Rates and revenue: Obama's strange obsession
President Obama's fixation on raising the official tax rate on Americans with incomes of more than $200,000 a year borders on the pathological. Financially, it makes no sense. There are better ways to stimulate the economy, reduce the debt and balance the budget. But Obama is determined to force higher tax rates on higher-income Americans regardless of the effects on the budget or the economy.
"There can be no deal without rates on top earners going up," White House Spokesman Jay Carney said last week. "There's not going to be an agreement without rates going up," Treasury Secretary Timothy Geithner said on CNN on Sunday.
But raising rates does not necessarily raise federal revenue (see Thomas Sowell's column on this page). And Republicans have offered a plan that would raise $800 billion in revenue without raising rates. Based on a proposal from Democrat Erskine Bowles, it would reduce loopholes that allow richer Americans to avoid paying the higher rates already on the books.
Obama rejected it. A White House spokesman said it wasn't "balanced." It reportedly raises revenues by $800 billion and shaves spending by $1.4 trillion. Obama's offer raises taxes by $1.6 trillion, trims entitlements by $400 billion, cuts another $110 billion and adds $50 billion in new spending. There's a $600 billion gap between new revenues and spending cuts in the GOP plan, and a $1.04 trillion difference in Obama's plan. What's that about balance?
Balance is not what Obama wants. He wants total ideological victory over the Republican Party. For that, he is willing to risk plunging the country into another recession.