I was surprised to read noted economist Michael Boskin’s op-ed in the WSJ and his take on the economy and the election. Basically the article states that Obama will raise taxes and push the US into recession.
- Some economists think we already are headed for a recession. So it doesn’t seem like a sound conclusion that Obama higher taxes will lead to a recession if the US is already on its way.
- There seems to be some maxim in popular culture that says low taxes are good and high taxes are bad. The lowest possible tax rate is 0% and the highest is 100%. I don’t think anybody is arguing that they want 0%…100% is equally insane. So, I don’t understand why economists don’t start speaking about the optimum tax rate. Boskin seems to be using supermarket logic. “Obama wants to raises taxes….isn’t that bad blah blah”.
- Presidents don’t raise or lower taxes. The congress does that.
- I don’t think it’s accurate to characterize Bill Clinton has having a big government agenda when Bush is the king of big government. In 1998, the US budget was $1.7 trillion. In 2008 the budget is $2.9 trillion. That’s a 70% increase in ten years. The US population increased from circa 270 million to 304 million, a 12% increase. Let’s assume around a 3% inflation adjustment over 10 years which is roughly 35%. So our population increased by 12%, our inflation by 35% and our federal budget by 70%. That’s big government.
- As a small business owner, paying taxes means you’re doing well. I started a medical software company during college, and the amount of paperwork was astounding. If you want to encourage growth, a reasonable solution is making the regulatory overhead lower, not lowering taxes. Between city, county, state and federal taxes, regulations and licenses it stifles what small businesses want to do most: work on their business, not fill out government forms. Another brilliant idea is Mark Cuban’s proposal to abolish taxes for under 25 person companies.
Responses to your 5 points:
1) Not all recessions are the same; they vary in length and severity. Boskin’s point is that Obama’s tax-and-spend liberal policies will exacerbate what is already a deep recession. I agree with him.
2) Agreed, there is some “optimum” tax rate, but the U.S. already has the highest tax rates in the world, both for income and capital gains. A great way to stimulate growth would be to eliminate the capital gains tax and incentivize capital investment. Obama is doing the opposite.
3) You’re right, the President doesn’t raise taxes. But he sets and pushes his tax agenda to Congress and, with a Democratic majority, it’s probably smart as a fellow Democrat to follow your party leader’s agenda. This is quintessential politics.
4) Two wrongs don’t make a right. Moderate conservatives like myself are a completely different breed than the neoconservative, Reagan-esque brand (i.e. high military spending) of Republican politics that President Bush brought to Washington. True conservatives disagree with many of Bush’s policies.
5) As a start-up owner, you’re probably not going to be paying taxes anytime soon, so I agree with you that reducing regulatory overhead is a good solution. However, I think a better one would be to implement tax credits for companies in sectors like solar and wind energy, that act to reduce externalities to society.
I miss you dearly.
Pat