Obama and the 'Rich'

Wall Street Journal
Wednesday, June 11, 2008

Barack Obama has been on a class-warfare tirade since he locked up the nomination, accusing John McCain of defending Bush tax cuts for "the rich." "For eight long years," he said Monday in a speech laying out his economic agenda, "our president sacrificed investments in health care, and education, and energy, and infrastructure on the altar of tax breaks for big corporations and wealthy CEOs."

Hmmm. Anybody even dimly acquainted with the record, especially President Bush's vast expansion of Medicare, might doubt the factual basis of such a statement. Never mind. Mr. Obama and the Congressional Democrats promise to sock it to "rich" taxpayers next year to pay for "middle class tax cuts" as well as some $300 billion in new spending. But there's a problem: They won't tell us exactly who the rich are.

In various tax proposals Mr. Obama has set the definition of rich at levels of $100,000, $200,000 and $250,000 in annual income. He has vowed, for example, to erase the Bush tax cuts not only for those who make more than $250,000, but to end the cap on Social Security taxes, which amounts to a tax hike on anyone who makes more than $100,000 in income. More recently, Austan Goolsbee, an Obama economic adviser, told me the new cap might be set at $200,000.

All of this has caused some heartburn among certain Democrats in high cost-of-living states. New York Rep. Joseph Crowley says a couple with earnings of $100,000 could be "a police officer and nurse." "In New York City," he adds, "they'd be struggling."

A similar argument came to the fore as Democrats debated the recent farm bill. Under the new law, farmers will be able to retain full subsidies even if they have incomes of $750,000. Because of various gimmicks, the USDA says that farmers could even have incomes up to $2 million and still be eligible for a farm welfare check. When it comes to farmers, Nancy Pelosi, Hillary Clinton and Barack Obama apparently believe that "soaking the rich" means soaking them with handouts.

This is not just a rhetorical exercise. It could tell us a lot about whether Democrats can come anywhere close to paying for all their spending promises and still meet their vow to balance the budget. One problem for Senator Obama and his class-warfare crowd is that repealing the Bush tax cuts for those with earnings of more than $250,000 would raise only about $40 billion a year, according to Cato Institute economist Alan Reynolds. That would leave President Obama with a $360 billion shortfall to meet his other proposals. Either those nurses and policemen are going to have to be defined as "rich" by Team Obama, or the Democrats' pledge of balancing the budget in five years is a fantasy. Add the fact that his various spending proposals will certainly prove more costly than projected. It sounds like not just the top 2% but most of the bottom 98% had better get ready for higher taxes under an Obama administration.