Commentary by Pete du Pont
September 29, 2010
Source: The Wall Street Journal
How big has the government grown under the Obama administration?
“The average level of U.S. government spending as a percentage of GDP from the end of World War II to the present is 19.6 percent,” observes the Heritage Foundation. “In the past two years that level has exploded, reaching 24.7 percent in 2009 and an estimated 25.4 in 2010. . . . Without urgent action the U.S. is on course for national bankruptcy.”
So as Heritage says, the first urgent action is to get government spending under control, something that the current administration has almost no interest in.
The next task is to offer concrete plans and proposals to lead our nation to surer economic footing and more job opportunities. As Douglas Schoen and Heather Higgins showed last week in The Wall Street Journal independents want Congress to “decrease the size and scope of government, cut spending and taxes, balance the budget, reduce the federal debt, reduce the power of special interests and unions, repeal and replace the health care legislation, and decrease partisanship.” Those are not only good, substantive policies, but come January they will become the challenges for the new Congress, which is very likely to be led by the GOP, since independents in the Schoen-Higgins poll favor Republicans over Democrats by 22 points.
Last week the House Republicans put forward a set of concrete ideas in their “Pledge to America.” Among their proposals: rolling back government spending to “pre-stimulus, pre-bailout levels,” which is projected to save $100 billion in the first year and presumably more in future years is one.
Then stopping the new January tax increases and cutting back our huge federal spending growth oversome 25% over the past two yearswill help the economy grow more rapidly. As the pledge points out: “Over the past three years, nonsecurity discretionary spending . . . has increased a staggering 88 percent.” Reforming entitlement spending – Social Security and Medicare, for example is another good goal, as is getting the government out of the energy business and regulation.
Repealing and replacing ObamaCare is equally important. This partisan law puts 17% of the U.S. economy under federal government control and management. Healthcare should be made by individuals not, as the pledge puts it, by the “more than 160 boards, bureaus and commissions” established under ObamaCare. Allowing people to purchase health coverage across state lines, increasing the use of health savings accounts, and undertaking medical liability reform are also included in the Pledge.
Another good idea is elimination of the requirement that small businesses “report to the Internal Revenue Service any purchases that run more than $600″part of the ObamaCare law, though the connection to health care is obscure. That huge influx of information would require an increase in the size and scope of IRS operations, and would drown entrepreneurs in paperwork.
The pledge estimates that Democrats in the Obama years “have enacted $680 billion in gross tax increases,” including the pending expiration of the Bush tax cuts. Some 31 million families will soon have to pay an average of $1,033 in higher taxes because the child tax credit drops from $1,000 to $500, and 35 million married couples “will pay an average of $595 in higher taxes next year” because of the reinstatement of the marriage penalty.
If Congress and the president do nothing, existing tax rates will increase substantially on Jan. 1. Income tax rates will rise from to 15% from 10% for some, to 39.6% from 35% for others. Taxes on capital gains will go to 20% from 15%, on dividends rates to as high as 39.6% from 15%. Nor has Congress addressed the alternative minimum tax problem, so that more than 20 million families may end up paying it. Finally in the new health care bill there is a 3.8% tax on investment income and another 0.9% extra Medicare tax on wages, effective in 2013.
Anotehr nasty new wrinkle of ObamaCare: Starting with the 2011 tax year, the W2 form you get from your employer will include the value of your employerprovided health benefits as well as your wages. That means in the future you may be paying income taxes on your insurance too.
All this is now relevant because the House and Senate Democrats who forced the sunsetting of the Bush tax rate reductions have done nothing during this session to stop the coming increases.
The good news is that the Democrats are becoming squeamish. Tax increases are becoming very unpopular in a weak economy. Some 37 House Democrats have signed a letter urging the extension of all the Bush tax cuts. Add the 178 House Republicans, and that’s just two votes short of a majority (with two seats vacant, the House currently has 433 members).
In less than five weeks all House seats and 37 Senate seats will be up for election. Those members who do not support stopping these tax increases will have a difficult time explaining to their frustrated voters why raising taxes is a good idea in a bad economy. With Republicans all but certain to increase their numbers in the election, there’s a good chance that tax reform will be next year’s biggest public policy argument.
A coming tax debate and the Pledge to America will lay out the goodgoverning principles we should expect if Republicans take control of the House. After two difficult years, it looks as if America’s public policies are going to change in a more positive direction.