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WAGING WAR ON PROSPERITY
By DICK MORRIS & EILEEN MCGANN
Published in the New York Post on March 3, 2009
President Lyndon Johnson's administration was known for his War on Poverty.
President Obama's will become notable for his War on Prosperity.
We're speaking, of course, of Obama's plans to hike income taxes on the most
wealthy 2 or 3 percent of the nation. He's not just raising the top rate to 39.6
percent; he's also disallowing about one-third of top earner's deductions,
whether for state and local taxes, charitable contributions or mortgage
interest. This is an effective hike in their taxes by an average of about 20
percent.
And soon the next shoe will drop - he'll announce that he's keeping yet another
of his campaign promises: to apply the full payroll tax to all income over
$250,000 a year. (Right now, the 15.3 percent Social Security tax only applies
to the first $106,800 of income - you neither pay the tax on income above that,
nor accumulate added benefit.) For many taxpayers in this bracket, this hike
will raise their total taxes by about half.
Finally, he's declaring war on investors by raising the capital-gains-tax rate
to 20 percent.
These increases are politically insignificant: The top 2 percent of the nation
casts only about 4 percent of the votes, barely enough to attract the notice of
even the most meticulous pollsters.
But they have enormous economic significance. Those who earn more than $200,000
pay almost 60 percent of America's income taxes and account for a third of its
total disposable income. If these spenders and investors are hunkering down,
waiting for the revenuers to beat down their doors, their confidence will be
anything but robust. Their spending will drop; they'll be unlikely to invest
(except in new tax shelters).
Franklin Roosevelt's presidency was marked by an emphasis on recovery in his
first term and class warfare (which he called "reform") in his second.
Campaigning for re-election in 1936, FDR famously declared, "I should like to
have it said of my first administration that in it the forces of selfishness and
of lust for power met their match. I would like to have it said of my second
administration that in it these forces met their master."
Obama seems to have skipped the first-term FDR program and jumped right into the
class divisions and warfare of the second.
But the president would do well to remember that Roosevelt's assault on the rich
led directly to the recession of 1937-39 - when unemployment soared back up to
19 percent. (It was brought down only by World War II.)
Obama must realize that his tax hikes will dampen investment and consumer
spending and prolong and deepen the economy's woes - this is presumably why he's
postponing most tax hikes until 2011. But taxpayers, particularly wealthy
taxpayers, are not dumb: They'll know what's coming, and look to secure the
hatches in advance by sitting on their money.
But then, Obama must also realize that his stimulus package, with its massive
growth of government, is going to kindle huge inflation in coming years. And he
surely realizes that he can't expand government health insurance as massively as
he intends introducing rationing of medical services.
He must know, but not care.
Here is a president who would rather redistribute income than create wealth. He
thinks it more important to grow government than to fight inflation. He believes
that it is crucial to expand health care to the young and middle aged, even if
it means cutting it back for the elderly. He's more committed to effecting
"broad change" in his first term than he is to winning a second one.
We have a president, in short, who will stand on his principles. Unfortunately,
they're bad ones.
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DickMorris.com to read all of Dick's columns!
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