Shoving Us Over the Fiscal Cliff: Obama Blocks Tax Reform – Tea Party Nation

Shoving Us Over the Fiscal Cliff: Obama Blocks Tax Reform – Tea Party Nation.

Posted by Seton Motley

Note: This first appeared in the PJ Tatler.

 

President Barack Obama’s scant involvement with the Fiscal Cliff negotiations has been limited to his rigid insistence that the tax rate on the nation’s job creators be raised from 35% to 39.6%.

 

Tax reform – as a general principle and a way to raise revenue – is a presidential non-starter.

 

Now.  Last year, the president said this:

 

“What we said was give us $1.2 trillion in additional revenues, which could be accomplished without hiking taxestax rates — but could simply be accomplished by eliminating loopholes, eliminating some deductions and engaging in a tax reform process that could have lowered rates generally while broadening the base.”

 

Funny, that’s what House Speaker John Boehner just proposed.  $800 billion over ten years in additional coin for the realm.  By loophole-eliminating, code-simplifying – and thus job creating – tax reform.  Not via job-killing tax rate increases.

 

And the President’s tax hikes will kill jobs – 710,000 of them.  While only raising the same $800 billion over the next decade.

 

Do not misunderstand – this is not a defense of Speaker Boehner’s revenue raise.  The Feds don’t have a revenue problem – they have a spending one. Read more of this post

Obama’s Bumbling Class Warfare Agenda – Daniel J. Mitchell – Townhall Finance Conservative Columnists and Financial Commentary

Obama’s Bumbling Class Warfare Agenda – Daniel J. Mitchell – Townhall Finance 

We know that President Obama’s class-warfare agenda is bad economic policy. We know high tax rates undermine competitiveness. And we know tax increases will lead to even more wasteful and destructive government spending.

But analytical arguments won’t necessarily bring us victory. Let’s also mock the President’s divisive agenda with some amusing cartoons.

Our first contribution comes from Lisa Benson. This cartoon sort of reminds me of this Chuck Asay gem, presumably because of an engine that is overburdened by bad government policy.

You can find some of my favorite Benson cartoons here, here, here, herehere, and here.

Next we have one from Michael Ramirez. He’s used elements of this theme before, as you can see here and here.

More Ramirez gems can be found here, here, here, here, here, herehereherehereherehere, and here.

Our next contribution comes from Henry Payne. I’m not even sure why I like it, but I do.

More clever Payne cartoons can be seen here, here, here, here, and here.

Last but not least, we have one from Jerry Holbert.

This last one isn’t specifically about class warfare, but I liked it so it earned its way into this post. Holbert is new to me, but this is a good introduction.

Now let’s take this opportunity  to discuss one serious point. Obama presumably wouldn’t be pursuing a spiteful tax agenda if he didn’t think it was a political winner. Is it possible – notwithstanding the title of this post – that he’s right?

Ezra Klein makes that case in a column for Bloomberg.

…polls consistently show that increasing taxes on the wealthy is hugely popular. …Obama’s announcement on Monday was an effort to publicize one consequence of inaction: If Republicans refuse to extend the Bush tax cuts for only the bottom 98 percent of taxpayers, insisting instead on extending them for the top 2 percent as well, the resulting gridlock could trigger a tax increase for everyone. Obama wants to saddle Republicans with two unpopular tax positions simultaneously: Republicans are so intent on not raising taxes on the rich that they’re willing to raise taxes on everyone else.

In addition to arguing that the no-tax-hike-for-anyone position will actually lead to a tax-hikes-for-everyone result, Klein suggests that an anti-tax-hike agenda is a pro-spending-cut agenda.

 In the New York Times Magazine, Robert Draper reported what happened when a focus-group moderator for Priorities USA, the pro-Obama super-PAC, explained to voters that Romney and the Republicans want to cut deeply into Medicare while cutting taxes on the rich: “The respondents simply refused to believe any politician would do such a thing.” As in any game of poker, once the cards are down on the table, you usually find that one side actually holds the winning hand. The question is whether Democrats can call the Republicans’ bluff before November.

That passage includes factual mistakes (Medicare spending would continue to grow under the GOP reform plan, for instance, just not as fact as currently projected), but that’s not relevant in the world of politics. The real issue is whether the pro-tax agenda is a political winner. Or, to be more specific, is a class-warfare tax agenda politically popular?

I hope not, though it is possible.

For what it’s worth, I think the key is whether the GOP maintains a firm no-tax-hike stance. Here’s some of what I wrote last year about this topic.

…the no-tax-increase pledge helps the GOP because it sends a signal to all voters that they will not be raped and pillaged (at least in excess of what is happening now). This puts Democrats in a tough position. They can play the politics of class warfare (as Obama likes to do) and say only the “rich” will pay higher taxes, but voters don’t dislike their upper-income neighbors. Moreover, they probably suspect that Democrats have a very broad definition of what counts as rich, so they instinctively gravitate to the GOP position. After all, the only sure way of avoiding a tax hike on yourself is to oppose tax hikes for everyone. If Republicans put tax increases on the table, however, the politics get turned upside down. Instead of being united against all tax increases, voters realize somebody is going to get mugged and they have an incentive to make sure they’re not the ones who get victimized. That’s when soak-the-rich taxes become very appealing. Democrats, for all intents and purposes, can appeal to average voters by targeting the so-called rich. And even though voters will be skeptical about what Democrats really want, they don’t want to be the primary target of the political predators in Washington. Think of it this way. You’re a wildebeest running away from a pack of hyenas, but you know one member of your herd will get caught and killed. You despise hyenas, but at that critical moment, you’re main goal is wanting another member of the herd to bite the dust.

I’d also call attention to this polling data, which suggests some additional effective ways to fight class-warfare policy.

P.S. Supporters of limited government also should explain that the left wants higher taxes on the rich as a prelude to higher taxes on everyone. The New York Times accidentally admitted this was their agenda, and there’s plenty of evidence from Europe showing that screwing the middle class is the only way to finance big government. Simply stated, the Laffer Curve limits the degree to which the rich can be raped and pillaged so the politicians have no choice but to eventually target the rest of us.

.

Tax Hikes Are Economically Destructive, Politically Poisonous, and Completely Ineffective at Reducing Red Ink – Daniel J. Mitchell – Townhall Finance

Tax Hikes Are Economically Destructive, Politically Poisonous, and Completely Ineffective at Reducing Red Ink – Daniel J. Mitchell – Townhall Finance

Back in April, I explained that I would accept a tax increase if “the net long-run effect is more freedom, liberty, and prosperity.”

I even outlined several specific scenarios where that might occur, including giving the politicians more money in exchange for a flat tax or giving them additional revenue in exchange for real entitlement reform.

But I then pointed out that all of those options are unrealistic. And I’ve expanded on that thesis in a new article. Here’s some of what I wrote for The Blaze.

The no-tax pledge of Americans for Tax Reform generates a lot of controversy. With record levels of red ink, the political elite incessantly proclaims that all options must be “on the table.” This sounds reasonable. And when some Republicans say no tax hikes under any circumstances, there’s a lot of criticism about dogmatism. Theoretically, I agree with the elitists.

So does that make me a squish, the fiscal equivalent of Chief Justice John Roberts?

Nope, because I’m tethered to the real world. I know that there is zero chance of getting a good agreement. Once you put taxes “on the table,” any impetus for spending restraint evaporates.

But even though I’m theoretically open to a tax hike, I am a de facto opponent of tax increases for the simple reason that we will never get a good deal. We won’t get sustainable spending cuts. Not even in our dreams. We won’t get real entitlement reforms. Even if we hold our breath ‘til we turn blue. And we won’t get the “Simpson-Bowles” tax reform swap, where taxpayers give up $2 of deductions in exchange for $1 of lower tax rates. Let’s not kid ourselves. In other words, reality trumps theory. Yes, there are tax-hike deals that would be good, but they’re about as realistic as me speculating on whether I’d be willing to play for the New York Yankees, but only if they guarantee me $5 million per year.

I then point out that a budget deal inevitably would lead to bad policy – just as we saw in 1982 and 1990.

Here’s the bottom line: There is no practical way to get a good deal from either the Democrats in the Senate or the Obama Administration. Notwithstanding the good intentions of some people, any grand bargain would be a failure that leads to higher spending and more red ink, just as we saw after the 1982 and 1990 budget deals. The tax increases would not be relatively benign loophole closers. Instead, the economy would be hit by higher marginal tax rates on work, savings, investment, and entrepreneurship. And the entitlement reform would be unsustainable gimmicks rather than structural changes to fix the underlying programs. Ironically, when a columnist for the New York Times complained that Republicans were being unreasonable for opposing tax hikes, she inadvertently revealed that the only successful budget deal was the one in 1997 – the one that had no tax hikes!

The last sentence is worth some additional commentary. As I explained in a previous post, the only bipartisan budget agreement that generated a balanced budget was the 1997 pact – and that deal lowered taxes rather than increasing them.

Some people try to argue that Bill Clinton’s 1993 tax hike deserves some of the credit, but I previously showed that the Administration’s Office of Management and Budget admitted – 18 months later! – that the nation would have triple-digit budget deficits for the foreseeable future.

What changed (and this is where Bill Clinton deserves credit) is that the nation enjoyed a multi-year period of spending restraint in the mid-1990s.

And when policy makers addressed the underlying disease of too much government spending, they solved the symptom of red ink.

How the Left Thinks Gun Control Actually Works – Daniel J. Mitchell – Townhall Finance Conservative Columnists and Financial Commentary

How the Left Thinks Gun Control Actually Works – Daniel J. Mitchell – Townhall Finance Conservative Columnists and Financial Commentary.

While there are some statists who viscerally despise freedom and want ordinary citizens disarmed so that only the government has guns, most supporters of gun control presumably are motivated by a sincere desire to reduce crime and violence.

Their problem is a naive assumption that bad people will obey laws banning gun ownership and possession. Or a flawed assumption that the police can be everywhere.

And this is why this video is not only funny, but also a glimpse into the leftist mindset.

It was included in a comment on this post featuring a very funny cartoon,

but it definitely deserves more attention.

And if you like videos upholding the right to keep and bear arms, check out this heartwarming Christmas story.

Last but not least, this poster (click to enlarge) is quite effective.

Indeed, this post about the Fort Hood murders, featuring the superb analysis of John Lott, is must reading on the foolishness of so-called gun free zones.

 

Should States Be Allowed to Tax Outside their Borders, Particularly if It Means a Database of Your Online Purchases?

Tax competition, as I have explained to the point of being a nuisance, is an important restraint on the greed of the political class. Simply stated, politicians are less like to over-tax and over-spend if they know that geese with the golden eggs can fly across the border.

This is mostly an issue in the world of international tax policy, but the same principles apply for sub-national governments inside a nation.

State and local governments should compete with each by offering the best fiscal climate. Sadly, just as high-tax nations such as France and Germany are trying to hinder global tax competition, high-tax state governments are seeking to undermine fiscal rivalry inside the United States.

More specifically, they want to create a state sales tax cartel that would allow governments to force out-of-state businesses serve as deputy tax collectors. Greedy politicians are fearful that online shopping deprives them of revenue, so they are pushing for a privacy-threatening database that will enable them to track and tax these transactions.

I explained this issue last week for a standing-room-only audience on Capitol Hill.

The entire discussion is posted online, including the very astute observations of my former Heritage Foundation colleague, Adam Thierer, now at the Mercatus Center.

Investor’s Business Daily also has opined on why this is a bad idea, but if you want to get really worried, the clowns at the United Nations want to power to tax and regulate the Internet.

 

 

The Tax System Explained in Beer – Daniel J. Mitchell – Townhall Finance Conservative Columnists and Financial Commentary

Tax

Tax (Photo credit: 401K)

The Tax System Explained in Beer – Daniel J. Mitchell – Townhall Finance Conservative Columnists and Financial Commentary.

In my explanations of the Laffer Curve, I’ve shown evidence that high tax rates discourage productive behavior and boost the underground economy.

And if higher tax rates are sufficiently onerous, the resulting reductions in taxable income can completely offset the revenue-generating impact of higher tax rates. Indeed, this is what’s already happened with the “Snooki tax.”

And the same thing happens in reverse. If lower tax rates lead to a big enough increase in taxable income, the government actually collects more revenue – which is exactly what happened when the top tax rate was lowered in the 1980s.

I’ve also tried to explain, shifting from economics to philosophy, that confiscatory tax rates are unfair and immoral. And I’m glad to see that most Americans agree, with 75 percent of all people saying that nobody should ever face a tax rate of more than 30 percent.

Notwithstanding that polling data, though, I fear that many people don’t really understand the economics of taxation. So I’m happy to share this little story that periodically winds up in my inbox.

===============================================

Suppose that every day, ten men go out for beer and the bill for all ten comes to $100. If they paid their bill the way we pay our taxes, it would go something like this…

  • The first four men (the poorest) would pay nothing
  • The fifth would pay $1
  • The sixth would pay $3
  • The seventh would pay $7
  • The eighth would pay $12
  • The ninth would pay $18
  • The tenth man (the richest) would pay $59

So, that’s what they decided to do.

The ten men drank in the bar every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve ball.

“Since you are all such good customers,” he said, “I’m going to reduce the cost of your daily beer by $20?. Drinks for the ten men would now cost just $80.

The group still wanted to pay their bill the way we pay our taxes. So the first four men were unaffected. They would still drink for free. But what about the other six men ? How could they divide the $20 windfall so that everyone would get his fair share?

The bar owner suggested that it would be fair to reduce each man’s bill by a higher percentage the poorer he was, to follow the principle of the tax system they had been using, and he proceeded to work out the amounts he suggested that each should now pay.

  • And so the fifth man, like the first four, now paid nothing (100% saving).
  • The sixth now paid $2 instead of $3 (33% saving).
  • The seventh now paid $5 instead of $7 (28% saving).
  • The eighth now paid $9 instead of $12 (25% saving).
  • The ninth now paid $14 instead of $18 (22% saving).
  • The tenth now paid $49 instead of $59 (16% saving).

Each of the six was better off than before. And the first four continued to drink for free. But, once outside the bar, the men began to compare their savings.

“I only got a dollar out of the $20 saving,” declared the sixth man. He pointed to the tenth man,”but he got $10!”

“Yeah, that’s right,” exclaimed the fifth man. “I only saved a dollar too. It’s unfair that he got ten times more benefit than me!”

“That’s true!” shouted the seventh man. “Why should he get $10 back, when I got only $2? The wealthy get all the breaks!”

“Wait a minute,” yelled the first four men in unison, “we didn’t get anything at all. This new tax system exploits the poor!”

The nine men surrounded the tenth and beat him up.

The next night the tenth man didn’t show up for drinks so the nine sat down and had their beers without him. But when it came time to pay the bill, they discovered something important. They didn’t have enough money between all of them for even half of the bill!

And that, boys and girls, journalists and government ministers, is how our tax system works. The people who already pay the highest taxes will naturally get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up anymore. In fact, they might start drinking overseas, where the atmosphere is somewhat friendlier.

===============================================

Very well done. Reminds me of the PC version of the story about the ant and the grasshopper, or perhaps the joke about using two cows to explain various economic and political systems.

And if you like those, you’ll appreciate this modern fable about bureaucracy, featuring an ant and a lion.

New Polling Data Shows How to Fight Obama’s Class Warfare – Daniel J. Mitchell – Townhall Finance Conservative Columnists and Financial Commentary

taxes

taxes (Photo credit: 401K)

New Polling Data Shows How to Fight Obama’s Class Warfare – Daniel J. Mitchell – Townhall Finance Conservative Columnists and Financial Commentary.

Since starting this blog, I’ve periodically shared polling data that gives me hope. Highlights include:

o More than two-to-one support for personal retirement accounts.

o Recognition that big government is the greatest danger to America’s future.

o An increasingly negative view of the federal government.

o More than eight-to-one support for less spending rather than higher taxes.

o Strong support for bureaucrat layoffs and/or entitlement reforms instead of higher taxes.

o And my favorite poll results are the ones showing that voters understand that the goal is less spending, not lower deficits.

Now there’s some new research that is both encouraging and educational. Here’s part of the report from The Hill.

Three-quarters of likely voters believe the nation’s top earners should pay lower, not higher, tax rates, according to a new poll for The Hill. The big majority opted for a lower tax bill when asked to choose specific rates; precisely 75 percent said the right level for top earners was 30 percent or below. The current rate for top earners is 35 percent. Only 4 percent thought it was appropriate to take 40 percent, which is approximately the level that President Obama is seeking from January 2013 onward. The Hill Poll also found that 73 percent of likely voters believe corporations should pay a lower rate than the current 35 percent… Republicans were more likely than Democrats to support lower tax rates for the wealthy, but voters in both parties solidly supported lower rates compared to current law. Eighty-one percent of Republicans favored tax rates below current levels, compared to 70 percent of Democrats. The Hill Poll, conducted by Pulse Opinion Research of 1,000 likely voters, also found broad support for lower rates across income groups. The group most supportive of lowering tax rates on the wealthy below current rates made between $20,000 and $40,000 a year; 81 percent supported tax rates of 30 percent or lower.

This data is important because it shows the value of framing an issue. Instead of defensively responding to Obama’s class warfare, proponents of good tax policy should be making a philosophical/economic point that “nobody in America, no matter how rich or how poor, should have to pay more than one-fourth of their income to government.”

And proponents of class warfare should be put on the spot and asked “what do you think is the maximum tax rate anyone should pay?”

Last but not least, friends of liberty should make the key point that higher tax rates on the so-called rich are merely precursors for higher tax rates on everyone else – as even the New York Times recently admitted.

Back to the Future: Part III – Thomas Sowell – Townhall Conservative

Back to the Future: Part III – Thomas Sowell – Townhall Conservative.

Editor’s note: This article is Part III in a series. Click here to read Part I. Click here to read Part II.

Ninety years ago — in 1921 — federal income tax policies reached an absurdity that many people today seem to want to repeat. Those who believe in high taxes on “the rich” got their way. The tax rate on people in the top income bracket was 73 percent in 1921. On the other hand, the rich also got their way: They didn’t actually pay those taxes.

The number of people with taxable incomes of $300,000 a year and up — equivalent to far more than a million dollars in today’s money — declined from more than a thousand people in 1916 to less than three hundred in 1921. Were the rich all going broke?

It might look that way. More than four-fifths of the total taxable income earned by people making $300,000 a year and up vanished into thin air. So did the tax revenues that the government hoped to collect with high tax rates on the top incomes.

What happened was no mystery to Secretary of the Treasury Andrew Mellon. He pointed out that vast amounts of money that might have been invested in the economy were instead being invested in tax-exempt securities, such as municipal bonds.

Secretary Mellon estimated that the amount of money invested in tax-exempt securities had nearly tripled in a decade. The amount of this money that the tax collector couldn’t touch was larger than the federal government’s annual budget and nearly half as large as the national debt. Big bucks went into hiding.

Mellon pointed out the absurdity of this situation: “It is incredible that a system of taxation which permits a man with an income of $1,000,000 a year to pay not one cent to the support of his Government should remain unaltered.”

One of Mellon’s first acts as Secretary of the Treasury was to ask Congress to end tax exemptions for municipal bonds and other securities. But Congress was not about to set off a political firestorm by doing that.

Mellon’s Plan B was to cut the top income tax rate, in order to lure money out of tax-exempt securities and back into the economy, where increased economic activity would generate more tax revenue for the government. Congress also resisted this, using arguments that are virtually unchanged to this day, that these would just be “tax cuts for the rich.”

What makes all this history so relevant today is that the same economic assumptions and political arguments which produced the absurdities of 1921 are still going strong in 2011.

If anything, “the rich” have far more options for putting their money beyond the reach of the tax collectors today than they had back in 1921. In addition to being able to put their money into tax-exempt securities, the rich today can easily send millions — or billions — of dollars to foreign countries, with the ease of electronic transfers in a globalized economy.

In other words, the genuinely rich are likely to be the least harmed by high tax rates in the top brackets. People who are looking for jobs are likely to be the most harmed, because they cannot equally easily transfer themselves overseas to take the jobs that are being created there by American investments that are fleeing from high tax rates at home.

Small businesses — hardware stores, gas stations or restaurants for example — are likewise unable to transfer themselves overseas. So they are far more likely to be unable to escape the higher tax rates that are supposedly being imposed on “millionaires and billionaires,” as President Obama puts it. Moreover, small businesses are what create most of the new jobs.

Why then are so many politicians, journalists and others so gung-ho to raise tax rates in the upper brackets?

Aside from sheer ignorance of history and economics, class warfare politics pays off in votes for politicians who can depict their opponents as defenders of the rich and themselves as looking out for working people. It is a great political game that has paid off repeatedly in state, local and federal elections.

As for the 1920s, Mellon eventually got his way, getting Congress to bring the top tax rate down from 73 percent to 24 percent. Vast sums of money that had seemingly vanished into thin air suddenly reappeared in the economy, creating far more jobs and far more tax revenue for the government.

Sometimes sanity eventually prevails. But not always.

I’m sick of Warren Buffett – Tea Party Nation

President Barack Obama and Warren Buffett in t...

Image via Wikipedia

I’m sick of Warren Buffett – Tea Party Nation.

Posted by Judson Phillips on August 15, 2011 at 11:49am in Tea Party Nation Forum

Warren Buffet is a wealthy man.  He has made an incredible amount of money from our free market system.   But when it comes to politics, he is about as far to the left as Obama.  He is now whining that the rich should be taxed more.

 From Warren Buffett in the New York Times:

 OUR leaders have asked for “shared sacrifice.” But when they did the asking, they spared me. I checked with my mega-rich friends to learn what pain they were expecting. They, too, were left untouched.

While the poor and middle class fight for us in Afghanistan, and while most Americans struggle to make ends meet, we mega-rich continue to get our extraordinary tax breaks. Some of us are investment managers who earn billions from our daily labors but are allowed to classify our income as “carried interest,” thereby getting a bargain 15 percent tax rate. Others own stock index futures for 10 minutes and have 60 percent of their gain taxed at 15 percent, as if they’d been long-term investors.

These and other blessings are showered upon us by legislators in Washington who feel compelled to protect us, much as if we were spotted owls or some other endangered species. It’s nice to have friends in high places.

Last year my federal tax bill — the income tax I paid, as well as payroll taxes paid by me and on my behalf — was $6,938,744. That sounds like a lot of money. But what I paid was only 17.4 percent of my taxable income — and that’s actually a lower percentage than was paid by any of the other 20 people in our office. Their tax burdens ranged from 33 percent to 41 percent and averaged 36 percent.

 The full story is here: http://www.nytimes.com/2011/08/15/opinion/stop-coddling-the-super-r…

 I am sick of his whining bovine scatology.  The reason Buffett paid less is he has an army of accountants and tax lawyers who go out and found deductions for him. 

 He is a hypocrite.  If he wants the rich to pay more, he could start by not taking any deductions from his income taxes.  Oh wait, you mean he doesn’t want to do that?

 How about stroking the government a check for $10 billion?  Buffett was an Obama supporter.  I’m sure he can call the White House and get Obama on the phone.   I’m sure for that, Obama would even give you a Rose Garden ceremony.

 What Warren Buffett does not tell you is the deep dark secret of the liberal billionaires.  Buffett talks about how much he paid.  Based on that, his taxable income was probably around $42 million.  That’s a lot, right?  According to Forbes Magazine, Warren Buffett’s net worth is approximately $62 Billion!

 The income tax taxes income, not wealth.  The people it hits the hardest, other than the middle class, are those who are in the process of creating wealth.  Buffett does not care.  He can pay more taxes.  He has created his wealth and there are many ways he can avoid paying taxes on that wealth.

 The dirty secret is for the billionaires; they are members of the club.  They like being the members of the club but do not want anyone else to be members of the club.  A sharply progressive income tax prevents others from joining that club.  If we had the income tax system Buffett prefers when he was a young man, just starting Berkshire Hathaway, he would not be one of the richest men in the world today.

 Warren, if you want to give all of your money to the government that is fine with me.  They even have a process where you can give gifts to the Treasury. Do not tell me taxes need to go up.  Government spending needs to go down.  It needs to go way down.  The government needs to let people keep more of their hard earned money. 

 That even includes liberal dolts like you.

More Obama Spending Won’t Do It – Larry Kudlow – Townhall Finance

More Obama Spending Won’t Do It – Larry Kudlow – Townhall Finance.

There he goes again.

Out on the campaign trail, President Obama is proposing more federal spending as his answer to sluggish growth and jobs. That won’t do it, Mr. President.

He wants more infrastructure spending, undoubtedly in the form of an infrastructure bank. That’s a terrible idea. It’s borrowed from Latin America, where bloated and corrupt bureaucratic construction agencies have helped bankrupt any number of countries in the past.

He wants to lengthen 99-week unemployment insurance, although numerous studies have shown that continuous unemployment benefits are associated with higher unemployment.

And he wants to extend the temporary payroll tax credit, which is not a permanent reduction in marginal tax rates, has no incentive effect, has not worked so far, and is really a form of federal spending — not real tax relief.

Earlier this week, when he signed the debt-ceiling bill, the president ranted on about the need to raise tax rates on successful earners, investors, and small businesses. He’s trying to bring back tax hikes as part of the phase-two special committee seeking additional deficit reduction, even though his own party rebuffed him on this in the late stages of the debt talks.

All this is a prescription to grow government, not the economy. 

What the economy needs, Mr. President, is a strong dose of new incentives, with pro-growth tax reform that flattens marginal rates and broadens the base for individuals and businesses. This includes moving to territorial taxation that ends the double tax on foreign earnings of U.S. companies. Plus, we desperately need a complete moratorium on federal regulations. As Sen. Barrasso recently noted, the government put out 379 new rules on business in July alone, amounting to $9.5 billion in additional costs.

None of these pro-growth reforms are in sight. So the stock market is going through a nasty 10 percent correction over fears of another recession (and European debt default).

But at least we got some good news on jobs. The July jobs report came in stronger than expected. It’s not great. But at least nonfarm payrolls increased 117,000 — as the prior two months were revised upward by 56,000 — while private payrolls gained 154,000.

That’s definitely not a recession reading. But neither is it a strong performance. If the economy were really rebounding, we would be creating 300,000 new jobs a month.

In the report, the unemployment rate slipped to 9.1 percent from 9.2 percent. But that’s mostly because nearly 200,000 workers left the civilian labor force. Another negative is the household employment survey, which fell 38,000 in July after dropping nearly half a million in June. That survey measures job creation among small owner-operated businesses or the lack thereof.

Yet when looking at the new jobs report, along with reasonable gains in chain-store sales and car sales, plus the ISM Purchasing Managers reports (which stayed above the 50 percent line), I repeat my thought that we are not headed for a double-dip recession.

Over two years of so-called economic recovery, growth has averaged about 2.5 percent. It fell to less than 1 percent in the first half of this year, largely from a commodity-price shock that included oil-, gasoline-, and food-price spikes. That price shock resulted mainly from the Fed’s QE2 depreciation of the dollar — a big mistake. It eroded real consumer incomes and spending.

Lately, the dollar has stabilized and energy prices have come down quite a bit. That will reduce inflation and support better consumer spending. Businesses are already highly profitable and cash-rich. They are investing some of that, but not nearly enough to create sufficient new jobs. Who would, with all these Washington policies?

Finally, the Fed remains ultra-easy with excess liquidity and a zero interest rate.

So it looks to me like we will return to the sub-par 2.5 percent growth trend rather than dip back into recession. However, at this pace, unemployment may hover around 9 percent right up to election time next year.

More spending won’t do it Mr. President. Tax and regulatory incentives will.

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