In a speech in the Rose Garden Monday, President Barack Obama unveiled a $3 trillion deficit-reduction plan with some $1.5 billion in tax hikes. It offers some cuts in Medicare but does not raise the eligibility age, nor does the plan touch Social Security. The president also proposed what he calls the “Buffett Rule,” named after billionaire Warren Buffett, to raise taxes on capital gains from investment income from 15 percent to 35 percent.
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“President Obama says his plan isn’t ‘class warfare, it’s math.’ Well, here’s some math: If the federal government were to take every penny of income above $250,000 from the 2 percent of households that earn more than that amount, the total would be $1.4 trillion.
“If the federal government were to take every penny of net worth from the nation’s 400 billionaires – including Warren Buffett – that would total another $1.3 trillion. Combine the two amounts and that totals $2.7 trillion, approximately $1 trillion less than needed to cover this year’s federal budget. And once all that money is spent it’s gone. Those billionaires would be paupers with no money to invest and hire people.
“Federal spending has grown from $1.8 trillion 10 years ago to $3.7 trillion this year, which exceeds growth in prices, wages, gross domestic product, population, and any other economic or demographic measure that could justify such growth.
“Federal spending grew 32 percent during the eight years of the Clinton administration, which saw a relatively strong economy. It grew more than 80 percent during the eight years of the Bush administration, which ushered in this recession. The more government spends, the more it drains resources from the private sector. Until we have a president and lawmakers who recognize this, no amount of taxation will ever be enough to balance the budget or improve the economy.”
“President Obama protests too much. His denial that these proposals are class warfare shows, in fact, that they are. The well off – the people who create wealth in this country – already pay a greatly disproportionate share of the taxes.”
“What the country needs is true tax reform that lowers rates, reduces deductions, and adds certainty for the future by requiring a super majority to alter the new code. This by itself should expand revenue to the government, perhaps substantially. Including some revisions in investment income taxes might be advisable, but keep in mind that when you tax something you get less of it.
“The ‘Buffet Rule,’ as proposed, would substantially reduce investment activity when the country desperately needs investment. It would also freeze assets to avoid higher taxation when those monies might be better allocated elsewhere and send investors into less productive ventures that are tax-avoiding loopholes in the current tax system. The outcome would be much less revenue than Obama’s static analysis suggests – perhaps less than is currently generated by the 15 percent rate. Implementing the entire Obama plan would most assuredly send the economy into a deep contraction.”
“One flaw of the president’s plan is that it would destroy Social Security for those who have already paid in. Social Security is one of the biggest budget burdens – even though it was supposed to be a get-what-you-pay-for plan. It never was, of course, but the president’s proposal would tear away that fig leaf altogether and make it explicitly a welfare scheme – a forced transfer of wealth from the ‘rich’ to the elderly.
“That would mean future Congresses could cut benefits with a clear conscience because there would be no pretense of them being earned. Or, more likely, they will destroy the investment portion of the economy by overtaxing the rest of the public, or inflate the currency, or both – which is Obama’s current approach. Either course would be a disaster for the elderly and the general public, alike.”
“Buffet’s Rule is a clever ploy to divert attention from the task of promoting a recovery from the recession and toward the subsidy of favored liberal constituencies, especially labor unions. It is also a battle of the billionaires who have already made their fortunes against the millionaires who are poised to invest their smaller fortunes into productivity-enhancing projects, thereby stimulating the recovery. Just the threat to tax the investors who have the promise to be successful, will be sufficient to delay and perhaps deter the recovery. That is economic suicide in the extreme.”