later implemented after he became President.
Kennedy’s proposed tax rate cuts were adopted in 1964, after his 1963 assassination. Kennedy’s plan cut the top income tax rate from 91% to 70%, and reduced the lower rates by similar magnitudes. The bottom rate was cut from 20% to 14%.
In response, the economy and federal tax revenues boomed until the end of the decade. By 1966, unemployment had fallen to its lowest peacetime level in almost 40 years! U.S. News and World Report exclaimed, “The unusual budget spectacle of sharply rising revenues following the biggest tax cut in history is beginning to astonish even those who pushed hardest for tax cuts in the first place.” Arthur Okun, the administration’s chief economic advisor, estimated that the tax cuts expanded the economy in just two years by 10% above where it would have been.
But all we have gotten from President Obama is higher tax rates for almost every major federal tax. On January 1, 2013, the Bush tax cuts of 2001 and 2003 were extended for everyone, including the middle class, the “working class,” and the poor, except for the top 3% of income earners, which suffered a major tax increase as a result. The same top 3% also suffered the new Obamacare taxes going into effect at the same time, even though the so-called “rich” already pay far more than their fair share of income taxes.
As a result, the tax rate for capital gains increased by nearly 60%, as did the tax rate on corporate dividends. Income tax rates on the disfavored taxpayers increased by nearly 20%. Those disfavored taxpayers can be otherwise called the nation’s employers, investors and successful small businesses. In other words, the sources of America’s jobs. But our career “community organizer” President doesn’t understand anything about the sources of America’s jobs.
Moreover, under President Obama, America’s marginal corporate income rate, at nearly 40% counting state corporate income taxes, is now the highest among all advanced economies, with no relief in sight. By sharp contrast, even the substantially socialist European Union has cut its corporate income tax rates in recent years from an average of 38% to below 25%. Even Communist China has cut its rate below 25% as well. In Germany, the corporate tax rate has been cut to 18%. In Canada, which has boomed while Obama has been America’s President, the corporate tax rate has been slashed to 15%.
President Obama last year also permanently restored the death tax, which Congress had voted to phase out, at a 40% rate on estates over $5 million, not very much for successful small businesses and farmers. That represents a fourth layer of taxation on capital investment, counting the personal income tax, the corporate income tax, and the capital gains tax. Capital investment is the source of new jobs and wage increases for working people in our capitalist economy. But our “community organizer” President doesn’t understand that.
That anti-growth Obama tax policy, Obama’s excessive regulatory burdens and barriers, and destabilized prospects for the dollar, are the reasons why real economic growth for all of 2013, the fifth year of Obama’s Presidency, was still less than 2%. There was only any economic growth at all in 2013 because of the sequester spending cuts, the House Republican majority that was elected to stop any further Obama policy atrocities, and the fracking oil and gas revolution on private and state owned lands, which Obama has shut down on federal controlled land and offshore. Such similar, almost negligible economic growth, well below America’s historical average, has continued for all of the more than 5 years now that Obama has been President, for the same reasons.
For all the previous 10 recessions since the Great Depression, all of the GDP lost during the recession was regained within 4 quarters of the recovery on average. For Obama’s “recovery,” that took four years. Moreover, for those previous 10 recessions, all of the jobs lost during the recession were regained within 2 years on average. Today, almost 5 years after the recovery began, we still have not recovered all of the jobs lost. President Obama’s first term brought America the slowest economic growth of any Presidential term since the Great Depression.
That adds up to the worst recovery from a recession since the Great Depression. The economic policies of ten previous Presidents produced better economic recoveries from recessions than the policies of Barack Obama. Even Jimmy Carter.
Moreover, Obama apologists cannot say that the recovery has been so bad because the recession was so bad. The American historical record is the worse the recession, the stronger the recovery. But not under President Obama. The recovery has been so bad because all of President Obama’s economic policies have been so consistently anti-growth.
Yet in his 2015 budget proposal, President Obama just proposes more of the same policies that have failed America so miserably for so long now under his Administration. He proposes still another trillion dollar increase in personal and corporate income taxes. His budget projects that his tax policies would double total federal taxes from 2013 to 2024. Federal taxes by 2024 under Obama’s policies would be higher as a percent of GDP than in all but 2 years of the previous 79 years since World War II, again according to Obama’s own budget projections.
Obama would use those increased tax revenues to increase spending by another trillion dollars by 2018 over 2013, to over $4.4 trillion, and by another $1.5 trillion by 2024, to nearly $6 trillion. His own budget projects that by 2024 we will be spending $812 billion, nearly $1 trillion, in debt interest alone. That is because President Obama will have added nearly $8 trillion to the national debt from the end of the 2008 fiscal year to the end of this 2014 fiscal year, almost doubling it, and actually proposes in his current budget to add another $7.1 trillion by 2024, reaching a total national debt by then of $25 trillion!
As House Republican Committee Chairman Paul Ryan has noted, the House Republican majority has now passed three budgets that would lead to a fully balanced budget, and even ultimately pay off the national debt. But President Obama’s 2015 budget proposal never balances the budget, or even reduces the national debt. Senate Democrats have announced that they will continue the new, emerging, lawless tradition of today’s Democrat Party by not even proposing or passing a budget this year, contrary to federal law.
Speaking at Powell Elementary School in Washington, DC on March 4, President Obama said regarding his budget, “It’s a roadmap for creating jobs with good wages and expanding opportunity for all Americans.” Sillier words were never spoken. His 2015 budget message says that his budget proposal “provides a roadmap for accelerating economic growth, expanding opportunity for all Americans, and ensuring fiscal responsibility.” Sillier words were never written.
Increasing taxes by still another trillion dollars on precisely the employers, investors, successful small businesses, and energy producers, banks, and other large businesses, that are the actual sources of jobs with good wages, while increasing government spending and debt by trillions more, is not going to create jobs with good wages, nor expand opportunity for all Americans, nor restore economic growth. Especially while continuing the same excessive overregulation and destabilizing monetary policies that have been hallmarks of Obamanomics.
President Kennedy could have told him that. Kennedy actually did create jobs with good wages, and expanded opportunity for all Americans, by doing just the opposite of Obama. Given President Obama’s pitiful record on economic growth, he should have the good sense to not even talk about promising growth at this late stage of his Presidency. But his rhetorical style is “Calculated Deception.”
America is learning by experience under President Obama that this President does not learn by experience. After 5 years of increasing taxes, federal spending, and debt, which has failed to produce economic growth and prosperity, but instead the worst recovery from a recession since the Great Depression, President Obama has proposed in his 2015 budget to do still more of the same. To recall a 1960s folksong, when will they ever learn?
A bipartisan majority exists in Congress for personal and corporate tax reform to lower tax rates, while closing loopholes. President Obama could lead that bipartisan majority to achieve such reform, just like Reagan did with his historic 1986 tax reform, which helped to extend the historic 1980s Reagan boom to 25 years, from late 1982 to late 2007. The lower tax rates from such reform would powerfully boost lagging economic growth and prosperity, creating the good paying jobs Obama keeps saying he wants, just like it did for Kennedy and Reagan.
But after Obama’s phony, poll driven campaign in 2008 calling for an end to partisanship, President Obama does not have even one bipartisan achievement. He has killed tax reform instead, by insisting that it must involve still another trillion dollar tax increase, to gain his support. His budget message is silent on any such bipartisan tax reform, even though Republican Ways and Means Chairman Dave Camp has publicly released just such a proposal, compromised to appeal to Democrats, and new Democrat Senate Finance Committee Chairman Ron Wyden has expressed interest in such reform. Instead, Obama’s budget message calls still further proposed tax increases on the nation’s employers, investors, and successful small businesses “tax reform.” Given Obama’s 2008 campaign shtick, his message to the American people is “Good Morning Suckers.”
After 5 years of telling us that renewed prosperity, economic growth, and good paying jobs are just around the corner, if we would just increase still further federal spending, deficits and debt, now the Obama Democrats tell us that they are liberating America from work. That they are, with all the logical consequences. Among those logical consequences is that today’s Democrat Party no longer represents working people.
Moreover, President Kennedy drew the line on Soviet expansionism, and ran to the right of Nixon in 1960 on national defense, lamenting the rise of an alleged “missile gap” with the Soviets. When the Soviets started installing nuclear missile launchers in Cuba, President Kennedy ordered a naval blockade of Cuba that forced the Soviets to back down.
But just two weeks ago, in Moscow, Russian Defense minister Sergei Shoigu announced plans to establish military bases in Cuba, Venezuela, and Nicaragua for the Russian Navy, and for refueling strategic bombers (to bomb what, or who?). That should have been the expected response to Obama Democrat, Secretary of State John Kerry, who announced in a Washington speech three months ago that, “The era of the Monroe Doctrine is over.”
Instead of challenging this Russian military expansion, or leading an effective response to Russia’s aggression against Ukraine, which would involve new authorization for export of America’s burgeoning natural gas supplies to the EU, President Obama is busy creating his own missile gap. In a perverse throwback to the Cold War Obama keeps telling us is long over, he negotiated and pushed through the 2010 “New Start” supposed arms control deal, which only actually advances Obama’s 1960s hippie policy of unilateral nuclear disarmament. That deal requires the sharp reduction of America’s nuclear deterrent from 5,000 deployable warheads to just 1,550. It did not require any reduction of Russian nuclear forces in return.
Obama Democrat, Undersecretary of State Rose Gottemoeller, Obama’s top arms negotiator, continues to promote still further, 1960s hippie, unilateral nuclear disarmament, proposing to slash America’s nuclear warheads to as low as 300. Not that this would even matter anymore. Obama refuses to even test America’s aging nukes for reliability, to determine how far natural nuclear warhead deterioration has gone. Instead, Obama is now promoting the Comprehensive Nuclear Test Ban Treaty, which would prohibit any further such necessary testing at all.
But not the Russians, or the Communist Chinese. They are both financing comprehensive nuclear modernization programs, with new warheads, and delivery systems, including missiles and bombers. Obama’s very unKennedy, unilateral disarmament, hippie thought response is again delivered by Gottemoeller: “We are not developing new nuclear weapons or pursuing new nuclear missions.”
But on our current course, that may not matter either. Just one nuclear missile fired from any shipping vessel off America’s east coast, one fired off America’s west coast, and for good measure one fired off America’s southern coast, and exploded miles overhead, would fry all electronics systems below. In an instant, no electricity for America. Existing cars, trucks, planes and trains, all of which include essential electronic systems, would no longer work.
Forget about driving to the grocery store, or to the drug store, or to the doctor’s office, or to the hospital. They would not have any delivered supplies for you anyway. In an instant, America would be hurled back to the 18th century. That is why a 2004 Presidential Commission concluded that in such an event, 90% of Americans would be dead within a year. As someone who drives to the grocery store every day, I know I would be. Even military vehicles will not work to rescue us. America’s missiles and bombers could not respond, even if we had the leadership to do so, which we do not.
On our current course, both Iran and North Korea will soon have the capability to carry out such a genocidal attack against the American people. Or it could be launched from Russian military bases in Cuba, Venezuela, and Nicaragua. A Kennedy or a Reagan today would be rushing to harden America’s electric grid, military, and transportation system against such an Electro-Magnetic Pulse (EMP) attack. But the New York Times, the Washington Post, and other Democrat Party controlled media are engaged in a cover-up of this crucial American vulnerability. Fox News, the Wall Street Journal, talk radio and other independent media urgently need to cover this emerging existential threat. Newt Gingrich is among the leading American experts regarding the threat.
Kennedy, Truman, and FDR were liberals. But they were true American patriots, who like Reagan, led the rebuilding of America’s defenses to defeat the Fascists, and the Communists. But today’s Democrat Party of Barack Obama, Elizabeth Warren, Bill DeBlasio, and Hillary Clinton is more Marxist than any party in Communist China, or formerly Communist Russia.