You might recognize the White House talking points some Democrats have borrowed in the debt ceiling negotiations: Taxes need to be raised on “millionaires and billionaires” and “oil companies raking in billions in profits.”
And often that means repealing the Bush-era tax cuts. But is that an obsession?
On Monday’s “The Laura Ingraham Show,” CNBC host Larry Kudlow observed that it might be. However, he warned that his crystal ball is telling him the outlook isn’t so good.
“You know, we had a bad release this morning, very bad — consumer spending and incomes,” Kudlow said. “Real consumer spending has actually now fallen for the second straight month. And after taxes and after inflation, what’s called ‘real disposable income,’ is falling. What you got here is another 2-percent quarter coming up. This whole first half looks like 2-percent growth, GDP, which is pretty poor, 4-percent inflation, 9.1-percent unemployment. I mean, it really is a dismal picture and Washington policies are not helping.”
Kudlow explained the answer isn’t higher taxes in a weak economy and even those that tout Keynesian economics would agree with that. But he also said high inflation looms.
“I mean look, do I read this right — the Democrats in all the debt negotiations want to raise taxes in this kind of economy,” Kudlow said. “What am I missing here? I don’t care whether you’re a Keynesian or a supply-sider, or whatever. You don’t want to be raising taxes when the economy is completely sputtering and the inflation rate is picking up by the way, thanks to [Federal Reserve Chairman Ben] Bernanke. So it’s not a good picture.”
The best solution, “The Kudlow Report” host said, was a plan with spending cuts and changing tax rates. But he reiterated a point he had made on his Saturday radio show, when he questioned the Democratic Party’s seeming obsession over ending the Bush tax cuts.
“I mean, why not?” Kudlow asked. “A nice simple plan [with] significant spending cuts to deal with the debt problem. And then at at the same time, slash the business tax rate to 15 percent, with no deductions and stop all of this rhetoric about ending the Bush tax cuts, particularly for the small business owners and the most successful earners. I have never seen — the Democratic Party has an obsession over the Bush tax cuts. It’s like, whatever the problem is they repeal the tax cuts. It’s like they need a 12-step program to deal with their obsession and anger over the Bush tax cuts. So why not just lower spending, lower taxing coming out of these debt talks? That would provide some confidence and some incentives. That would help.”