A Friday evening editorial at the Wall Street Journal explains.
Discussing taxes Friday, Obama claimed that “… on Tuesday night, we found out that the majority of Americans agree with my approach.” No we didn’t, the Journal shows, at least if we’re to believe the exit polls people on his side of the aisle claim tell us all we need to know (bolds are mine):
The President’s Tax Bludgeon
Instead of an olive branch, the President keeps campaigning.
… that’s not as clear as he claims. One exit poll question on Tuesday asked “Should taxes be raised to help cut the budget deficit?” The answer was no by nearly 2 to 1.
… Mr. Obama’s hard line will cheer his left flank, which wants him to drive Republicans into submission on taxes and everything else. Apart from the joy of humiliating the GOP, the calculation seems to be that tax rates don’t matter to the economy. So raise rates with impunity, pocket the extra revenue, and only then discuss whether to cut any spending or reform the tax code or entitlements.
But to what end? Congress’s Joint Tax Committee estimates that raising taxes on income over $250,000 ($200,000 if you’re single) will raise $823 billion over 10 years on a static revenue basis. That includes all revenue from increases in marginal income tax rates, capital gains, dividends, reinstating the phaseouts of deductions for the wealthy and also treating dividends as ordinary income.
That’s only $82 billion a year in extra revenue when the federal deficit in fiscal 2012 was $1.1 trillion. So even if Mr. Obama gets his way, his tax increase would only cut the deficit by about 7.5%. And that assumes the tax increase would have no impact on economic growth. If growth slows below its already paltry pace, tax revenue would rise by less than expected despite the higher rates.
… he’s taking a big gamble both with the economy and his own second term.
… To succeed in a second term, Mr. Obama needs faster economic growth above all else. He must have GDP growth of 3%-4% a year, instead of the 1%-2% of his first term, in order to raise incomes and provide the revenue he wants to reduce the deficit and pay for his spending. Growth at this pace is what helped Ronald Reagan and Bill Clinton survive other setbacks in their second terms.
The success of those two-term Presidents was also bipartisan. Reagan passed tax reform when Democrats ran the House. Mr. Clinton agreed to a balanced-budget deal with Newt Gingrich that cut the capital gains tax rate to 20% from 28%. If Mr. Obama wants to avoid a fiscal and political crash, he’ll have to stop campaigning and start governing.
Sadly, that’s not going to happen.
Unfortunately, the Journal, like so many others, assumes that Obama is even interested in acceptably growing the economy. The truth is that he has hasn’t shown legitimate interest in doing that. From his viewpoint, if that happens, fine (at least enough of it to give him political cover with his media lapdogs). But what’s really important to him, as he has demonstrated time and again during his two-year campaign in 2007 and 2008 and his nearly four years in office, is “fundamentally transforming” the nation into a top-down, government dependent-dominated state, the consequences be damned.
He doesn’t care that going after tax increases, solves less than 10% of the problem, or that changing marginal rates virtually guarantees that the increase in tax collections will be nowhere near what the static estimate cited above. He only cares about “revenge,” while continuing to drive what has until now been the greatest economy in the world towards financial oblivion. He’s figuring that regardless of what happens, he and his party will emerge as the political winner. He may be right, but even if he isn’t, that’s okay by him. The “transformation” will have been accomplished.