Economy & Budget

The Democrats Are At It Again!

This morning the Democratic Congressional Campaign Committee (DCCC) charged Michigan Rep. Tim Walberg (R) with seeking to raise gasoline taxes by 23 percent. When I read this, I couldn’t figure out why a conservative Republican like Walberg would make such a proposal, though it’s always possible that he, like anyone who lives and works in the District of Columbia, might have finally simply slipped his moorings.

When I looked into the matter, however, I found that our Democratic friends weren’t quite telling it like it is. The DCCC bases its charge on Walberg’s sponsorship of legislation described in the committee press release only as “HR 25.” I assumed this must be the Republican Tax the Drivers Act of 2008 until I pulled it up.

In fact, of course, HR 25 is the legislative embodiment of the “Fair Tax” under which the federal income tax would be replaced by a consumption tax. The legislation would do away with the IRS and the income tax and has the support of a good many people in and out of Congress.

None of this appeared in the DCCC release, which simply declared that Walberg would “impose a 23 percent tax on all goods and services purchased in the United States in 2009, including gas.” The impression conveyed, of course, is that he’s a tax raiser and, indeed, that he likes taxes even more than someone like, say, Sen. Barack Obama (D-Ill.). Those who simply read the release can, I think, be excused for concluding — as I almost did — that the poor fellow from Michigan had gone bonkers.

Actually, I’m no fan of the Fair Tax. I’ll leave arguing its merits to the Mike Huckabees of the world, but it represents a serious attempt to reform our tax system, and those who support it deserve better than this.

As it turns out, however, the DCCC release is little more than another sign that the 2008 campaign is under way and that rational men and women should beware.

Keene is chairman of The American Conservative Union, whose website can be accessed here.

The Joke's on You

The back and forth between John McCain and Barack Obama over VP vetter Jim Johnson's mortgages is pretty funny — maybe the two candidates could actually trade Charlie Black and Jim Johnson and declare a truce.

But has the McCain campaign noticed the new economic policy adviser just hired? Jason Furman, who at 37 years old is an expert in fiscal policy, has such an impressive resume that you have to wonder if he started college at age 6. Furman has served as staff economist in the White House Council of Economic Advisers under Clinton, was senior director for the National Economic Council, has worked at the World Bank, earned a Ph.D. at Harvard University and was an economic adviser to John Kerry in 2004. And according to the New York Sun Furman is a Wal-Mart defender. In 2005 he published a paper titled "Wal-Mart: A Progressive Success Story," heralding the consumer savings delivered by the chain that is considered a corporate bogeyman to many Democrats.

Mr. Change and the Same-Old Same-Old

As I sat in the Bloomberg studio, listening to Barack Obama’s stem-winder of a speech, listening to his lilting promises of spending more money on education, on healthcare, on programs for the poor and programs for the middle class, on foreign aid, on program after program, I wondered where he was going to get the money. And then it dawned on me. He is going to get it from me, and from hundreds of thousands of people like me.

His spending plans are ambitious, as are his plans for tax increases, while his reform plans are, shall we say, a bit thin. OK, let’s not kid ourselves. His idea of reform is to bring one-party Democratic government back to Washington. His agenda is good for traditional Democratic constituencies like labor, government bureaucrats and trial lawyers, but not very good for anybody else.

Bernanke Gets a Clue

According to The Wall Street Journal, “Federal Reserve Chairman Ben Bernanke on Tuesday put the U.S. dollar squarely on the Fed's radar screen, saying its slide against other currencies has led to an ‘unwelcome’ rise in U.S. inflation and may be a factor in inflation expectations. Bernanke also suggested that the Fed is unlikely to lower official interest rates further, though his remarks suggested that — barring a further rise in inflation expectations — the Fed probably won't contemplate higher rates until there is more stabilization in home prices.”

Well, thank God somebody has started to talk about fixing the precipitous decline in the dollar.

Best to Lead America

Armstrong Williams questions if any of the presidential hopefuls will be able to bring our country back to prosperity.


David Rubenstein and Private Equity, Part II

During a recent Institute for Education/INFO forum, David Rubenstein, co-founder of the Carlyle Group, discussed both the economy and bananas — often in the same sentence. Rubenstein himself is quite humble and self-deprecating for a man on Forbes’s Top 400 Wealthiest People list, and much more sober than expected when diagnosing the economy.

Rubenstein first quoted Hollywood producer Bo Goldman, saying that “nobody here knows anything” when discussing economic issues. He also related a story about Alfred Kahn, an adviser to Jimmy Carter, who used the “R word" (recession) during the 1980 campaign before being asked to stop. Kahn acquiesced and instead began saying, “We are approaching a banana,” since no reporter would write that in his or her column. Somewhat like the chastened Kahn, Rubenstein was hesitant to use the “R word.”

David Rubenstein on Private Equity

When introducing David Rubenstein, the co-founder of the Carlyle Group, at yesterday’s Institute for Education/INFO breakfast, I was not quite sure how to refer to him. Is he a mogul? Is he a tycoon? The title I eventually settled on was the one I read in Gerry Seib and John Harwood’s new book, Pennsylvania Avenue: Profiles in Backroom Power. They referred to David as a private equity pioneer. That sounded perfect. Rubenstein said jokingly that he was a bit intimidated by that title since he did not want to ruin it for “future pioneers of private equity.”

Rubenstein characterized his business as a balance between fear and greed.

Once it was demonstrated that private equity firms could make incredible profits, banks started lending money to them fearlessly. This made it very easy for private equity firms to get loans.

A Budget? Let’s Fudge It

The easiest thing to do in Washington is to increase spending. (The second easiest thing is to increase taxes, but we’ll talk about that later …) Until a few years ago, the one stopgap measure to hold lawmakers in line on spending was a budget — a blueprint of priorities that drew the line in the sand in the name of the American taxpayer. But let’s be honest, the Republican majority in the late ’90s sort of ruined all that. Faced with a seminal moment of truth to do the right thing and restore fiscal discipline once they resumed the majority, Democrats, too, are withering like prepubescents at a Miley Cyrus concert.

The latest profile in buffoonery was on display last week, when Democratic Senate leaders reported the budget resolution may be pushed back again. Let’s not forget that federal law stipulates a budget must be resolved by March. There must have been a good reason to postpone resolution of a $2 trillion budget, right? Sure … Congress wanted to first spend more through the war supplemental. Now, I’m not saying we should nix funding for the war. But how about actually following the playbook that families practice every day — know how much you have and don’t spend more than that!

Obama and Taxes

Sen. Barack Obama (D-Ill.) seriously underestimates the impact of taxes on the economy and the federal budget. If elected president, and if he were to raise the capital gains tax as promised, the response of investors would be to sell prior to the anticipated capital gains rate increase or not sell at all.

When selling prior, you get the lower capital gains rate, and afterwards a higher capital gains rate. For example, if you have realized capital gains of $1 million, selling now will cost you $150,000 in federal taxes at a 15 percent tax rate. If you sell after Obama wins the White House, you will have a 25 percent tax rate, or $250,000 tax bite.

Gas Tax Holiday

The gas tax holiday took a hit tonight, as Hillary Clinton got creamed in North Carolina and barely edged out a victory in Indiana. John McCain should learn this lesson, drop the idea and move on to talking about the deeper problem behind the steep increase in gas prices, which is the declining value of the dollar.

McCain and Clinton tried to tag-team Barack Obama on this issue. But that played to Obama's argument that he is the authentic candidate who is willing to speak truth to power.