Roby Column - July 13, 2011
The Problem with New Taxes
President Obama now seems to recognize that any increase in the federal debt limit will require significant reductions in future spending. This is good news for taxpayers. But the President’s repeated demand that Congress also approve revenue raisers—Washington’s codeword for new taxes—represents a misunderstanding of our budget problems and a misreading of the American people.
“If Republicans want spending cuts, then they must agree to increase revenue,” President Obama said Monday, just weeks ahead of Treasury Secretary Timothy Geithner’s August 2 deadline for a debt limit deal. Failure to act, Geithner says, will lead to a default on our loans and “catastrophic, far-reaching damage.”
Hyperbole notwithstanding, President Obama and Congressional leaders are engaged in intense negotiations. The fact that the conversation even includes spending cuts is noteworthy given the President’s original request that Congress pass a “clean” debt bill—an increase in the government’s ability to borrow money with no corresponding restriction on future spending. The Republican led House of Representatives overwhelmingly rejected that approach in May.
Both sides know that significant and systemic reductions in spending will be required to win approval of a debt increase in the House. Budget gimmicks or promises for future action will not do. I look forward to evaluating the final proposal, but I – and many of my freshmen colleagues – consider any plan that incorporates the Presidents’ tax hikes to be dead on arrival.
Raising taxes in the middle of a fragile economic recovery would be a serious mistake. Even President Obama agreed in 2009 when he said, “You don’t raise taxes in a recession.” Now is not the time for the government to confiscate more money from those that have the ability to create jobs. Doing so will only prolong our sluggish economic recovery for the 25 million Americans who are out of work.
The best way to foster economic growth is to remove uncertainty from the marketplace by cutting spending and removing the threat of new taxes and regulation.
How can we expect a business owner to take on the responsibility of paying new workers today when the government may increase his taxes, force him to provide government-approved benefits, or impose new regulations on his industry tomorrow? The fear of further government intervention in the economy stifles small business owners who otherwise seek to grow, invest, and create jobs.
Politically driven taxation of hardworking Americans is not a sustainable answer. Limited government spending combined with sustained free market growth is the way our nation will start paying back our $14 trillion debt.
Beyond the immediate economic consequences, increasing taxes now would send the signal that the American people have acquiesced to the larger, more powerful federal government created under the Obama Administration.
When Democrats controlled the White House, the Senate, and the House in the 111th Congress, they increased discretionary spending by 24 percent – or more than 80 percent if you count the failed stimulus. During that period, the government engaged in an unprecedented intervention in the economy, buying equity shares in banks, choosing winners and losers in the auto industry, and imposing new mandates for health care on private citizens.
Recent history proves that as spending grows, so too does government power. Federal rules, regulations, and restrictions expand. Freedom erodes.
To increase taxes now would signal that the American people not only accept more government in American life, but that we endorse it and are willing to finance it with new revenues.
Once federal activity is established and taxation imposed, the bureaucracy that benefits rarely fades away. The result is bigger government, permanently entrenched. Allowing that to happen would be a tragic mistake.
Unfortunately, the Wall Street Journal was probably correct when it recently editorialized that raising taxes now was part of “the President’s spend-and tax plan from the start. Run up spending and debt in the name of stimulus and health-care reform, then count on Wall Street bondholders and the political establishment to browbeat Republicans into paying for it all. He apparently didn’t figure on the rise of the tea party, or 1.9 percent GDP growth and 9.2 percent unemployment two years after the recession ended.”
With that in mind, I am pleased that Majority Leader Eric Cantor stepped away from the table when the President first raised the possibility of new taxes, and I am encouraged that Speaker John Boehner has reiterated that Republicans will not accept tax increases as part of a debt deal. They should stand strong in that position with the full confidence that everyday Americans—who made their voices heard in the 2010 elections—are fully behind them.
The bottom line is that our country has a spending problem, not a tax problem. The solution is reducing spending, not raising taxes. Until the President and Congressional Democrats understand that, their proposals will lack credibility with the American people.