Obamanomics “myths” and fairy tales

posted at 2:15 pm on April 27, 2011 by Ed Morrissey

Investors Business Daily hammers Barack Obama’s budget approach in two articles today as based on myths and fairy tales.  First, John Merline gets into the gritty details in rebutting Obama’s notion that we can solve the monumental budgetary problems we face with slightly higher federal income tax rates on the rich.  Merline offers a telling chart that shows the percentage of federal income tax revenue provided by the top 1%, and explains how little impact Obama’s promise to roll back the Bush-era rates will have:

But in making the case for tax hikes, Obama has made several claims that, while they may strike a chord with voters, perpetuate myths about taxes and the rich. …

Obama would let the top two tax brackets go to where they were before those rates were set. He’d raise taxes for those making as little as $200,000, not just those worth at least a million dollars, and maintain the rates for everyone else.

However, when it comes to “affordability,” lower rates for the “rich” were the smallest part of the Bush tax cut. Extending those rates would reduce revenues by about $700 billion (not the $1 trillion figure Obama has peddled) over 10 years, according to Treasury data. Letting these rates expire is assumed — and thus not counted — in Obama’s 12-year plan.

But keeping all the other Bush tax rates would “cost” about $3 trillion — making them, by Obama’s logic, four times as “unaffordable” as the cuts on the rich.

Whatever issues we have at the moment with the federal tax system, the results show that the argument that it’s insufficiently progressive are simply false.  Merline’s chart shows that the top 1% of earners have paid an increasing share of overall federal income-tax revenues since 1980:

The issue of revenues may well be due to the progressive nature of the tax system.  Any system this dependent on the top 1% is vulnerable to sharp swings based on economic performance.  On the federal level, this is somewhat tempered by having a lower rate on capital gains, but those still add significant revenue to the Treasury.  California, for instance, has this same problem only to a greater degree, thanks to their very progressive income tax system, which relies more on capital-gains tax revenue.  A flat tax would provide a much more stable basis on which to produce reliable revenue.

Adding back the $700 billion over ten years hardly makes a dent in the projected $9-trillion plus deficits over the next ten years.  The problem isn’t that the wealthy aren’t paying their fair share, it’s that there isn’t enough income on that level to tax to close the gap.  In order to maintain current spending levels, we would need confiscatory rates of nearly 100% from not just the top 1%, but more likely closer to the top 10% or 15% of Americans.  Those are, however, the people we most need as investors in the private sector to create jobs and maintain a healthy economy.

We aren’t facing a revenue crisis; we are in the middle of a spending crisis.  Michael Ramirez makes the point bluntly in his excellent editorial cartoon for IBD today:

It’s the same old populist fairy tale that got us into the spending crisis we have at the moment.  Hopefully, Americans have grown up and stopped buying it.

Also, be sure to check out Ramirez’ terrific collection of his works: Everyone Has the Right to My Opinion, which covers the entire breadth of Ramirez’ career, and it gives fascinating look at political history.  Read my review here, and watch my interviews with Ramirez here and here.  And don’t forget to check out the entire Investors.com site, which has now incorporated all of the former IBD Editorials, while individual investors still exist.


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Note to Dana Milbank – get out of O’s ars, stop the crawling, and begin the thinking and objective reporting.

Schadenfreude on April 27, 2011 at 2:17 PM

Yeah, getting rid of those oil company subsidies should save us for less than 24 hours, but it will end a talking point.

J_Crater on April 27, 2011 at 2:21 PM

Just as in a free market products will be made to suit a demand, there is always a market of uneducated masses which will consume the lies of the left.

The ignorance of the people allow this to continue and the left seeks to perpetuate the ignorance. Sad.

Grafted on April 27, 2011 at 2:23 PM

Drowning In Debt

Liabilities: The latest finding that states have underfunded their pension and retiree health plans to the tune of $1.26 trillion is just the leading edge of an overwhelming wave of unfunded government promises.

According to the Cato Institute’s Michael Tanner, we’ve promised future retirees far more than we can pay at current tax rates. How much more? If these unfunded liabilities were included in our debt figures, it would reach $127 trillion — or more than 730% of gross domestic product. This debt tsunami isn’t hitting us by surprise. Indeed, Tanner and others have issued countless warnings that we’ve been promising future retirees far more than we can deliver, only to be met with indifference or hostility.

Galt2009 on April 27, 2011 at 2:23 PM

Love the cigarette in his mouth.

txhsmom on April 27, 2011 at 2:23 PM

Forgot the pixie dust and skittles. Oh, yeah, and the blue ribbon deficit commissions.

a capella on April 27, 2011 at 2:25 PM

Comics and charts are racist. /s

unlisted on April 27, 2011 at 2:26 PM

The issue of revenues may well be due to the progressive nature of the tax system. Any system this dependent on the top 1% is vulnerable to sharp swings based on economic performance.

[Shouldn't that be: the Oppressive nature of the tax system?]

So what does Obama want to do – make the situation worse by doing more of the Insane.

Of course, the response to this scheme making things even worse will be to…. Raise taxes once again..

And the plan after that has the same effect…..

Chip on April 27, 2011 at 2:31 PM

Yeah, getting rid of those oil company subsidies should save us for less than 24 hours, but it will end a talking point.

J_Crater on April 27, 2011 at 2:21 PM

Yeah, but raising taxes on the oil companies should promote more drilling and lower gasoline prices.

Oh….wait……….

iurockhead on April 27, 2011 at 2:31 PM

Comics and charts are racist. /s

unlisted on April 27, 2011 at 2:26 PM

zOMG… he put Obama in a jungle. Just like a monkey! It IS racist!!!/

Abby Adams on April 27, 2011 at 2:31 PM

Why isn’t he riding a frog?

StubbleSpark on April 27, 2011 at 2:32 PM

On myths and fairytales, the NYTs is best at both.

Liberals would like illegals, the dead and imprisoned to vote, repeatedly, if possible.

Schadenfreude on April 27, 2011 at 2:35 PM

If Obama was gay, Milbank and Matthews would be his two favorite gerbils.

BruthaMan on April 27, 2011 at 2:37 PM

I say ground AF-1 for about 3 days.

That might pay down the interest payments to the ChiComs for about 3 seconds. Stop campaigning and git ta work, Obama.

Key West Reader on April 27, 2011 at 2:37 PM

Why isn’t he riding a frog?

StubbleSpark on April 27, 2011 at 2:32 PM

Heh. Good recall.

Abby Adams on April 27, 2011 at 2:39 PM

I can not be troubled by all this RACIST NONSENSE from you former KKK members……I am busy setting my DVR for Barry Hussein’s appearance on Oprah

SDarchitect on April 27, 2011 at 2:44 PM

Myth and fairy tale, that Obama is smart.

The idiot will appoint the top moron, Panetta, to Defense.

Schadenfreude on April 27, 2011 at 2:46 PM

If Obama was gay, Milbank and Matthews would be his two favorite gerbils.

BruthaMan on April 27, 2011 at 2:37 PM

Heh, you’ve got an extra word in there. False assumption.

Schadenfreude on April 27, 2011 at 2:46 PM

People, it’s not the jungle… it’s Never Never Land…. as in Tinkerbelle!! Ramirez is brilliant! Odumbo is communist.

ultracon on April 27, 2011 at 2:49 PM

More of what has never worked before, will salve all our problems. -ObaMao

Slowburn on April 27, 2011 at 2:53 PM

The ignorance of the people allow this to continue

A few questions: Who exactly are these “people?” Do you include yourself? No, of course not.

What does it accomplish to say this? Do you propose a remedy?

Bat Chain Puller on April 27, 2011 at 2:54 PM

More of what has never worked before, will solve all our problems. -ObaMao

Slowburn on April 27, 2011 at 2:53 PM

Unprecedented!

unlisted on April 27, 2011 at 2:56 PM

Yeah, getting rid of those oil company subsidies should save us for less than 24 hours, but it will end a talking point.

J_Crater on April 27, 2011 at 2:21 PM

Problem is, they aren’t ‘subsidies’, that’s just Obamaspeak. They are normal deductions that any manufacturing company gets for work done in the USA. Eliminating them for ‘oil companies’ only in fact targets them unfairly.

Meanwhile he can throw money at the Brazilian oil company. Little Bammie’s well of hypocrisy reaches down to China.

slickwillie2001 on April 27, 2011 at 2:58 PM

If Obama was gay, Milbank and Matthews would be his two favorite gerbils.

BruthaMan on April 27, 2011 at 2:37 PM

Maybe, were it not for the inescapable that Barack Obama would only ever be gay for…Barack Obama.

Cylor on April 27, 2011 at 3:11 PM

.

Obamanomics = Trickle up Poverty

.

Lawrence on April 27, 2011 at 3:26 PM

You just don’t understand Obama’s plan Ed. None of us do. His plans are very complex and multi-dimensional for us to grasp.

Let’s just implement Obama’s smart power and watch his magnificense unfold.

Vince on April 27, 2011 at 3:28 PM

Obamanomics = Trickle up Poverty

Lawrence on April 27, 2011 at 3:26 PM

Hahaha. I’m going to steal that

Chuck Schick on April 27, 2011 at 3:48 PM

It’s the same old populist fairy tale that got us into the spending crisis we have at the moment. Hopefully, Americans have grown up and stopped buying it.

LOL, good one.

Midas on April 27, 2011 at 4:17 PM

If Obama was gay, Milbank and Matthews would be his two favorite gerbils.

BruthaMan on April 27, 2011 at 2:37 PM

Oh snap!

ornery_independent on April 27, 2011 at 4:32 PM