President George H.W. Bush lost the presidency because he broke his 1988 campaign pledge: “read my lips: no new taxes.” Now President Obama is as blatantly poised to disregard his most fundamental campaign promise: “if you make less than $250,000 your taxes will not go up. Not one dime.”
In our new book Catastrophe, we write about the breadth of Obama’s planned tax hikes and the heights to which he will drive taxes. To pay for his health care catastrophe, Obama will likely make all health insurance premiums, paid by employers, taxable to the employees.
So if your income is $50,000 and your employer pays $10,000 in health insurance premiums for you, your taxable income will be $50,000. In effect, this means that most taxpayers will have to pay more than a third of their incomes to the federal government.
And Obama’s “cap and trade” legislation is the exact same as Al Gore’s BTU tax which was the centerpiece of Clinton’s 1993 tax program. Eventually, Clinton replaced it with a flat 5 cent gasoline tax. But the idea of taxing utility bills to drive down electricity use is as old as the Clinton Administration. But Obama can’t call it a tax because that would break his pledge. So he calls it cap and trade instead.
Finally, it is obvious that Obama will be unable to restore financial solvency to Social Security and Medicare without big hikes in the payroll tax, coming in 2011!
It is ultimately these tax increases which will drive Obama’s congressional majority from office in the 2010 elections. His stimulus package, raising the deficit damaged the recovery by raising interest rates. Now he will complete the catastrophe by raising taxes. Together, these tax hikes and interest rate increases will choke off any recovery the business cycle would naturally catalyze.
From now on, its Obama’s recession.