Even Bill Clinton disagrees with Obama’s desire to raise taxes now. In a Face the Nation interview, he indicated that we shouldn’t raise taxes when the economy is so sluggish. He said to wait “a year or two” for economic growth to return, and then tackle the deficit by raising taxes.
The best plan of action is to not raise taxes at all across the board, or if you’re going to raise taxes, do so by closing loopholes like the mortgage interest deduction (which drives up interest rates and penalizes renters). And close loopholes in exchange for an across the board rate cut, which will help spur economic growth. Economic growth is the biggest generator of tax revenue.
Lest there be any doubt that tacking the deficit is best achieve through spending cuts and not through tax increases, two Harvard economists analyzed 107 separate attempts at fiscal reform in OECD (developed) countries from 1970 to 2007. The goals in each case was to lower debt-to-GDP ratios.
Their study confirmed the obvious: Instances that failed mainly relied on large tax increases and only modest spending decreases, if any. Instances that succeeded mainly relied on large spending decreases and only modest tax increases, if any.
They also found that instances that relied on spending cuts rather than tax increases are less likely to create recessions.
Obama is setting us up for failure yet again.
The country needs a new CEO. Fast.