"No New Taxes" Meet Barack Obama

In the eyes of most people, including political pundits, scholars, and every day voters, the beginning of the end of the George H.W. Bush presidency began in June 1990 when he decided to raise taxes. Raising taxes is the occupational hazard of a politician. Even my favorite tax cutter, Ronald Reagan, found himself doing such near the end of his second term. For George Bush, it was absolutely fatal.

In 1988 Bush was desperately trying to make the case that he could carry the Reagan mantle. Conservatives have long been suspicious of Bush's tax cutting credentials. In 1980 Bush described Reagan's tax cut objectives as "Voodoo Economics." Many rank and file Republicans feared that the candidate of 1980 would become the President of 1989. During the 1988 Republican National Convention, Bush tried to placate those concerns with a paragraph that would at first lift up his candidacy and then later haunt his presidency. During that speech, Bush told the enthusiastic crowd: "And I'm the one who will not raise taxes. My opponent now says he'll raise them as a last resort, or a third resort. But when a politician talks like that, you know that's one resort he'll be checking into. My opponent, my opponent won't rule out raising taxes. But I will. And the Congress will push me to raise taxes and I'll say no. And they'll push, and I'll say no, and they'll push again, and I'll say, to them, ‘Read my lips: no new taxes.’ Many believed that statement both sealed the deal and cursed his presidency when he turned back on his pledge in less than two years.

Fast forward to 2008 and candidate Obama has pledged that the middle class would not see an increase in taxes. In fact, we were told that the vast majority of those making less than $250,000 would actually receive a tax cut. This was a constant theme of the Obama campaign and we were even given a nifty calculator on the Obama website so people could see how much they would save under the Obama plan. Fox News reports that is about to change: "'We will not get this economy back on track, recovery will be not strong and sustained, unless we ... can convince the American people that we're going to have the will to bring these deficits down once recovery is firmly established,' Treasury Secretary Tim Geithner said on ABC's 'This Week.' Asked point blank whether it was right to suggest it is a matter of when, not if, taxes will be raised, Geithner responded, 'It is absolutely right.'" The Associated Press went on to point out that Geithner would "not rule out tax increases for the middle class." The Administration can't afford to do such because the middle class has the vast majority of the taxable income "available."

According to Steve Moore of the Wall Street Journal, "The latest data show that a big portion of the federal income tax burden is shoul­dered by a small group of the very richest Americans. The wealthiest 1 percent of the population earn 19 per­cent of the income but pay 37 percent of the income tax. The top 10 percent pay 68 percent of the tab. Meanwhile, the bottom 50 percent—those below the median income level—now earn 13 percent of the income but pay just 3 percent of the taxes."

When Obama begins to go after this "treasure chest" of dollars, his positive polling numbers will go the exact opposite direction as the unemployment figures. The amount of days that will be left in his administration will likely become very numbered indeed.

Kevin Price is Host of the Price of Business, the longest running show on AM 650 (M-F at 11 am) in Houston, Texas and on AOL Radio. His articles often appear in Chicago Sun Times, Reuters, USA Today, and other national media. Steve Moore of the Wall Street Journal calls Price the “best business talk show host in the country.” Find out why and visit his blog at www.BizPlusBlog.com and his show site at www.PriceofBusiness.com. You can also find Price on Strategy Room at FoxNews.com.

Is the Economy in Danger or Was Yesterday a Mere Speed Bump?

The Headlines are fairly ominous today at CNN Money. We read about a "Wound Licking Wednesday" because the stock market dropped by over 400 points. Just below that article we see that "Economic Growth Not So Strong," with the actual increase being only 2.2 percent instead of the initial estimates of 3.5 for the fourth quarter of last year. The problems are not merely domestic, with the headline "Asia Stocks Tumble -- Except China" (this news is considered a major factor in our stock market decline yesterday). In fact, the news is so bad today, I suggest you avoid any sharp objects while reviewing it.

Seriously though, there is probably some legitimate cause of concern, but I believe that the economy is still on track towards a positive trajectory for this year. I say this for a few reasons:

* The power of divided government. There is an old saying, when the legislature is in session, no one's wallet is safe. Thanks to the fact that the President is of one party and the majority of the Congress is in the other, the chance of much being done legislatively is very slim in deed. This is a good thing in the eyes of business.

* Unemployment remains at historic lows. Zero unemployment is considered by most economists to be around 4 percent (because of people who are seasonally employed, are in illegal activities, are actually creating a business, etc.). Our unemployment is a mere 4.5 percent, thus near zero. This means the housing bust is probably going to actually be a mere burp (since high unemployment is a typical prerequisite to a housing bust) and should find itself having a strong year over all.

* The long term and consistent growth for so many quarters. This too is historic (even with the small increase from the last quarter) and there is nothing in the fundamentals of the economy to make one think it should change any time soon.

However, if the economy does go south, there are several potential contributing factors. If Congress passes its massive increase in the minimum wage and the President signs off on it, the economy will certainly suffer. Also, if the President signs on to a Democrat tax increase, we could find ourselves in serious trouble. In fact, the Congress failing to keep the current tax cuts in effect (a requirement in the bill that was passed with the tax cuts) will equal a tax increase in the eyes of many.

In the end, though, I expect 2007 to be extremely strong on the economic front, even if it is a little soft compared to last year. I have such optimism, not so much because of the ability of government to prevent a slump, but because of the entrepreneurs that has kept this economy growing. Let's face it, the economy typically thrives in spite of government, not because of it.

National Center for Policy Analysis is Idea Central

One of my favorite organizations for years has been the National Center for Policy Analysis. I often find myself too busy to spend time reading their articles or visiting their website, but every time I do they never disappoint. It seems everything I read of theirs provides a "eureka" moment and my understanding of the subject I am studying increases dramatically.

Recently I spent some time on their site and read an insightful article by the organization's Chairman, former Governor Pete du Pont (R-DE). du Pont (photo) was my choice for President in 1988 as the brilliant leader told people the truth about the problems the nation faced and the necessary policies to change the status quo. He told farmers in Iowa that subsidies was actually hurting agriculture both in the US and around the world and he told seniors that Social Security needed to be reformed in order for future generations to be able to benefit. He always told the hard truths, which may be why his candidacy didn't catch on. Even to this day I would gladly get on a Pete du Pont bandwagon.

In his recent article in Opinion Journal (from the Wall Street Journal), the former Governor pointed out that, if they thought things were bad under the Republicans in Congress, wait until the Democrats pursue their policy objectives. The following is a quick summary of two of their goals:

* Social Security. In ten years, Social Security will be paying out more than it is brining in, which will find the system in a crisis beyond rhetoric. We should obviously do something about it today. The Republicans wanted to look at options that empowered individuals to become investors in the economy by being able to have their "contributions" turn into real investments through private initiatives; resulting in an expanding economy, serious return on the money put into the system, and numerous other positive effectives. The Democrats are talking tax increases which will hurt job development when businesses are forced to match Social Secutiry tax and raising the age, which will discriminate against minorities who already suffer from the current system. The Democrats, in essence, desire more of the same policies that have failed for years.

* Tax Increases. The Republicans are opposed to such and point to long term economic expansion and low unemployment as examples of how the recent tax cuts have worked. Not only have they contributed to economic growth, they have led to revenue increases by spurring on taxable economic activity. While the Democrats want to exact huge largesse from every small economic action through excessive taxation, Republicans take a Wal-Mart approach, by making a little off of so much more activity. If the Democrats really want to reduce the deficit, they would never touch the tax cuts. They declare that taxes must go up, no matter how much harm they do. It isn't because of efficiency, but envy; because the Democrats simply seem to despise econonomic freedom.

The former Governor goes on to examine spending increases, protectionism, and more showing a clear difference between the two parties. Because of the President's veto pen and their slim majority in Congress, it is unlikely that the Democrats will be successful in their policy objectives (except for the possibility of reversing the tax cuts and minimum wage increases), but what they will provide through their policy initiatives is a great road map of what the future will be if the Democrats ever win a governing majority and a sobering warning to everyone who would consider such an option.

The National Center is one of the greatest resources of ideas in the public policy market today and I'm glad that it is out there helping to successfully wage a war of ideas.