April 26 2012
President Obama has for the last three years appeared to live in a dream world where, if only that dastardly GOP would roll over and let him raise taxes, the economy would thrive.
Forbes magazine contributor Charles Kadlec, however, has unearthed an academic paper that presents a persausive argument to the contrary…from a former Obama economics adviser:
A powerful analysis by President Barack Obama’s first Chair of his Council of Economic Advisers (CEA) indicates the President’s proposed tax increases would kill the economic recovery and throw nearly 1 million Americans out of work….
Although Dr. Romer’s analysis is full of equations and econometric jargon, the clarity of her conclusions are a fatal indictment of the Obama Administration’s demand for tax increases. In what may be the first time since David Stockman’s “Trojan Horse” comment regarding the Reagan tax rate cuts, a high White House Official has completely undermined her own Administration’s policy while serving. Had this happened during a Republican administration, a la Stockman’s Atlantic interview, it would have been Page One news. “Obama To America: Drop Dead.”
The paper was coauthored with the former adviser's husband, Berkeley Professor, David H. Romer, and it was published in the American Economics Review in June 2010, while she was still part of the administration.
Using the Romer paper as a basis, Kadlec projects:
In other words, the tax increases proposed by President Obama would have a major contractionary impact on economic growth, and by implication, job creation and employment regardless of changes in government spending, what the Fed does or what happens to the price of oil etc.
How big an impact? In his 2013 budget, President Obama proposes $103 billion in 2013 tax increases, including $83 billion of higher income taxes on those who make more than $250,000 a year, or about 0.65% of GDP. Using the Romer baseline estimate, that would reduce real GDP by 2 percentage points over the next 10 quarters. Based on the general relationship between economic growth and unemployment, such a fall in output implies a loss of more than 800,000 jobs.
The President’s budget fails to mention, far less include, the negative effects of its proposed tax increases in its economic assumptions. Instead, it assumes real GDP growth will accelerate to 3.0% next year and to 3.6% in 2014. Based on the Romers’ study, it is far more likely real GDP growth would slow to near 2% next year and remain well below 3% in 2014.
The president is so motivated by his beliefs that he is blind to their impracticality. He regards raising taxes as the panacea for everything. Relevant to this, Noemie Emery had a column yesterday on the “plague” that Obamacare has become for the Democrats:
Rep. Brad Miller, D-N.C., who is also retiring, remarked that "[w]e would all have been better off if we had dealt first with the financial system" and said Democrats wasted time and political capital creating problems that dragged the economy down.
Rep. Dennis Cardoza, D-Calif., who is also retiring, said the bill should have been done in "digestible pieces," and they should have 'figure[d] how they were going to pay for the bill, and then figure[d] out what they could afford."
Rep. Barney Frank, D-Mass., of all people, says the Democrats should have stopped after Scott Brown won his election.
But they didn’t try to fix the economy first, they refused to embrace incremental reform, and they didn't stop after Scott Brown was elected.
I submit they didn’t do any of these things because they are led by an administration convinced that it can do whatever it pleases and then just send the bill to the American people. We used to have tax and spend Democrats. Now we have spend and then tax Democrats.