The more the American people learn about the fiscal cliff deal, the less they like it. Republicans—particularly the core of the base—are still enraged that the deal included forty-one dollars of taxes for every one dollar of spending cuts. And now liberals are angry that so many of those new taxes fell on the backs of the poor instead of the wealthy. As that bastion of conservative thought, MSNBC, put it,
The actual effect of the deal, however, was to raise taxes on 77% of American households, while giving away billions in tax breaks to politicians’ corporate patrons.
Dealing with the Republicans first, I am disappointed in the deal, but I don’t really blame them for the result. After all, Barack Obama ran on raising taxes. It was a key component of his election strategy. If we just made “the wealthy pay a little bit more,” everything would be great, he told us. And the American people bought it. To make matters worse, poll after poll showed that the country was going to blame Congress if no deal was made.
So imagine you are Republican congressional leaders. On the one hand, you have a country that just voted to raise taxes. On the other, you’ve got a public ready to vote you out of office if you don’t make a deal with a recalcitrant president who—like so many foolish, re-elected incumbents before him—thinks a relatively narrow win means that he has some great mandate to never compromise again. Is it any surprise that the American people and the president got the tax increases they seemed so hungry for?
The liberal reaction is just sad. It constantly amazes me that there are people out there who think we can make our debt problems go away just by taxing the rich. Math has proven them wrong time and again. If we taxed the top 1% at 100% of their earnings, we’d only net $616 billion dollars. Sound’s like a lot, right? That’s slightly more than half of the federal deficit–not budget–for 2012. No, if you want to fund our spending binge, you are going to have to tax the poor and the middle class. It’s no wonder that so much of the new taxes have fallen to the lower income folks.
President Obama’s justification for the tax increases is cringe-worthy. After Bill Clinton saved his presidency at the DNC, Obama began to note that he only wanted to take the tax rate back to the levels under Bill, a time of immense prosperity for our country. The implication seemed to be that higher taxes were somehow responsible for that prosperity (but presumably had nothing to do with the burst economic bubble of the late 90s/early 2000s).
Never in my life have I seen a more egregious example of the failure to recognize that correlation does not imply causation. We had a booming economy in the 1990s because of the peace dividend from the end of the Cold War and because Al Gore invented the internet. While the Iraq War is over and Afghanistan is winding down, I don’t foresee that kind of peace dividend in the cards, and as far as I know, Al Gore hasn’t patented any more breakthrough technologies.
Those who are counting on a similar boom during the second term of the Obama presidency may be disappointed. Our economy will recover eventually, but new taxes won’t be the cause. And it won’t be the rich that suffer in the meantime.