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The Tyranny of Unintended Consequences
By John Vajas on August 17, 2011
President Obama and the news media have attempted to create a narrative that points to a “broken” political system as the underlying cause for our economic depredations. Yet this argument deliberately disregards the reality that the American people voted for divided government as a stopgap against unbridled government intervention into the free-enterprise system—and the unintended consequences that have exacerbated economic problems.
Politics has long been proclaimed as “the art of the possible,” but in reality it is generally the art of the impossible. Take the president’s most recent “pivot to jobs,” which has been profoundly noted as the pivot to save his job. While Obama purports to create jobs, he also proposes massive tax increases on “millionaires and billionaires” ironically making over $200,000 for individuals and $250,000 for married couples.
Economics 101 states that if you tax something you will get less of it and if you subsidize something you will receive more. Many businesses small and large that we rely on to create jobs are located within the ranges the president wishes to tax at higher rates, but Obama maintains that his policies will create jobs. Taxing people who have higher incomes may satisfy an innate urge but it is impossible to point to it as a viable solution to lower unemployment.
Revenues to the federal government have historically increased after the preceding reduction in income tax rates. Empirical data has verified that the federal government has generated greater tax receipts as a result of lower capital gains, dividend, interest and corporate tax rates as well. Reductions in these rates act as strong incentives to businesses and individuals to engage in a greater volume of economic activity and investment in the economy—thus allowing for a greater allotment of income for the government to tax.
Higher taxes act as disincentives for wealth creation, investment and entrepreneurial activity—with the unintended effect of lowering the base of income to tax and revenue to the government. But President Obama and liberals in Washington maintain that tax increases are indispensable to reducing the debt and deficit.
ObamaCare, like many massive pieces of federal legislation, was cynically titled the Patient Protection and Affordable Care Act. Yet premiums have continued to skyrocket due to third party mandates and regulations, raising costs significantly on small businesses—while the expansion of bureaucracy and unfunded liabilities will balloon already swollen budgets at both the state and federal level. But no worries, the president recently defended his unconstitutional legislation with the stale bromide of at least “Obama cares”.
One sector of society that is undoubtedly booming and its workforce expanding is the federal government. A Heritage Foundation study on regulation found that since the middle of 2009, the federal register has churned out 75 economically significant regulations with the total cost of $38 billion. Do increased compliance costs and burdens on businesses lead to greater job creation or is it impossible?
Liberals have ostensibly engaged in a vociferous rage against reality, somehow blaming the tea party for a stagnant economy. But it is evidently clear that our present reality is the culmination of their social crusade to punish success and the free market—and the unintended consequences that flow from their flawed policies.