Critics of last night’s debate complain that the first half focused on irrelevancies. Unfortunately for Barack Obama, he didn’t do much better on the relevancies, either. Take for instance this portion of the debate when Charles Gibson asked him about the capital-gains tax rate and his plans to almost double it. Gibson makes it clear that raising tax rates reduce their revenue, but Obama assumes a greater revenue anyway — and that’s not even the most clueless part of the exchange:
SENATOR OBAMA: Well, Charlie, what I’ve said is that I would look at raising the capital gains tax for purposes of fairness. We saw an article today which showed that the top 50 hedge fund managers made $29 billion last year — $29 billion for 50 individuals. And part of what has happened is that those who are able to work the stock market and amass huge fortunes on capital gains are paying a lower tax rate than their secretaries. That’s not fair.
And what I want is not oppressive taxation. I want businesses to thrive and I want people to be rewarded for their success. But what I also want to make sure is that our tax system is fair and that we are able to finance health care for Americans who currently don’t have it and that we’re able to invest in our infrastructure and invest in our schools.
And you can’t do that for free, and you can’t take out a credit card from the Bank of China in the name of our children and our grandchildren and then say that you’re cutting taxes, which is essentially what John McCain has been talking about. And that is irresponsible.
You know, I believe in the principle that you pay as you go, and you don’t propose tax cuts unless you are closing other tax breaks for individuals. And you don’t increase spending unless you’re eliminating some spending or you’re finding some new revenue. That’s how we got an additional $4 trillion worth of debt under George Bush. That is helping to undermine our economy, and it’s going to change when I’m president of the United States.
MR. GIBSON: But history shows that when you drop the capital gains tax, the revenues go up.
SENATOR OBAMA: Well, that might happen or it might not. It depends on what’s happening on Wall Street and how business is going. I think the biggest problem that we’ve got on Wall Street right now is the fact that we’ve got a housing crisis that this president has not been attentive to and that it took John McCain three tries before he got it right.
And if we can stabilize that market and we can get credit flowing again, then I think we’ll see stocks do well, and once again I think we can generate the revenue that we need to run this government and hopefully to pay down some of this debt.
Read and listen very carefully to this. The higher priority for Obama isn’t to raise revenue; it’s to ensure fairness. In order to do that, he will have the government take a bigger share of the gains and redistribute them through social programs to others. The pretense of having more money acts as a veneer for good, old-fashioned redistributionism
And his example shows his bias. He talks about billionaires paying a different rate than secretaries on income, but that’s purposeful. The idea behind a lower capital gains tax is to encourage risk-taking. The secretary in this parable garners an income at much lower risk because investors have taken a risk in creating her job. When the risk succeeds, it generates much more taxable income across the board. When it doesn’t, the investors lose a lot of money.
If the risk carries a heavier tax burden, less money will go towards investment. People will instead put their money into safer, less risk-intense areas, such as savings or low-yield bonds and commodities such as gold. That will create fewer opportunities for employment, which translates across the board into less revenue for the government as well as a stalled economy. The surest way to start an economic disaster is to increase penalties for investment.
Obama’s blindness on capital gains reveals a hard-Left mindset. He sees investors always profiting and never losing, while the people who work at jobs created by successful investment as victims of this exchange rather than the beneficiaries of it. Obama wants to use the heavy hand of government to take away the rewards of risk from those who invested, and instead redistribute it to those who took no risk to create economic growth. In doing so, he will kill the engine that drives the American economy.
Obama either fails to understand how a free-market economy grows, or simply doesn’t care. Either way, it makes him a dangerous choice for the Presidency.