President Obama and Nancy Pelosi may tell the American people that the recession is over, but unemployment is staggeringly high, job creation remains low, and our country's debt continues to mount. So if the recession is over, when is the recovery going to start?
Our government can help spark true economic recovery by freeing capital and loosening its grip on the financial markets. As the past two years have shown, government is incapable of stimulating the economy through increased spending and taxing. Despite the resounding mandate the American people put forward on November 2, many Democrats continue to stick their collective heads into the Keynesian sand refusing to accept reality and acknowledge that their way was resoundingly rejected.
It is beyond belief that the congressional majority decided to wait until the 11th hour to act on legislation to prevent the increase in tax rates for allAmericans. Instead, they choose to play a game of legislative chicken that ultimately put the best interests of the American people in jeopardy. They tried to advance the misguided notion that allowing the Bush tax cuts to expire next year for the top two tax brackets was somehow in the best interest of our nation. Their thresholds were over $200,000 for single filers and over $250,000 for joint filers. By raising taxes 24% and 17% on these brackets, respectively, they were simply trying to redistribute the economic pie and not actually grow it. Their tax increases would have hurt small businesses and entrepreneurs and stymied any real economic recovery.
'Disingenuous' numbers
The fact of the matter is small businesses, the heart of the American economy, would have been disproportionately hit by the Democrats' tax increases. The administration's often cited claim that only "3% of small businesses" are affected by the tax increases is disingenuous at best and downright manipulative at worst. What matters is not how many small businesses are affected by the tax increases, but rather the amount of business income subject to a tax hike.
Why? First, the administration's definition of small businesses includes taxpayers who derive business income from unprofitable firms, consulting income, investment conduits, and other forms of passive income.
The importance of small businesses to economic recovery cannot be understated. Small businesses create 60% to 80% of new jobs in the United States. In 2007 alone, small businesses accounted for 46% of business receipts, 47% of wages paid, and 52% of net business income. If President Obama raises taxes, more capital will be directed away from these small businesses and funneled through the inefficient hands of the federal bureaucracy. These tax increases will continue to turn our markets into a state-influenced oligopoly.
Rooted in Keynesian economics, the Democrats' half-hearted attempts to solve the economic crisis have been to increase government spending and now taxing. Under their watch, the federal government has robbed private industry of the ability to allocate its own capital. By taking money out of the hands of private citizens and businesses, they are saying, "We can spend this money better and more wisely than you."
Yet government has no business experience. Its survival is not dependent upon its profit margin but the ballot box. Although the Democrats insists otherwise, government has neither the proper motivation nor the ability to spend the private sector's earned monies to stimulate the economy.
The risk-taking entrepreneurs, the clever inventors, and the competitive industrialists are the driving force that propels our economy forward. Their initiative and ingenuity create new ideas, products, services, and jobs. They grow our economy. Free-flowing capital helps our businesses and entrepreneurs expand, produce and hire. Democrats' tax increases will seize this capital — forcing it through layers of swampy bureaucracy — discouraging and stifling economic growth.
Undermining a recovery
Clearly, their economic policies have failed to-date. After the bailouts, the stimulus spending bills — not to mention a bank-breaking health care bill — our economy shows little signs of recovery. Their insistence on a policy of tax increases will only hold back businesses and sabotage recovery efforts.
The goal of economic policy should not be to take capital out of businesses' capable hands. It should be to help our entrepreneurs, our businesses, our citizens engage in sustained risk-taking so that they — and not government — can grow our economy. It should be to free more capital to allow them to invest in ideas, people and products. It should provide a climate of certainty that fosters more long-term investments. It should be to encourage and revive the American entrepreneurial spirit. Only then will we start to see true economic recovery.
Rep. Darrell Issa, R-Calif., represents the 49th District of California and is the presumptive Chairman of the House Committee on Oversight and Government Reform.
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