Promoted from the diaries by Jeff.
Barack Obama looked deeply into the eyes of the electorate. The candidate adopted his most honest and regal bearing. He then intoned with sonorous quality, and no hesitancy whatsoever, anyone making less than $250,000 a year “will not see their taxes increase by a single dime” if he was elected. It was salesmanship at its finest, and 52% of the electorate participating in the last election took a flyer.
There were also many other things the current administration promised us. The oceans would stop rising, everyone would have perfect healthcare and there would be a major stimulus package to jumpstart the economy. In fact, if we didn’t pass that stimulus, unemployment could get as high as 8.1%.
In the process of making sure unemployment wasn’t anywhere near 8.1%, the Obama Administration opened the checkbook, drained the ATM and maxed all the lines of credit in order to fuel the Dionysian binge. Meanwhile, in the midst of our execution of a $3Tr Federal Budget, the tax revenues have gone significantly lower. Now, it seems the bills have started coming due.
We return to Candidate Obama’s solemn promise to not raise taxes on a single American making less than $250,000 in annual income. Given the recent talk from inside his administration, it’s a genuine shame we never made him say “Scout’s Honor.” The Wall Street Journal covered Operation Walkback live, as Larry Summers and Timothy Geithner slithered on over to the Sunday news shows.
Asked about raising taxes on the middle class on Sunday on CBS’s “Face the Nation,” White House economist Larry Summers wouldn’t repeat Mr. Obama’s pre-election promise. “It is never a good idea to absolutely rule things out no matter what,” Mr. Summers said—except, apparently, when his boss is running for office. Meanwhile, on ABC’s “This Week,” Treasury Secretary Timothy Geithner also slid around Mr. Obama’s vow and said, “We have to bring these deficits down very dramatically. And that’s going to require some very hard choices.”
I commend the interlocutors of both programs for straying from the Obama Party Line and committing some legitimate journalism. What we’ve just seen happen is the return of the Nixonian “inoperative statement.” Now Democratic majorities have been safely elected to just about everything that gets elected. The moment of accountability past, the “reality-based community” has disembarked from the space vessel, and gotten acquainted with the realistic unpleasantness of budgetary facts.
The repeal of George W. Bush’s tax cuts is a foregone conclusion. Yet, the Democrats have still encountered the issue that people will not want a single payer for their healthcare that doesn’t have enough scratch on hand to order a pizza from Little Caesar’s. That probably explains the outpouring of angst from Non-Conservative, and Non-Libertarian citizens over the current Healthcare reforms being bandied about in Congress.
The Democrats have reacted to this conundrum in predictable faux-populist fashion. They have disembarked from their private jets and demanded new taxes on the rich. This predictable Potemkin panacea will not forefend the coming national bankruptcy. The Wall Street Journal runs the numbers and the Vampire Squid of Overdeterming Statism will not close the deficit by jamming it’s blood-funnel into the wallets of the rich. (HT: Matt Tiabbi – Vampire Squids are cool.) The journal reports as follows.
Roughly 3.8 million filers had adjusted gross incomes above $200,000 in 2006. (That's about 7% of all returns; the data aren't broken down at the $250,000 point.) These people paid about $522 billion in income taxes, or roughly 62% of all federal individual income receipts. The richest 1% -- about 1.65 million filers making above $388,806 -- paid some $408 billion, or 39.9% of all income tax revenues, while earning about 22% of all reported U.S. income.
In other words, 7% of the returns received by the IRS accounted for 2/3 of the tax receipts in 2006. Googling a memorandum written by Peter Orszag in May of 2007, the US took in $2.4Tr in revenues in Tax Year 2006. Roughly $1Tr came from individual income taxes. So let’s say The Evil Rich™ kicked in $0.666Tr.
They officially pay 35% on their income above $200K. Making the naïve, Hopey-Changey assumption that doubling this rate will double that revenue, The Evil Rich™ will then kick in $1.3Tr. So, assuming the Obama Stimulus package works just like Joe Biden promised, and revenues return back to 2006 levels, that gives us an extra $0.650Tr.
So adding our imaginary new revenue to our ridiculously over-estimated revenue haul for 2010, we get a ball-park number of $3.1Tr. If budget equaled outlays, Peter Orszag would equal Wile E. Coyote, Supra-Genius. Making my ceteris paribus assumption again, I get predicted outlays running $3.6Tr in Budget Year 2010. The Road-Runner seems about to once more escape.
So where does Barack Obama get $0.500Tr. for next year? I didn’t even stay at a Holiday Inn Express last night, but I’ll take my best whack at it. I see three probable alternatives.
Scenario One, “George Bush Made Me Raise Your Taxes,” involves President Obama passing the “Recovery From The Evil Bush Presidency Act™” and brazenly jacking Middle Class tax rates through the roof. I see that as the least probable. I’d derive personal pleasure from sending The Honorable Dr. Parker Griffith a sincere letter regarding his vote on that legislation.
Scenario Two, “Fees, Tariffs and Excises Only Feel and Act Exactly Like Taxes; They’re Not Taxes,” involves a series of new laws that have the exact same effect as taxation, but are meticulously worded, so that it never gets called a tax. I have my money on this scenario. George Orwell would take ironic pride. Get ready to make lots of little “contributions” and “investments” in good governance for the preservation of fairness (sarcasm off).
Scenario Three, “I’ll Just Pass This Blame to Turbo-Tax Timmy” involves running the printing presses until the missing $0.500 Tr. just magically appears. Again, inflation doesn’t get called a tax. However, we all know, it’s the cruelest and most regressive form of taxation known to man.
So Barack Obama promises the Moon. He also tells us we don’t even need to pay for the rocket. His budget goes far beyond even the most positive year of tax revenues in recent history. He can’t even execute said budget without a 17% cost overrun.
This leaves him short a projected $1.2Tr. in Federal Revenues next year if the stupidity continues. The stupidity will continue until moral improves. The Taxman cometh. If you feel a couple of pounds lighter next year, that’s your wallet, not a successful combination of exercise and diet.