Chance for greatness? - An appeal to the president to deal with the economic crisis

Dear President Obama:

Mr. President, you have now won your second term as the president of the United States of America. You have the distinct opportunity to end your second term as one of the most successful presidents of all time. You did inherit an economy that was beginning to fall into an abyss. If you provide the leadership necessary to climb out of this precipice, you will have earned your place of distinction among all great presidents. However, if you choose the wrong path, your greatness will be diminished and we will become another Greece.

Mr. President, a quantitative-easing policy without end threatens the value of our currency. It now takes $1.28 to buy what $1.00 did only 10 years ago. It takes seven cents more for every dollar spent than it did when you first took office. The cost of the necessities my family buys (food, clothing, fuel) certainly has increased far greater than the CPI. We, who are retired, find it difficult to maintain the style of living to which we are accustomed. Our savings are losing purchasing power. This all reminds me of what happened in Roman times when they devalued their currency by putting less and less silver in their coins until it was worthless. It became a fiat currency too.

I fear that all this money printing and devaluing the dollar will only lead to a worldwide currency war. Brazil, Russia, India, and China have already begun trading among themselves without converting to the American dollar. Even the IMF has expressed a desire to replace the dollar as the world’s reserve currency.

I just today saw Harry Reid speak and he was saying, “we need more revenue.” Now this is where the debate begins. How do we achieve the goal of increasing revenue. I know that you, Mr. President, have always turned to the productive years under the Clinton administration as the go-to example of how to best produce more revenue. Now let’s look at some historical facts regarding this assertion.

First, President Clinton does deserve some credit but as FactCheck.org explains, “How much he deserves is a matter of opinion…” FactCheck.org also indicates that “many other factors, having little or nothing to do with government, also were at work during the Clinton years. Personal computers and the Internet came of age, bringing a revolution in the efficiency of processing information and making workers more productive. Manufacturing companies embraced more efficient production methods. There was a massive reduction in military spending, begun during the George H.W. Bush presidency.” This was also the period following the end of the cold war, oil prices dropped to about $11 per barrel, inflation was averaging less than 2 percent, and, more importantly, we were not fighting a war.

Mr. President, you say, “I want to reform the tax code so that it is simple, fair, and asks the wealthiest households to pay higher taxes on incomes over $250,000 — the same rate we had when Bill Clinton was president; the same rate we had when our economy created nearly 23 million new jobs, and the biggest surplus in history…”

A factor you fail to recognize is that when President Clinton was inaugurated in 1993 and up until 1998 he was still running an annual budget deficit — as high as $255.1 million. Conversely, in 1998, following his 1997 tax decrease he began, for the first time in his presidency, to experience an annual budget surplus. These budget surpluses continued to grow for the rest of his presidency and surged to $236.2 million.

Tax revenues also peaked during the last year of the Clinton presidency, year 2000, at $2.026 trillion. I hear Harry Reid, James Carville and others make the same allegation about Clinton raising taxes causing an economic boom. Not true Mr. President — it was his tax reduction that produced the economic boom.

President G.W. Bush inherited the 2000 dot.com bubble and then had to respond to the 9/11 attack in 2001. Without question, fighting two wars took its toll on the deficit during the rest of his presidency. In spite of this, tax revenue grew after his tax-reduction bill passed in 2003. Revenue grew steadily from $1.782 trillion in 2003 to $2.568 trillion during his last year. Bush’s so-called tax break for the wealthy generated a 44 percent increase in revenue throughout his last five years in office. The Bush tax cuts were passed in response to a recession occurring as George W. Bush entered office.

To this day, under your presidency, Bush’s tax cuts continue to create an average annual revenue of $2.241 trillion while President Clinton’s last four years produced an average of $1.789 trillion. Roughly a half a trillion or 25 percent more than during President Clinton‘s time.

A Forbes article reports the following occurred after President Bush’s tax cuts were in place: 1) “The top 1 percent of earners saw their tax bill increase 58 times more than the top 25-50 percent of earners. 2) The top 1 percent of earners saw their tax bill increase 414 times more than the bottom 50 percent of earners.” The evidence seems to contradict your contention that increased taxes on the wealthy are needed to increase revenue.

Now let’s look at how much your fairness and redistribution doctrine would generate in tax revenue. Would it be enough to reduce the deficit in any meaningful way? It has been estimated that such an increase would raise anywhere between $35 and $70 billion annually. Let’s see, we are currently adding to the deficit at the rate of $1.2 trillion annually. The eighth-grade math is simple — it doesn’t add up. Even If the IRS had the authority to confiscate all income over $1 million, it is estimated that it would collect about $616 billion. As you can see, we come up short any way you look at it. But let’s turn to one of the 2008 debates when moderator, Charlie Gibson, pointed out that both President Clinton’s and President Bush’s tax cuts had increased revenue each time taxes were reduced. He further explained that in the 1980s when the tax rates were increased the revenue went down. You seemed to nod you head in agreement at the time. But, when Mr. Gibson asked why you would raise taxes knowing this, your response was, “What I have said is that I would look at raising the capital gains tax for purposes of fairness.” There you go — its the fairness doctrine even if it brings in less revenue. This kind of class warfare worked, and helped get you re-elected, too.

You continually say we can’t go back to failed policies that haven’t worked. Mr. President, you need to bone up on your history. The so-called “rich” have means of avoiding taxes if they are too high. Dan Mitchell of the Cato Institute shows this graphically by the use of the Laffer Curve. Municipal bonds are one means of avoiding taxes. Also, leaving the country is not out of the question. Donald Trump recently put it this way, “Rich people are international people. Whether they live here or live in a place like Switzerland, it really doesn’t matter to them.” I know of several people who are exercising this prerogative and I continue to read of people such as a movie producer and the co-founder of Facebook who have done so recently.

Mr. President, if you go all the way back to the Harding administration in 1921, you will find what Charlie Gibson said in 2008 still rings true. Also, JFK, Reagan, and, yes, even George W. Bush understood and proved that reducing taxes has a stimulative effect on economic activity and produces an increase in revenue. You cannot argue with history! As Harry Truman once said, “The only thing new in this world is the history you don’t know.”

So, Mr. President, what will be your legacy? For my grandchildren’s sake, I sincerely wish you good fortune in your endeavor to get our economy on a solid footing. Please be amenable to listening to those on the other side. And please do not be so dogmatic in your approach. Reach out to other intelligent people such as those at the Heritage Foundation, Thomas Sowell at Stanford, and Dan Mitchell at the Cato institute. In other words, step out of your comfort zone.

Lastly, I would like to bring to your attention what a European financial expert recently warned in a speech given here in the United States, “We (Europe) are looking in the rear-view mirror as we see you (America) move down the same road we’ve just traveled.”

Lester D. Still is a resident of Kalispell.