Michael Barone

Barack Obama doesn't seem to care about these things. In the 2008 campaign, ABC News' Charlie Gibson asked him whether he would increase the capital gains tax rate even if it meant reducing government revenue, as has happened in the past.

Yes, Obama said, "for purposes of fairness." He wants to take away money from people who have earned it even if government gets less to spend.

Obama argues that government spending can generate growth. But money spent propping up state and local public employee unions and funding supposedly shovel-ready projects -- major features of his 2009 stimulus package -- didn't do much for the economy.

In contrast, Obama's former chief economist Christina Romer and her husband David Romer, in a 2010 academic paper, wrote that "exogenous" tax increases, like letting the "Bush tax cuts" expire after the recession is over, are "highly contractionary."

"Our estimates suggest that a tax increase of 1 percent of GDP reduces output over the next three years by 3 percent," the Romers wrote. "The effect is highly significant."

Higher taxes are the prime ingredient of European austerity. The danger is that with sluggish growth revenues will languish and the bond market will shut down, as in Greece. Then spending gets cut with a meat cleaver, not a scalpel.

House Budget Chairman Paul Ryan understands this. House Democrats' "balanced approach" -- with tax rate increases -- "just means let's start European austerity right now," he told The Washington Examiner last week.

Ryan's budget, which passed the House, would cut tax rates but would also eliminate tax preferences. Many high earners would end up paying more. But because they wouldn't face higher rates on the next dollar they earn, there would be no incentive to seek tax shelters.

You can find Democrats who agree with this approach, though they'd differ with Ryan on details. But they won't speak up as long as their leader keeps pursuing that great white whale.


Michael Barone

Michael Barone, senior political analyst for The Washington Examiner (www.washingtonexaminer.com), is a resident fellow at the American Enterprise Institute, a Fox News Channel contributor and a co-author of The Almanac of American Politics. To find out more about Michael Barone, and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate Web page at www.creators.com. COPYRIGHT 2011 THE WASHINGTON EXAMINER. DISTRIBUTED BY CREATORS.COM