Columnist.
If you shake out the Obama budget in terms of bold headlines, it's really a class-warfare, tax-the-rich budget. Layer upon layer of tax hikes are piled on successful investors, small-business owners and corporations. The capital-gains tax goes from 15 percent to 24 percent (including Obamacare). The dividends tax goes from 15 percent to nearly 40 percent, and that's not including the double tax on corporate profits embodied in dividends and capital gains. The Bush tax cuts for top earners are repealed.
Out on the campaign trail, Fed head Ben Bernanke is an unpopular guy. Mitt Romney and Newt Gingrich have both said they would replace Bernanke, not reappoint him. Rep. Ron Paul would swap the whole Federal Reserve monetary system for a gold-linked dollar, making the yellow metal legal tender. And it was Gov. Rick Perry of Texas, before he dropped out of the race, who said more quantitative easing by the Fed would be "almost treasonous."
You would think that with one of the weakest economic recoveries on record, President Barack Obama would be searching desperately for ways to promote economic growth. It is, after all, an election year. Most pundits and pollsters agree that it's the economy, stupid. But instead, Obama used his State of the Union speech to rail on about fairness, inequality and redistribution. The Obama strategy is simple: Tax the rich, because they don't pay enough. The problem is that they do pay enough. According to the Tax Foundation, Americans making $1 million or more pay a 25 percent average tax rate. People in the $50,000 to $100,000 income category -- call it the middle class -- pay 7 to 8 percent.
Let me build on Charles Krauthammer's great Friday column, "The GOP's Suicide March." Krauthammer argues that just as President Obama's class-warfare, soak-the-rich mantra started lagging in the polls, some Republicans on the campaign trail started making the case that Mitt Romney's Bain Capital was involved in nothing more than vulture capitalism, looting companies and destroying jobs. Keeping class envy alive. I'm not going to name names, because everybody knows who these Republicans are. Instead, I want to go positive and commend Romney himself. Romney did his best in the second South Carolina debate to fight for free-market capitalism and Adam Smith, and against the spread of Obama-style crony capitalism and class envy.
There's a very troubled company out there called U.S. Government Inc. It's teetering on the edge of bankruptcy. And it badly needs to be taken over and turned around. It probably even needs the services of a good private-equity firm, with plenty of experience and a reasonably good track record in downsizing, modernizing, shrinking staff and making substantial changes in management. Yes, layoffs will be a necessary part of the restructuring. A quick look at the income statement of this troubled firm tells the story. Just in the past year (FY 2011), the firm spent $3.7 trillion, but took in only $2.2 trillion in sales revenues. Hence its deficit came to $1.5 trillion.
While so much attention has been turned to Newt Gingrich's catastrophically mistaken attack on Mitt Romney's Bain Capital, free-market capitalism, investment and profits, a potentially much more significant development occurred in the New Hampshire debate Saturday night. For the first time, Romney embraced a much bolder tax-reform plan. Under pressure from a number of supply-side conservatives (including me, and most especially the editorial-page folks at The Wall Street Journal), Romney appears to be listening. Here's his money quote from the debate: "But I look long term to do just what Jon (Huntsman) indicated, which is to take Bowles-Simpson and to reduce the rates in our tax code, to reduce the number of exemptions and limit the amount of exceptions that can occur. At the same time, I don't want to raise capital-gains tax rates, as they do in Bowles-Simpson. But simplifying the code, broadening the base, is the right way to go for our tax code long term."
Message to my fellow conservatives: Please don't blame the mainstream media for the improvement in jobs, unemployment and economic growth. Reporters are not making this up. The economy is better. It's going to give President Obama a leg up on the election. GOP beware, and come to your senses. Take Friday's jobs report from the Bureau of Labor Statistics. Non-farm payrolls gained 200,000, and the unemployment rate slipped to 8.5 percent from 8.7 percent. It may well be that a seasonal quirk added 42,000 messengers and couriers to the totals, but that will be lost in the headline reporting. It will be given back next month. It's inconsequential to the overall story. Likewise, a normal labor participation rate would yield much higher unemployment. But that's academic.
When you think of Republican Rep. Paul Ryan, terms like earnest, serious and important come to mind. So does the term old-fashioned. Ryan comes from an old-fashioned place, the blue-collar town of Janesville, Wis. He cherishes the old-fashioned values of a faithful family man. He even looks old-fashioned, with his white shirts and striped ties. And he uses old-fashioned argument skills, persuasively weaving big-picture themes with the numbers that back them up. And Ryan has old-fashioned goals, too, like saving America from fiscal bankruptcy, economic stagnation and a European-style entitlement state.
The payroll-tax-cut debate is not really about the payroll tax, which is a very weak-kneed economic stimulant and a lackluster job creator because of its temporary nature. Without permanent incentives at lower tax rates, these rebates don't do anything for growth and jobs. Instead, the key to understanding the payroll-tax debate is to grasp President Barack Obama's leftist vision of taxing successful earners (the millionaire surtax) and his obsession with clean energy at the expense of fossil fuels. These are ideological positions. They support the Obama vision of class warfare and his attachment to radical environmentalism.
Say what you will about former Speaker Newt Gingrich. His philosophy, his policy proposals, his track record, his campaign and all the rest. But the one thing you have to acknowledge about Gingrich is that he's a sizzler. He has a way with words. And he's as good a communicator as anyone in modern politics. In my CNBC interview with Gingrich this week, he slammed President Obama's tax-the-rich, class-warfare attack on banks and businesspeople. He hammered Obama, calling him a hard-left radical who is opposed to free enterprise, capitalism and "virtually everything which made America great."
It's often said that help comes to those who help themselves. But Europe can't seem to help itself. So on Wednesday, the U.S. Fed came to the rescue. And that rescue triggered a global stock market rally, including a near 500-point gain in the United States. Basically, the Fed is making it cheaper for Europe to borrow dollars. And this dollar backstop symbolically shows that the Fed, the European Central Bank and other big central banks are not going to permit a 2008-type credit freeze and financial meltdown.
With a great feeling of loss and sadness, I want to join with so many others to mourn the passing of Ted Forstmann, the brilliant financier, entrepreneur and free-market capitalist. A Wall Street Journal editorial from Paul Gigot and a column by Charlie Gasparino in the New York Post chronicle Ted's great achievements. It was Ted who invented the leveraged buyout, and it was Ted who walked away from the bubble of overleveraged junk bonds. Ted was a major philanthropist, and an education reformer, too.
It would be a great tragedy if a super tax hike came out of a supercommittee compromise deal. It would do great harm to the economy -- just as much harm as President Obama's various tax-hike threats. And on the Republican side, a super tax hike would irreparably split the GOP. OK. Here's the good news. In a CNBC interview this week, I asked supercommittee co-chair Jeb Hensarling about an idea from the Democrats to raise taxes by $600 billion to $800 billion. About $300 billion of that might be upfront, with $500 billion later from some tax-reform overhaul. This would be an unmitigated economic disaster.
There were three winners in the CNBC debate: Herman Cain, Mitt Romney and Newt Gingrich. Gov. Rick Perry was the obvious loser because of his memory lapse. The guy with the toughest job on Wednesday night was Cain, who has been hammered by sexual-harassment charges. He needed a strong performance to put him back on message with his 9-9-9 tax plan and pro-business, free-enterprise views. I give him first prize, simply because he performed so well. He had the most to gain and the most to lose. He gained.
Despite some modest improvements in the jobs picture with the release of Friday's Labor Department report, I would guard against any irrational overexuberance that problems with employment or the economy are being solved. A smaller-than-expected 80,000 gain in nonfarm payrolls was bolstered by upward revisions in the prior two months, amounting to 102,000 additional jobs. So over the past three months the establishment survey has averaged 114,000. It's really nothing to write home about.
The world economy has once again dodged Armageddon. The European Union finally forged a Greek bond deal, and a rescue fund big enough to ring-fence banks and sovereign debt, in order to avoid a catastrophic, Lehman-like contagion event. At the same time, the U.S. economy moved away from the threat of recession with a third-quarter real gross domestic product report of 2.5 percent. In response, stocks are soaring. We'll live to see another day.
The latest Gallup poll pegs President Obama's approval at a new low of 41 percent. That adds to the thought that the winner of the GOP presidential-primary sweepstakes is going to be the next president. And inside that Republican contest, the policy pendulum is swinging toward pro-growth, flat-tax reform. A new agenda. With Herman Cain's 9-9-9 plan and the announcement of a Steve Forbes-type flat tax from Gov. Rick Perry, the GOP flat-tax-reform competition is dominating the headline news.
Herman Cain is the only GOP presidential candidate who wants to kill the tax code. That's right. Put a knife in it. Junk the entire system. And people are cheering as he rises in the polls in his quest for the nomination. Cain's 9-9-9 plan is not perfect. But then again, the good should never be the enemy of the perfect. Rep. Paul Ryan gives the plan a thumbs-up. Supply-side mentor Art Laffer tells me it would be "far, far better than the current system." And Chris Chocola, president of the free-market Club for Growth, calls it "a truly revolutionary tax reform that would amount to a massive job-creating tax cut on investments, savings and income."
The stronger-than-expected ISM manufacturing-index reading for September might normally suggest that the economy, at least for now, has dodged a recession bullet. After zero jobs and zero real consumer spending in August, which put the stalled economy on the front end of recession, the ISM number is the first major September reading. But economist Michael Darda says hold the applause: Inside the ISM, new orders and order backlogs either flat-lined or declined and remain below 50 -- the DMZ recession marker on the index.
So just when everyone had concluded the Chris Christie matter -- saying, "Great speech at the Reagan Library, but he's not gonna run for president" -- the New York Post comes along with a story that says the New Jersey governor is seriously considering a 2012 run. Apparently the Reagan Library experience had a big impact on Christie, and others. He's now being urged to go for it by Nancy Reagan, Henry Kissinger, former president George W. Bush and former first lady Barbara Bush.
