President's Economic Policy Is Limited to Class Warfare

President's Economic Policy Is Limited to Class Warfare
By Carol Platt Liebau
8/22/2011

Buoyed by poll data claiming that Americans finally embrace “taxing the rich” in order to reduce the skyrocketing national debt and deficit, the President spent last week’s bus tour calling for “shared sacrifice” and for the “wealthy” to “pay their fair share.” With the President’s own policies having exacerbated and prolonged the economic pain, Democrats from President Obama on down are once again refusing to let the crisis go to waste; they’re seeking to use the downturn as an opportunity to inculcate in struggling Americans a sense of class grievance.

After all, it’s long been source of frustration among the left that, in America, most citizens don’t resent the rich – rather, they seek to join their ranks. Instead of accepting this phenomenon as another example of American exceptionalism (and an important factor in our nation’s historic economic strength), it’s become an article of faith among the leftist elite that “ordinary” Americans simply don’t understand their own economic (or “class”) interests.

Indeed, Barack Obama’s most famous remark of the 2008 campaign claimed that working people’s misdirected “frustrations” at their economic plight explained their alleged “cling[ing] to guns or religion or antipathy to people who aren’t like them” (after two-and-a-half years of Obamanomics, perhaps we’re all becoming “bitter clingers” now). Similarly, an entire book, Thomas Franks’ What’s the Matter with Kansas, essentially argued that “working people” are bamboozled by conservatives’ sly deployment of social issues into voting against what Franks (and other liberals) deem to be their best interests.

So it’s hardly surprising that, bereft of fresh ideas to revive the ailing economy, President Obama and his fellow Democrats have fallen back on their favorite ideological prescription for America: Raising taxes on “the rich.” The only problem? Their “solution” is at once incoherent, ineffective at addressing the problem it’s supposed to solve and, ultimately counterproductive.

The President’s call for “shared sacrifice” by “the wealthy” makes no sense when placed in the context of the facts. According to the most recent IRS data, the top 1% of income earners pay 38% of all federal income taxes; the top 10% pay 70% of all federal income taxes; and the top 25% pay 86% of all federal income taxes. At the same time, about half of US households pay no federal income taxes – not a penny. So by whom, exactly, should the “sacrifice” now be “shared”? And what, exactly, constitutes any one American’s “fair share” – and does it bear any relationship whatsoever to the amount of federal government programs or benefits s/he consumes? Is there any limit to what even the ultra-wealthy should be compelled to pay?

Even if the President’s poll-tested euphemisms for raising taxes made sense, his approach does little to reduce the national debt or deficit. A study from the non-partisan Tax Foundation notes that taking every cent from those earning more than $10 million per year would raise only $168 billion, reducing the national deficit by only 12% and the debt by a measly 2%. Taxing America’s millionaires at 50% would reduce the deficit by 8% and the debt by 1%, raising only $120 billion more for government coffers, even if loopholes and deductions were eliminated.

And finally, policies that indulge the President’s obvious animus toward the “wealthy” will only hurt the most vulnerable Americans. Although the left may support thinning the ranks of “the rich” in the interest of “social leveling,” the history of the Great Recession shows that when the number of top income earners drops, it damages the government’s bottom line. A chart published in a Wall Street Journal blog, based on 2009 IRS figures, illustrates the point: In 2007, those earning more than $200,000 but less than $1 million paid $610 billion in federal income taxes, but by 2009, their contribution had fallen to $434 billion, creating a 29% decrease in government revenue. Those on the left who genuinely measure “compassion” for the poor by one’s support for federal government programs should actually be hoping for more rich people, not fewer of them.

So when the President and his allies offer no economic plan except higher taxes on the “wealthy,” bear in mind that their preoccupation defies logic, offers minimal results, and threatens even greater damage to those most in need of government programs. The President’s call to “soak the rich” – however cleverly phrased – isn’t a policy or a plan. It’s nothing but the newest iteration of an old, unwelcome ideology of envy, division and class warfare.