Thursday, March 07, 2013
"Most of the media is so sold out to Obama that they're missing the obvious," Jim DeMint said on Fox News only last week. "The policies the president has in place, especially the tax increases that just got in, are going to hurt our economy, probably actually bring it down." The former Republican senator from South Carolina was speaking as president-elect of the Heritage Foundation, a conservative think tank.
DeMint made this remarkably dire prediction seven days before the Dow Jones Industrial Average hit an all-time high. The employment numbers remain weak, but they, too, are improving and helping raise confidence levels, especially in the housing market.
By the time you read this, stocks may have gone higher or lower. And a raft of additional good and bad economic news will have marched across the Bloomberg screens. But we can count on one constant: Jim DeMint will be wronger than Captain Peter Wrongway Peachfuzz.
His lightning bolts did provide some stereophonic balance to President Obama's over-the-top warnings of grievous suffering should the sequester go into effect, a process that also began last week. Then, from the speaker on the right, came the not very relevant point that the tax hikes would take more money out of the economy than the forced spending reductions. "It's a whopping $149 billion in taxes vs. $85 billion in spending," complained Heritage spokesman Robert Bluey.
One wishes the bumper sticker could be widened to include these thoughts: For starters, the higher taxes plus the sequester equal significant deficit reduction, something conservatives purport to want. Also, combining new tax revenues with spending cuts would seem a balanced approach.
One can't repeat often enough that the stock market and economy took off after Bill Clinton's 1993 tax hike on upper incomes. Ignoring that evidence, the right persists in replaying the old videotape that higher taxes inevitably lead to economic desolation.
"Higher taxes will hinder economic growth," Heritage said back in 1993. They "will shrink the tax base and reduce tax revenues." They will "result in larger federal budget deficits." Newt Gingrich, off by about 180 degrees, confidently predicted that the tax increase "will in fact kill the current recovery and put us back in a recession." As we know, the opposite happened.
Certainly, other things helped create Clinton-era budget surpluses. The dot-com boom raised stock-market wealth, and defense spending went down. But the bottom line remains: By the end of Clinton's eight years, there were 23 million new jobs and average weekly wages were up 21 percent.
And here's the kicker: The booming economy made the richest Americans even richer. They did better after paying Clinton's higher taxes than they did in the George W. Bush era, when their tax rates were lower.
As noted, many other factors add to or subtract from the economy's health. Right now, the Federal Reserve's low interest rates are helping boost investment. Housing seems to be perking up. And the American economy was bound to eventually recover from the depths.
It's obvious, though, that Obama's tax increases, including a few fees on health care, are not blowing up the economy. It's amazing that guys like DeMint can go on Fox year after year and make the same crashingly silly predictions -- and that Heritage hasn't stopped him. (The Washington Post last December predicted that DeMint, a tea party hero, would give Heritage a "sharper edge." I don't think "sharp" is quite the word.)
As for the allegedly falling sky, all you have to do is look up. Some taxes have increased, and the sky's still there. Not only that, it's getting bluer.
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