What We Learned From The Debate

Yesterday afternoon, Peter Wehner, posted an analysis of the most recent Democratic debate to National Review Online. In Fisking Barack Obama, Wehner first notes the anger directed at ABC’s George Stephanopoulos and Charles Gibson by Obama supporters. I can say that this anger is wide spread on the Huffington Post, with many posters calling for a boycott of ABC and its parent company Disney. (Naturally of course I am going to go to Disney World next week.) Wehner argues that the debate questions were fair, relevant and informative.

On Iraq, Obama reaffirmed a rock-hard pledge that he will withdraw our combat troops and leave no permanent bases. He is wholly uninterested in what General Petraeus or anyone else has to say on the matter of our mission; our troops are coming home, come what may. And if as a result of a precipitous withdrawal we see mass death and genocide, a revitalized al-Qaeda, a strengthened Iran, and massive instability in the region, the withdrawal would presumably continue. There is, it seems, no scenario that would cause Obama to change his mind. David Brooks of the New York Times put it well: “To pledge an automatic withdrawal is just insane. A mature politician would’ve been honest and said: I fully intend to withdraw, but I want to know what the reality is at that moment.”

Charley Gibson noted that past decreases in the capital gains tax have led to increases in capital gains tax revenue, while tax increases have led to decreases in revenue. This is an example of the Laffer Curve at work. You can read my discussion of it here. But basically the idea is that people take tax rates into account when making decisions to work save or invest with lower tax rates leading to more (taxable) economic activity. This is especially true with capital gains taxes, because capital gains taxes are only paid when an asset is sold. The decision to sell or hold an asset is significantly affected by how high the capital gains tax is.

Sen. Obama’s response was, “I would look at raising the capital gains tax for purposes of fairness.” Obama assures us that he wants “businesses to thrive and I want people to be rewarded for their success.” But he also wants to “make sure … that our tax system is fair and that we are able to finance health care for Americans who currently don’t have it and that we're able to invest in our infrastructure and invest in our schools.” But back to the empirical evidence: when capital-gains taxes are cut, the private economy expands. So if lowering the capital gains tax led to a stronger economy and higher revenues, Obama presumably would still oppose it on grounds of “fairness” (a concept that doesn’t help you determine what the precise tax rate ought to be). This demonstrates the depth of Obama’s animus toward the corporate world, which is the engine of prosperity for America.

The problem with Obama’s idea of fairness is that values reducing income inequality over economic prosperity. We have all heard it said that the poor are getting poorer while the rich are getting richer. That is only half right. The rich are getting richer but so are the poor, just not as fast as the rich. The gap between the richest and the poorest is widening, but the poor today generally enjoy a much higher standard of living than they did 20 or 40 years ago. The question is this: Is it more important to raise up the poor or to reduce the gap between rich and poor? Because here is the problem, the policies that will do the most to create economic opportunities for the poor and the middle class will also allow the rich to get richer. Is it fair to reduce opportunities for the poor and middle class just to keep the rich from getting farther out in front?

Obama wasn’t much better in his treatment of other issues. Last night he said that a central focus of his campaign was to deliver on “middle-class tax relief.” When asked if he had just taken a pledge on not raising taxes on people making less than $200,000, Obama agreed. But later in the debate Obama admitted he would raise the cap on the payroll tax, meaning that those making more than $97,000 a year would pay higher payroll taxes. When Charles Gibson pointed out this fact to Obama and said there are “a heck of a lot of people between $97,000 and $200(,000) and $250,000” and that if you raise the payroll taxes, that will raise taxes on them, Obama said, “I would look at potentially exempting those who are in between.” But of course if he exempts all of those in between, then he’s not going to raise the payroll tax to help save Social Security. And if he doesn’t exempt all of those in between, then he’s raising taxes on those making less than $200,000.

I remember when Bill Clinton ran for president, he promised to raise taxes on millionaires. When he took office, the tax increases were on people making $125,000 a year. How did that make you a millionaire? Well if you were married to a person also making $125,000 a year in four years you would have a million dollars. It all depends on what the meaning of “is” is, or what millionaire is. Something like that. But anyway, congratulations, the Democratic presidential candidate will make almost everyone rich.

If you read Wehner’s article you can read about Obama’s position on guns and affirmative action.