WASHINGTON -- President Obama has a real problem with wealth and people who have it -- something this anemic, investment-starved economy needs more of, not less.
He also has trouble understanding growth economics and the recent economic history concerning tax rates, budget deficits and tax revenues, often citing statistics and outcomes that are just plain wrong.
He demonstrated his ignorance anew Monday during a one-hour town hall-style gathering where he took questions from CNBC analyst John Harwood and a studio audience that expressed deep disappointment and skepticism about his handling of the economy.
On the whole, it was a disappointing performance, as many dispirited Americans hoped that he would signal some change in his failed economic policies, more optimism about the economy's near-term future and a hint of compromise with those Republicans and Democrats in Congress who oppose raising taxes on small businesses, investors and anyone who makes more than $250,000 a year in the midst of a jobless recovery that barely deserves the name.
Obama insists he doesn't hate Wall Street, isn't anti-business, still believes in free enterprise and the private sector as the source of most job creation and hasn't been "vilifying business." This from the man who has made Wall Street, the health insurance industry, oil and coal businesses, the medical profession, big banks, credit card companies, mortgage brokers and just about any enterprise that makes, in his words, "obscene profits," his favorite whipping boys.
In the end, he repeated the same arguments he's been making for the past two years. He defended his economic policies, which he said have worked, and stuck to the same specious arguments why he will let the Bush tax-rate cuts on the two highest income brackets expire at the end of this year.
Why? Because he thinks the country can't afford them and the money is needed to reduce the deficit. He's done the math, he says, and whenever tax cuts have been tried, it has made the government poorer.
In fact, history shows just the opposite. Cutting personal income and business tax rates has brought in more revenue as a result of stronger economic growth. When President Kennedy proposed cutting marginal income tax rates across the board "to get America moving again," government economists warned it would worsen the deficit. But as the economy grew, more people were working and tax revenue rose. By the end of the 1960s, the budget was in a surplus.
When President Reagan took office in 1981 and cut income tax rates across the board, too, the budget was at about $600 billion. But federal revenues didn't decline over the course of his presidency as the economy soared out of a severe 1981-1982 recession. By the time he left office, annual tax revenues also soared to about $1 trillion as a result of stronger economic growth and new job creation.
Obama claimed that federal tax rates were higher in the 1950s under President Eisenhower and in the 1980s than they are now under his presidency. They were higher in the post-war decade, true, but he doesn't say, or doesn't know, that it was why Kennedy proposed they be cut for everyone, declaring, "a rising tide lifts all boats."
The income tax rates certainly were not higher when Reagan left office in 1989. He had brought the top marginal income tax rate down to 28 percent under a sweeping, bipartisan tax-reform bill.
Obama, still playing the class warfare card, talked of two dozen hedge fund managers who each made $1 billion and other wealthy Americans who were millionaires, saying they should be taxed at the 40 percent tax rate (instead of the existing 35 percent) because they are too rich.
But a soak-the-rich economic policy isn't going to create a single job or start up a new business. This requires capital and investors who are willing to risk it on new enterprises. Capital is on strike in the Obama economy, and his plan to push capital gains tax rates higher will only keep it locked up and spread further uncertainty throughout the investment and business community. It's pathetic to see Obama boast about creating 67,000 new jobs in one month, when jobs were being created at a rate of 200,000 to 300,000-plus a month under the Reagan tax cuts.
Consumer spending grew at an anemic annual rate of 2 percent in the second quarter under Obama's spending stimulus, in sharp contrast to the robust 6.5 percent rate under Reagan in 1983 as the economy surged out of Jimmy Carter's recession.
Unbelievably, Obama blames the recession on the 2001-03 Bush tax cuts. "I felt that we had to have a different economic philosophy," he told the CNBC audience. A lot of factors led to the recession we are in, but leaving more money in the economy wasn't one of them, and even Obama wants to keep Bush's low-to-middle income tax rates.
Worse, Obama believes you can raise taxes in a recession on the one sector of the economy that produces most of the jobs and much if not most of the capital investment to fuel economic growth.
Sucking another trillion dollars out of America's private sector will further weaken the economy and kill jobs, which in turn will reduce government revenue and worsen the deficit.