“Good evening,” Scott Pelley, anchor of “CBS Evening News,” opened last Tuesday night. “This is the worst economic recovery America has ever had.” And that wasn’t even the bad news.
“We’ve been looking for hopeful signs,” Pelley continued, “but today the chairman of the Federal Reserve threw a cold splash of reality on those hopes.”
Earlier that day, Federal Chairman Ben Bernanke told the Senate Banking, Housing and Urban Affairs Committee, “Given that growth is projected to be not much above the rate needed to absorb new entrants to the labor force, the reduction in the unemployment rate seems likely to be frustratingly slow.”
Indeed, not only has unemployment stagnated at 8.2 percent, but consumer spending and manufacturing actually fell in June. Far from recovering, it appears that our economy is teetering on the brink of another recession.
And what is the Democrats’ response to this economic slowdown? Are they looking for ways to lighten economic burdens on consumers and employers? Nope. They are threatening the economy with an almost $500 billion tax hike, nicknamed Taxmageddon, that will kick in on January 1.
Democrats are not proposing legislation that would raise taxes by that much. But thanks to expiring Bush and Obama income and payroll tax cuts, as well as impending Obamacare tax hikes, Americans are set to see their tax bill rise by $493.92 billion in 2013 alone.
Republicans want to prevent any of these tax hikes from hitting the U.S. economy. Democrats disagree. In addition to the tax hikes in Obamacare, they want tax rates to rise for families making $250,000 a year or more. And if they don’t get their way, Democrats are willing to let the full $493.92 billion tax tab hit every income level and send our teetering economy over the brink.
What would happen then? Bernanke told the Senate on Tuesday that if Democrats let these tax hikes take effect, along with a much smaller set of spending cuts, “a shallow recession would occur early next year and about one-and-a-quarter million fewer jobs would be created in 2013.”
In other words, Democrats are willing to risk another recession just so they can hike taxes on the rich.
Why? A potent mix of ideology and wishful thinking is blinding them to economic reality. Talking Points Memo’s Brian Beutler reports that Democrats believe “the economic consequences of tumbling over the fiscal cliff won’t really be felt until the election is over” and that “if Congress pulls the country over the fiscal cliff, it can at any point deploy a parachute. It’ll harm the economy, but in a quickly reversible way.”
Former Congressional Budget Office Director Douglas Holtz-Eakin begs to differ. He released a study last week showing that Taxmageddon, and the scheduled spending cuts, would cause a 6 percent drop in gross domestic product, a 2 percent rise in unemployment and 2.8 million more unemployed people.
Asked if the economic effects of Taxmageddon will be confined to 2013, Holtz-Eakin replied, “The fiscal cliff is already having an impact because businesses and families are not blind to the impending spike in taxes. Reports have already indicated that confidence and spending are declining and uncertainty in the tax code is sure to negatively impact businesses’ likelihood to hire in the near term.”
President Obama disagrees. His spokesman Jay Carney told reporters Wednesday that Obama “simply supports the return of the tax rates for the top 2 percent of American earners that was in place under President Clinton.” Carney said that despite warnings of “Armageddon” from Republicans in 1994, what we got instead was “the longest peacetime expansion of our economy in history.”
But 2012 is not 1993. In 1993, the United States was already experiencing strong economic growth. In 2012, the Obama recovery is “the worst economic recovery America has ever had.”
And unless Obama and the Democrats cave on their tax demands, it will only get worse.
Conn Carroll ([email protected]) is a senior editorial writer for The Washington Examiner. Follow him on Twitter at @conncarroll.
