House Majority Leader Steny Hoyer said Tuesday that tax increases will eventually be necessary to address the nation’s mounting debt. Tax cuts are scheduled to expire at the end of the year, affecting taxpayers at every income level. Obama proposes to permanently extend them for individuals making less than $200,000 a year and families making less than $250,000 — at a cost of about $2.5 trillion over the next decade.
“As the House and Senate debate what to do with the expiring Bush tax cuts in the coming weeks, we need to have a serious discussion about their implications for our fiscal outlook, including whether we can afford to permanently extend them before we have a real plan for long-term deficit reduction,” said Hoyer. In the short term, government spending has been necessary to stimulate the economy, Hoyer said. But in the longer term, Congress will have to rein in spending and raise taxes to tackle the debt, he added.
There are three interesting aspects to this announcement.
First, the implicit admission by the House Majority leader that the debt problem is spiraling out of control. Doubt it? Let’s take a look at Obama’s favorite role model, Europe. Hungary’s Prime Minister on Tuesday proposed an overhaul of the tax system and cuts to the public sector, to reassure jittery markets that it can handle its debt. A new 29-point fiscal plan will introduce a six-year tax for financial institutions. He also suggested the plan would cut public sector wages and eliminate benefits. In England, much the same. Britain launched an emergency package of higher taxation and spending cuts that are aimed at slashing a huge public deficit, amid intense concern about sky-high debt levels in Europe. Finance minister George Osborne announced that he would slap a levy on banks, ramp up taxation on goods and services, freeze public sector pay and slash benefits spending in an attempt to cut the public deficit. We all are aware, aren’t we, of the problems Greece is having.
America’s debt is out of control, and Obama shows no interest in eliminating it. On the contrary, he seems determined to aggravate it. According to John Kyl, Obama refuses to secure our borders unless we assimilate millions of unemployable, illiterate foreigners that will suck up more and more of the dwindling supply of dollars. Santayana was right, but we don’t have to wait for history, we can see the failure of euro-socialism nightly.
The second interesting aspect is the news out of capitol hill that the Senate has killed an attempt to repeal lucrative tax breaks enjoyed by the oil and gas industry. The move by Vermont’s Bernie Sanders would have raised $35 billion over 10 years by limiting the ability of oil companies to write off drilling expenses, eliminating a tax deduction for the capital costs of oil and gas wells and repealing a tax deduction for domestic production of oil and gas. But Sanders was on the losing end of a 61-35 vote. What makes it really interesting is that this was done by a Democrat controlled senate. Who’s in bed with big oil?
Now for the third, and most interesting aspect. Way back in September of 2008, Obama made a “firm pledge” not to raise “any form” of taxes on those making less than $250,000 per year:
“I can make a firm pledge. Under my plan, no family making less than $250,000 a year will see any form of tax increase. Not your income tax, not your payroll tax, not your capital gains taxes, not any of your taxes.” After Obama broke his “firm pledge” when he signed into law a steep hike in the federal excise tax on tobacco, White House spokesman Reid H. Cherlin attempts to claim that the Obama pledge only applies to “income or payroll taxes.” During a White House press briefing, when challenged as to how Obama’s tax pledge squares with his tax hike on tobacco, White House spokesman Robert Gibbs replies: “People make a decision to smoke.” Moments later, when asked if Obama’s tax pledge applies “to the health care bill”, Gibbs replies: “The statement didn’t come with caveats.”
So he broke the pledge there. Later, in June of 2009, when challenged on ABC’s This Week with George Stephanopoulos as to whether Obama’s tax pledge applies to healthcare reform, White House Advisor David Axelrod replies: “One of the problems we’ve had in this town is that people draw lines in the sand and they stop talking to each other. And you don’t get anything done.” Later in August of 2009, Treasury Secretary Tim Geithner refuses to rule out a pledge-breaking tax hike after being given several opportunities to do so: “I think what the country needs to do is understand we’re going to have to do what it takes, we’re going to do what’s necessary.” After all of that, White House Spokesman Robert Gibbs reiterates Obama’s tax pledge:“I am reiterating the President’s clear commitment in the clearest terms possible, that he’s not raising taxes on those who make less than $250,000 a year.”
Fast-forward to May of this yea. At a Manhattan breakfast sponsored by Thomson Reuters, White House Budget Director Peter Orszag threw that pledge out the window. Instead, he described Obama’s “read my lips, no new taxes” pledge as a “stance” and a “preference” that is subject to study by the president’s newly formed bipartisan Commission on Fiscal Responsibility. “The president has been very clear about what he prefers,” Orszag said under questioning. “That was his stance during the campaign, and he still believes that’s the right course forward.”
Now we get to see if he’ll break his pledge a third time when the House tries to raise taxes. And they will try. Whether it’s letting Bush era tax cuts expire, or dreaming up new and more exciting taxes like a VAT, Obama will have to sign off on increases or face an increasingly disillusioned group of congressional democrats. Because after all, only suckers really ever believed Obama’s pledge in the first place.