Return of Bowles-Simpson
Here is a new story that shows the absurdity of Obamanomics or the Obama class warfare strategy of economic growth. Great Britain reported the number of millionaires dropping by two-thirds and revenues expected from those millionaires dropping by half after raising tax rates to 50%. While the goal was to raise revenues to lower the budget deficits, revenues fail to meet expectations and worse, the Britain's weak economy took a hit. Now British Prime Minister David Cameron is attempting to reduce the top rate to 45% with the idea of hoping to increase revenues and maybe enticing some of the millionaires to come back to Great Britain.
Obama has made it clear that he is determined to raise tax rates among the wealthy and there is very little reason to suggest that this is designed to enhance economic growth. For Obama, it is about fairness and punishment of the rich for being rich. This brings us back to the Obama deficit commission headed by Erskine Bowles and Alan Simpson. While not perfect, the commission's plan at least understood that tax rates do matter and promoted a more growth oriented tax reform package. The overall emphasis was to raise revenues by closing loopholes and increasing economic activity by lowering marginal tax rates. The plan represented an overall tax increase with the wealthy paying most of the share. While many did not like the loss of many popular deductions, Romney's proposed solution to the deduction question was to set a dollar amount for deductions and allow tax payers to decide where to use those deductions. This would diffuse this particular objection.
The other aspect was reforming entitlements and reducing government spending to at least 21% of the GNP, which would be a significant reduction from where we are right now. So, when the Republicans suggest why not Bowles-Simpson, they have put forward a bipartisan plan from a bipartisan commission put forward by the present President. Can’t get more bipartisan than that but so far, Obama has said no.
Obama has made it clear, no significant cuts or promises of cuts in the future in exchange for raising tax rates on the rich. Obama is using the glow of his recent victory to push his agenda, but there is one reality. The economy is weak and becoming weaker and while Obama plays a game of chicken with Republicans, the economy is set for a recession. Does Obama really want to go over the fiscal cliff? What will happen on January 1st if he refuses to compromise and be serious with dealing with the deficit problem that he caused? Everyone from the poor to the wealthy will see their taxes go up. While the Republicans are being held up as obstructionists, Obama is the true obstructionist as he is promoting an approach that even his own budget commission report has rejected. And under the Obama permanent recession, the Middle Class has seen their income drop.
If Obama would actually work with the Republicans in passing Bowles-Simpson, he could preside over a growing economy while sealing a Democratic majority for a generation. He would begin reducing the deficit, open up the economy and with the energy revolution, leave his successor with growing economy. The Republicans are giving Obama a life line and the question is, will he take or pursue his goal of transforming America into a European socialist state?