The Democrats Unfurl the White Flag on Taxes and Class Warfare

I'm dumbfounded and amazed. When Democrats and Republicans have a game of chicken, the GOP blinks 99 percent of the time. And I thought for sure this was going to happen in the fight about whether to extend all the 2001 and 2003 tax cuts (the GOP position), or whether to impose a big, class-warfare tax increase on investors entrepreneurs (the Obama position to punsih the so-called rich). Democrats simply needed to get one Republican senator to surrender and they would have 60 votes in the Senate to overcome any procedural objection. But, to my astonishment, this didn't happen. Democrats threw in the towel. Not totally, the issue is simply being postponed to a "lame duck" session after the election, but it's hard to see how the left will feel any more emboldened after being kicked in the teeth by voters. But there is a very dark lining to this silver cloud. As the Wall Street Journal warns, many statists actually want a big tax increase on everybody, and they can make this happen by simply sitting on their hands.

Only a week ago, President Obama and his media supporters were asserting that they had Republicans caught in their class-war pincers: They'd lure the GOP into opposing an extension of lower tax rates for the middle class in order to defend lower tax rates for those making more than $200,000 a year. ...[but] the Democrats have cut and run, lest they get blamed for voting for a tax increase in a slow-growth economy. This is how legislative majorities behave when they've lost the political argument and can sense their days are numbered. ...Democrats will now enter the campaign's home stretch with the threat that all of the Bush-era tax rates could expire on January 1. That means the lowest tax bracket would revert to 15% from 10%, the per child tax credit would revert to $500 from $1,000, and millions of middle class families would pay thousands of dollars more in federal taxes. Keep in mind that this is the not-so-secret desire of many on the left who think the country "can't afford" to let Americans keep so much of their own money. Peter Orszag has already admitted this since leaving his post as White House budget director. What these Democrats really mean is that they think the only way to pay for their spending plans is by soaking the middle class—because that's where the real money is. ...Liberals pretend they can finance a European-style entitlement state by taxing only the rich because they know that soaking the middle class is unpopular.

The "Tea Party's Already Won"

That's the tile of an insightful column at Thehill.com, which points out that Tea Party activism has succeeded in shifting the debate from making government bigger to making government smaller. The columnist also is correct in explaining how the Tea Party, by dethroning some entrenched incumbents, is forcing the GOP to at least pretend to be on the side of taxpayers.

The Tea Party insurgency will not only cost Democrats dozens of seats in Congress, and likely their majority — it will define the coming GOP presidential nominating process, determine the direction of the GOP for years to come and threaten any remaining plans Obama has for sweeping reforms of education, energy policy or our immigration system. Last March, Republicans joined Democrats in calling on Sen. Jim Bunning (R-Ky.) to end his filibuster against the extension of unemployment benefits paid for by deficit spending, embarrassed he was blocking aid to the jobless. But it took just three months for the grassroots pressure to reach the Capitol — Bunning was a Tea Party hero. By the time the $30 billion expired on June 2, Senate Republicans had united behind a nearly two-month filibuster of the next round of $34 billion in “emergency spending” for unemployment insurance. They were joined by Sen. Ben Nelson (D-Neb.), and some House Democrats warned their own leaders at the time that the days of votes on “emergency spending” would soon have to come to an end. ...The Tea Party candidates themselves — like O’Donnell, whom Karl Rove called “nutty,” — matter little. Only a few will actually get elected this fall. Yet the Tea Party has won without them. There are no tea leaves left to read. Democrats have been spooked and Republicans threatened, cajoled or cleansed. The results are already in.

Time to Shut Down the Congressional Budget Office?

One of the many disappointing things about Republicans is that they fail to correct problems when they get power. After the 1994 "Gingrich Revolution," the GOP had complete control of Capitol Hill. This meant complete authority over the Congressional Budget Office and Joint Committee on Taxation. Did Republicans use this power to fire the old staff and put in people who understood economics? Of course not. I don't know if this is because Republicans are stupid or if it's because they're too timid to take steps that would generate complaints from their enemies. Regardless, what really matters is that CBO and JCT are just as biased today as they were 20 years ago. Diana Furchtgott-Roth of the Hudson Institute exposes CBO's latest shoddy Keynesian analysis. She is correct, and the people making these same arguments 20 years ago were correct. And I'm afraid people will be saying the same things 20 years from now. Which leads me to think that maybe the best approach is to get rid of these bureaucracies.

...on Tuesday the nonpartisan Congressional Budget Office issued a report showing that the American Recovery and Reinvestment Act of 2009 increased the number of people employed by between 1.4 and 3.3 million people in the second quarter of 2010 and lowered unemployment by 0.7 to 1.8 percentage points. CBO concludes that without the Recovery Act unemployment, which stood at 9.5% in July, might exceed 10% and possibly be above 11%. There's just one problem. CBO's latest figures are inconsistent with its claims of the effects of the stimulus bill when it was passed in February 2009. If its models failed to accurately predict the effects of the stimulus bill then, why should we believe the models now? This is important because some are taking the CBO report as proof that the stimulus bill is working and so we need...more stimulus. ...After passage of the stimulus bill, in a March 2009 letter to Iowa Senator Chuck Grassley, CBO predicted that the unemployment rate in the last quarter of 2009 would rise to 9% without the stimulus package, from its then-current level of 8.2%. With the stimulus, CBO said, the unemployment rate would range from 7.8% to 8.5%. The actual rate in December, 11 months after enactment of the stimulus, was 10%, far higher than CBO said it would be absent the stimulus. ...If Americans had known in February of 2009 that the $787 billion stimulus package (whose cost CBO later raised to $862 billion) would not lead to declines in unemployment, but instead a substantial increase in the unemployment rate to 9.5%, opposition to the spending would have been practically universal. Put it another way - if Americans were asked now whether they would prefer today to have back the February 2009 unemployment rate of 8.2% and the $862 billion spent on stimulus, they would say yes. Some say things would have been worse if the stimulus funds had not been spent. They assume that more government spending, including the $862 billion stimulus, must be good for the economy. This form of Keynesian economics fell out of fashion decades ago everywhere, except in the halls of power in Washington. If more government spending always helped the economy, why stop at $862 billion? Why not give each American an unlimited bank account? Then the unemployment rate would likely rise to 100%. But some economists would still offer unverifiable models to "prove" the benefit to the American public.

Have Republicans Learned from their Mistakes?

Walter Williams looks at the terrible job Republicans did when they last held power and asks whether they deserve to win the House and/or Senate this November. Or perhaps the real question is whether it would make a difference for Republicans to regain control? The real test, Walter explains, is whether they would use their power of the purse to de-fund the implementation of Obamacare.

...what can liberty-minded Americans expect from a Republican majority? Maybe a good starting point for an answer might be to examine how Republicans have handled their majority in the past. ...The 1994 elections gave Republican control of both the House and Senate. They held a majority for a decade. The 2000 election of George W. Bush as president gave Republicans what the Democrats have now, total control of the legislative and executive branches of government. When Bush came to office, federal spending was $1.788 trillion. When he left office, federal spending was $2.982 trillion. That's a 60 percent increase in federal spending, closely matching the profligacy of Lyndon Johnson's presidency. During the Republican control, the nation was saddled with massive federal interference in education through No Child Left Behind. Prescription drug handouts became a part of the Republican-controlled Congress' legacy. And it was during this interval that Congress accelerated its interference, assisted by the Federal Reserve Bank, in the housing market in the name of homeownership that produced much of the financial meltdown that the nation suffered in 2008. ...If Republicans win the House of Representatives, there are measures they should take in their first month of office, and that is to undo most of what the Democratically controlled Congress has done. If they don't win a veto-proof Senate, they can't undo Obamacare but the House alone can refuse to fund any part of it. There are numerous blocking tactics that a Republican-controlled House can take against those hell-bent on trampling on our Constitution. The question is whether they will have guts and principle to do it. After all, many Americans, including those who are Republicans, have a stake in big government control, special privileges and handouts.

I'm skeptical about the benefits of a GOP takeover. Look at the GOP leadership in the House and Senate and you will find a bunch of politicians who supported Bush's big-government policies. They have been fighting against Obama's statist schemes for the past two years, to be sure, but are they saying and doing the right thing now because they genuinely believe in freedom, or are they fighting Obama merely for partisan purposes? Needless to say, I'm not very confident about the answer to that question.

I've had conversations with people about whether it might be best for the nation to have Republicans go up to 215 seats in the House and 48 in the Senate. That would be enough (particularly in the Senate) to block any new Obama schemes such as cap-n-trade, but it would leave Democrats in the majority and give Republicans more time to purge the big-government virus that infected the party during the Bush years. But if I genuinely had confidence the GOP would de-fund the implementation of Obamacare, that might change the calculation.

The Tea Party Manifesto

Former House Majority Leader Dick Armey and Matt Kibbe of FreedomWorks have a column in today's Wall Street Journal that explains the spontaneous, grassroots phenomenon of tea parties. They have plenty of interesting political and social analysis, but the most important part of their column is when they point out that the tea party movement is not a GOP-support organization. Instead, the tea party is engaging in a hostile takeover, forcing out the establishment Republican politicians that have become philosophically corrupted by the back-scratching network in Washington.

The tea party movement has blossomed into a powerful social phenomenon because it is leaderless—not directed by any one mind, political party or parochial agenda. The criteria for membership are straightforward: Stay true to principle even when it proves inconvenient, be assertive but respectful, add value and don't taking credit for other people's work. Our community is built on the Trader Principle: We associate by mutual consent, to further shared goals of restoring fiscal responsibility and constitutionally limited government. These were the principles that enabled the Sept. 12, 2009 taxpayer march on Washington to be one of the largest political protests in the history of our nation's capital. ...While the tea party is not a formal political party, local networks across the nation have moved beyond protests and turned to more practical matters of political accountability. Already, particularly in Republican primaries, fed-up Americans are turning out at the polls to vote out the big spenders. They are supporting candidates who have signed the Contract From America, a statement of policy principles generated online by hundreds of thousands of grass-roots activists. Published in April, the Contract amounts to a tea party "seal of approval." It demands fiscal policies that limit government, restrain spending, promote market reforms in health care—and oppose ObamaCare, tax hikes and cap-and-trade restrictions that will kill job creation and stunt economic growth. Candidates who have signed the Contract—including Marco Rubio in Florida, Mike Lee in Utah and Tim Scott in South Carolina—have defeated Republican big spenders in primary elections all across the nation. These young legislative entrepreneurs will shift the balance in the next Congress, bringing with them a more serious, adult commitment to responsible, restrained government. But let us be clear about one thing: The tea party movement is not seeking a junior partnership with the Republican Party, but a hostile takeover of it.

Republicans Should Disavow Bush's Big-Government Record

I don't agree with all the points in this column from Real Clear Markets, but I fully agree with the overall theme that the GOP would be wise to cut Bush out of the Party's history. Like Nixon, he was a failed, big-government statist.

The sour economy is presenting Republicans with a golden opportunity to retake both houses of Congress. The Democrats will try to defend their seats by attacking Bush's record on the economy. Republican candidates should counter this move by acknowledging the economic errors made during the Bush years. This will help restore the credibility of the Republican brand with respect to the economy and free up the candidates to move on to what really matters-the future. ...Was Bush 43 the worst post-1952 president in terms of the economy? No, he was the second-worst. Jimmy Carter managed to drive the Real Dow down by 78% in just four years, 1976-1980. If considered as one presidency, Nixon/Ford was the third-worst... So, what were the mistakes that made Bush 43 the second-worst president since 1952 with respect to the economy? The biggest single economic error Bush made was his "weak dollar" policy. While the president has no direct control over monetary policy, it is said that a president always gets the monetary policy he wants. Bush (and his Treasury Secretaries) wanted a weak dollar, and they got one. The dollar lost 69% of its value against gold during the Bush years. This accounted for almost 80% of the decline in the Real Dow during his presidency. The unstable dollar during the Bush years was the root cause of the financial crisis of 2008. The dollar fell almost continuously during the first seven years of his term. By February 2008, it had lost 72% of its value. ...The third biggest economic error under Bush was the design of the 2001 tax cuts, which phased in the reductions in the top income tax rate over 5 years. As we learned in 1981-1982, phased-in tax cuts guarantee economic sluggishness, because people defer income until the lower rates take effect. The result was a "jobless recovery", slow growth, and escalating deficits. The 2001 tax cuts also wasted $58 billion on futile Keynesian "stimulus", an error that Bush was to repeat in 2008. If Bush had gotten his 2001 tax cuts right, and economic growth in fiscal years 2002 and 2003 had averaged 3.5% instead of 1.6%, the "Bush deficits" would have peaked at 2.5% of GDP in FY2004, rather than at 3.5%. A continuation of 3.5% real growth would have put the budget in surplus by FY2007, despite the massive spending. ...Because the Democrats have "doubled down" on Bush's economic errors, Democrat-held House and Senate seats are ripe for the picking. During the first 18 months of the Obama administration (i.e., through June, 2010), the Real Dow fell by another 11% to 7.86, which was the level of June 1952. After 16 months of massive government "stimulus", total employment in June 2010 was 6.0 million below what the administration predicted it would be if the stimulus bill passed, and 3.2 million lower than they said it would be if the stimulus bill didn't pass. If the labor force participation rate had not unexpectedly declined, June's unemployment rate would have been reported at 11%.

George Will's CPAC Speech

Watch it here.

If This Is the GOP Future, They Will Be a Minority Party

Did Republicans lose in 2006 and 2008 because they were too far to the left or too far to the right? And which approach should they adopt if they want to regain power in 2010 and 2012? Some people think the GOP needs to be more moderate. David Frum, for instance, says Republicans need to mimic David Cameron in the United Kingdom. And at his website, Frum highlights this (rather disturbing, as I will explain below) video of Cameron making a pitch to the British people.



First, the good news about the video. It is possible that Cameron intends to do good things about education and welfare policy. Unfortunately, it's also possible that he intends to do bad things. But we don't know since there is nothing but rhetoric. Speaking of rhetoric, it is troubling that he also has lots of language about a "fair" society and the gap between rich and poor. This doesn't necessarily mean he intends to push bad policy. A policy of smaller government and free markets, after all, will boost economic growth and help poor people climb the ladder. Shrinking government also will reduce the power of special interests, which will make society more fair. But it's also possible - and perhaps more likely - that he is using this rhetoric to signal support for more redistribution.

What is most troubling, though, is that Cameron sides with government and against taxpayers whenever he gets specific about policy. About one minute into the video, he endorses the minimum wage and higher fuel subsidies. Fifteen seconds later, he wants more redistribution for food programs. The worst proposal comes around the 2:50 mark, when he endorses wage indexing instead of price indexing for the U.K.'s version of Social Security (which would be grossly irresponsible and undermine one of the best achievements of Margaret Thatcher). Last but not least, he then endorses more spending on government-run healthcare.

These proposals are all bad policy, but they're also bad politics. If an election is decided on the basis of which party is more excited and more sincere about redistribution, that benefits left-wing parties. That doesn't mean that a (supposedly) right-wing party will never win an election. Indeed, Gordon Brown may very well lose to Cameron later this year. But that will simply be a case of the electorate rejecting an incumbent party for doing a terrible job. There will be no mandate for better policy. Indeed, it appears that Cameron wants to be like Obama - a big-spending politicians who takes over from another big-spending politician. In the long run, this is a recipe for the Tories to be a minority party. And if Republicans follow the same approach, they also will be a minority party.

One final comment. It should go without saying that right-leaning parties should always be figuring out better ways of selling the message of liberty, freedom, prosperity, and responsibility. And they should be finding the candidates who are best able to articulate that message in an optimistic, forward-looking way to average voters. But that's not what Cameron represents. From what I can tell, he's Richard Nixon with a smile.

P.S. Cameron also has surrendered to the left on the global warming/climate change issue, though maybe the absence of any rhetoric in this video is an indication that he realizes the tide has turned and there is nothing to be gained electorally by imposing that particular piece of awful policy.

P.P.S. And he has refused to say that he will undo Gordon Brown's reckless decision to raise the top tax rate from 40 percent to 50 percent.

Just Because Democrats Are Terrible, that Doesn't Mean Republicans Are Good

Howie Rich has a very good column at Townhall.com. He asks whether Republicans have learned any lessons during their time in the minority, specifically whether they recognize that bloated and wasteful spending under Republicans is just as bad as bloated and wasteful spending under Democrats:

The GOP’s new revisionist message was summed up in a billboard that appeared recently on Interstate 35 in Wyoming. “Miss me yet?” a smiling picture of former President Bush asks passing motorists. In a word? “No.” What this theory of “Republican revisionism” lacks is even a tangential basis in fact. That’s because Republicans – at least prior to the election of a Democratic Congress in 2006 and a Democratic President in 2008 – were engaged in precisely the same policies they now spend all of their time railing against. ...Republicans are no strangers to massive government overreaching. For example, President Bush responded to the September 11 terrorist attacks by creating a huge new government bureaucracy... Meanwhile, he supported the unconstitutional suppression of free speech by signing so-called “campaign finance” reform, dramatically stifling the ability of the public to criticize incumbent politicians. ...Bush and his cronies loved pork barrel spending, too. In 2005 – over the strenuous objections of taxpayer advocates – he signed a massive $286 billion transportation bill that included 6,371 pet projects inserted by Republican and Democratic lawmakers. ...Bush and his GOP allies also fought to create new entitlement spending – including a prescription drug benefit to Medicaid that has cost taxpayers hundreds of billions of dollars. They federalized education with No Child Left Behind... Republicans are quick to forget that Bush is on the hook for a considerable portion of the unsustainable spending that is currently driving our debt even further into the stratosphere. Indeed, Bush cemented his anti-free market legacy in late 2008 with the passage of the Troubled Asset Relief Program (TARP) and tens of billions of dollars worth of automotive bailouts – additional examples of his kneejerk tendency to resolve every crisis faced by the nation with an unprecedented expansion of government power and taxpayer debt. Was Bush a better steward of your tax dollars than Obama? Yes – but that’s the problem. Getting mugged worse the second time around doesn’t absolve the first thief of his culpability.

Good Advice for Republicans from Tom Sowell

I've always been mystified by GOP politicians, pollsters, and consultants who argue that the GOP needs to support big government in order to win votes. The biggest victories for Republicans in living memory, after all, are the 1980 and 1994 landslides, when the GOP was most aggressive in promoting an anti-government message. The big-government, compassionate-conservative message of Bush, by contrast, led to electoral debacles in 2006 and 2008. Tom Sowell has been addressing the strange predilection of some Republicans to tack left. In his third column of the series, Sowell explains that the GOP should use an explicitly conservative message to appeal to black voters rather than foolishly assuming that a "me-too" platform will somehow work:

One of the things that is long overdue is some Republican re-thinking-- or perhaps thinking for the first time-- about the approach that they have been using, with consistently disastrous results, for trying to get the black vote. ...There is no point today in Republicans continuing to try to win over the average black voter by acting like imitation Democrats. Those who like what the Democrats are doing are going to vote for real Democrats. ...[Blacks] want their children to get a decent education, which they are unlikely to get so long as public schools are a monopoly run for the benefit of the teachers' unions, instead of for the education of the children. Democrats are totally in hock to the teachers' unions, which means that Republicans have a golden opportunity to go after the votes of black parents by connecting the dots and exposing one of the key reasons for bad education in inner cities and the bad consequences that follow. But when have you ever heard a Republican candidate get up and hammer the teachers' unions for blocking every attempt to give parents-- black or white-- the choice of where to send their children? The teachers' unions are going to be against the Republicans, whether Republicans hammer them or keep timidly quiet. Why not talk straight to black voters about the dire consequences of the pubic school monopoly that the teachers' unions and the Democrats protect at all cost, even though many private schools-- notably the KIPP schools in various states-- have achieved remarkable success with low-income and minority youngsters?

In his fourth column in the series, Sowell makes the common-sense point that a squishy, moderate message winds up appealing to nobody. That doesn't guarantee a lost election, to be sure. As Bush and Nixon showed, a milquetoast Republican can prevail if facing an incompetent Democrat in the right national climate, but those often turn out to be Pyrrhic victories since they often set the stage for big Democratic victories in the future. As Sowell notes, Reagan is the right model for the GOP:

A long-standing battle within the Republican Party, going back at least as far as the 1940s, is between those who want the party to clearly differentiate itself from the Democrats and those who seek a broader appeal by catering to a wider spectrum of social and ideological groups. The "smart money" advocates a "big tent" and deplores those who want a clearer adherence to the kinds of ideas espoused by Ronald Reagan. What the "smart money" fails to explain is how Reagan won two landslide presidential elections in a row. He certainly didn't do it by trying to act like Democrats. That's how the Republicans later turned off their own supporters, without gaining enough other voters to keep from being wiped out by the Democrats in two consecutive elections. ...When you try to waffle and be all things to all people, you can end up being nothing to anybody. That is where the "smart money" crowd have gotten the Republicans in recent years.