Candidate Obama seemed to have mastered the number one rule of campaigning: never let your opponent set the terms of the debate. If he makes broad assertion that you know to be false, expecting you to take it as a given, you must make it a point to say so. Undermine his premises. Only cede an inch if you know you can take a mile. Obama carried this strategy into the White House. Now he finds himself on the other side of the coin. Legislative failure after legislative failure means he is working from a weak position.

Now it is up to the Republican Party to take advantage. They’ll only succeed if they do not let the Democrats set the terms of the debate over the national debt. Fortunately, the President keeps tossing us softballs.

President Obama’s latest political game has been trying to convince people he’s the only one concerned about debt and deficits.  After spending a year and half creating new entitlements and creating record deficits, he now sternly lectures Republicans:

Next year when I start presenting some very difficult choices to the country, I hope some of these folks who are hollering about deficits step up. Because I’m calling their bluff.

Hmm. Now what difficult choices could the President be talking about?

I think I smell tax hikes in the air.

A recent editorial in the Wall Street Journal summed up Obama’s strategy this way:

Mr. Obama’s plan has been to increase spending to new, and what he hopes will be permanent, heights. Then as the public and financial markets begin to fret about deficits and debt, he’ll claim that the debt is “unsustainable” and that the only “responsible” policy is to raise taxes.

The plan would be genius if it weren’t so glaringly obvious.

Of course at the heart of Obama’s political strategy is one key (and astoundingly false) assumption: raising taxes simply raises revenue and has no adverse impact on the economy.  As the Wall Street Journal editorial states:

Congress still uses static revenue scoring—meaning no change in economic behavior from tax changes—the Joint Tax Committee thinks it will raise nearly $1 trillion over 10 years from the higher tax rates on incomes, dividends and capital gains.

The problem with assuming that economic behavior doesn’t change when tax policy changes is simply it’s not true.

This isn’t the time to go into a detailed lecture about economics and the Laffer or the Rahn Curve (though if you really want to tear into pro-deficit Democrats, I encourage you to read up on them). I’ll just throw out a few facts.

• After the Kennedy tax cut of 1964 passed, government income tax revenue increased at 8.6% annually.
• After Ronald Reagan slashed the highest marginal tax rate from 70% to 28%, income tax revenue increased by 2.7% annually between 1983 and 1986.
• After the Bush tax cuts of 2003, tax revenue increased 44% in the next 4 years.

Tax hikes always shrink the size of an economy. That’s Economics 101. When the economy shrinks, the tax base shrinks, and the government collects less revenue. Moreover, new government spending that is paid for by the tax hikes is a poor economic stimulator. The International Monetary Fund model shows that for every additional dollar of government spending $.70 worth of new GDP is created, The IMF has a model that says every additional dollar of government spending creates only $0.70 of new GDP. In other words, you have to borrow a buck to get 70 cents back. Not good economics.

Republicans cannot let Liberals and Democrats use record deficits as an excuse to raise taxes. They also cannot let President Obama get away with convincing Americans that tax hikes are actually the fiscally responsible thing to do. No! Getting government to stop spending American’s money is the way to reduce our deficit. In fact, shrinking the size of our economy just as it slowly inches toward recovery is the last thing the country needs.

Republicans and the America People ought to call the Democrats out on their faulty economic assumptions. We’ve got the factual high ground so let’s calling Obama on his bluffs.

by Brandon Greife, Political Director of the College Republican National Committee, and Avi Snyder

http://speakout.crnc.org/blog/2010/07/05/dems%E2%80%99-tax-raising-strategy-rests-on-faulty-assumptions/