PRESIDENT Barack Obama and other liberals insist tax increases don't harm the economy, but government spending cuts do. Real-world results are proving them wrong. Although the arbitrary nature of sequester cuts will create disruption in some parts of the economy (mostly the defense industry), they're unlikely to create more havoc than Obama's tax increases.
The expiration of the payroll tax break, largely an afterthought in the fiscal cliff deal that included more than $600 billion in total tax increases, provides evidence. When that deal was signed into law, the president and his allies said not to worry, the tax hikes only hit the “rich” who could afford it and wouldn't change any hiring or investment decisions as a result.
But the fiscal cliff deal ultimately increased tax payments for 77 percent of households. Now Walmart, Burger King and Kraft Foods Group have all lowered forecasts because they anticipate reduced consumer spending thanks to the change in payroll tax rate. That extra 2 percent payroll tax is expected to shift $110 billion away from consumers, according to estimates by Citigroup. There's no reason to think the other tax increases in the fiscal cliff deal will be any less consequential.
Now, under automatic budget cuts imposed by the sequestration, $85 billion is scheduled to be cut from this year's $3.5 trillion federal budget. Obama insists the $85 billion cuts “will hurt our economy” and “add hundreds of thousands of Americans to the unemployment rolls.”
So the president apparently thinks removing $110 billion from the private sector through a higher payroll tax (and over $600 billion in total tax increases) won't harm the economy, but a smaller $85 billion spending cut will lead to economic Armageddon? How does that make sense? Even with the sequester, the federal government will still spend more in 2013 than in 2012.
Obama's plan to prevent the sequester involves — you guessed it — more tax increases that he still insists don't harm the economy.
Continue reading this story on the...