American Elephants


Ignore the Hyenas and the Wildebeest too. by The Elephant's Child

Economist Dan Mitchell is an excellent explainer, and that’s why I so often post his videos. The Republicans are trying to save the country from the fiscal cliff, the people don’t know what a fiscal cliff is, and Obama thinks he can use the issue to force Republicans into raising taxes, which will destroy that issue for them forever, since Republicans don’t have any other issues, or so Obama believes.

Dan Mitchell believes that Republicans efforts to be “bipartisan” look like weakness to Obama, and have emboldened him.  Dan Mitchell says” Don’t surrender!”

  1. We don’t need a tax increase. We can balance the budget simply by limiting spending so that it grows by “only” 2.5 percent annually. As I say to Cavuto, the White House is pushing higher taxes in order to enable a bigger burden of government spending.
  2. It’s important to define austerity correctly. To provide an analogy, we have to drink liquid to survive, but that doesn’t mean it would be a good idea to guzzle paint thinner. Likewise, we need austerity, but that shouldn’t mean higher taxes. We need to be like Estonia and tighten the belts of the public sector, not the private sector.

“It’s not my  job,” Mitchell says, “to give Republicans political advice, but I also want to expand on arguments I made a couple of days ago, when I gave five policy reasons why the GOP shouldn’t surrender on tax increases.”

If Republicans put tax increases on the table, however, the politics get turned upside down. Instead of being united against all tax increases, voters realize somebody is going to get mugged and they have an incentive to make sure they’re not the ones who get victimized. That’s when soak-the-rich taxes become very appealing.

Democrats, for all intents and purposes, can appeal to average voters by targeting the so-called rich. And even though voters will be skeptical about what Democrats really want, they don’t want to be the primary target of the political predators in Washington.

Think of it this way. You’re a wildebeest running away from a pack of hyenas, but you know one member of your herd will get caught and killed. You despise hyenas, but at that critical moment, you’re main goal is wanting another member of the herd to bite the dust.

This is why surrendering to tax increases put Republicans in a no-win situation. They oppose class-warfare taxes because they understand the disproportionately damaging impact of higher top income tax rates and increased double taxation of dividends and capital gains. So when GOPers get bullied into agreeing to raise taxes, they want to target less destructive sources of revenue. But that usually means…taxes that are more likely to hit the middle class. Needless to say, Democrats almost always win if there is a fight on whether to tax the middle class or to tax the rich.

 




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