The Death knell of Obamanomics
by Tom Donelson on December 5, 2010 at 11:55 AM
The recent deficit commission chaired by Alan Simpson and Erskine Bowles recently concluded their work and while there is much to hate, there is as much to love. Not the least to love is that you have Democrats on record stating that marginal tax rates need to be lower, social security needs to be reformed, government spending needs to be restrained as a portion of the GNP, and lowering business taxes and deficits matter.
The deficit commission tax reforms will increase taxes on many Americans as they will lose previous deductions. The line in the sand drawn on government is higher than the normal historical norms but we now have a commission that is bipartisan in nature that states the obvious, government can take only so much of the economy before we start resembling Greece.
The reduction in marginal tax rates has been a conservative free market dream. From the original Reagan tax reforms of the late 80’s to the modern proponents of the flat tax, lowering the marginal tax rates to be accompanied by reducing deductions has been a goal of free market advocates. The commission accepts the logic of free market advocates that marginal tax rates matter and then the commission also reduces business taxes.
The commission makes it clear that government spending needs to be set at a specific level lower than the present levels is an admission that government needs to be limited! And the various reforms of social security including raising the age of recipients mean that there are liberals who understand that the social security is in trouble.
The commission with its emphasis on reducing spending as a percentage of the GNP and lowering marginal tax rates is the death knell of Obamanomics with tax credits for selected favored groups, higher rates on upper income, increase spending and deficits plus expansion of entitlements as the commission went into a more free market pathway.
There are tax increases in the present report, no real support for the repeal of Obamacare and the commission would leave government spending higher but they make the case that a more free market approach is needed not just launch increase economic growth but reducing the deficits. Free market reforms is what stands between Americans and economic Armageddon.
Throughout the process, we have seen a coalescing of conservatives, moderates on both side of the political aisle and even members of the ruling class concluding a new direction is needed to save America! The real opponent is the Democratic left, whose emphasis on class warfare, expanding entitlements and increase regulations enforced by various government agencies. In the recent tax debates, the left made it clear, the rich must pay even its mean lower economic growth. The left is perfectly willing to let the Middle Class take it in the rear if they don’t get their tax increase on the rich.
The commission work makes it clear that there is a consensus forming around the idea that tax rate and deficits matter as does government spending relative to government spending. Obamanomics is dead as Keynesian economics on steroids has failed to make a significant difference in the unemployment rate.