President Obama's press conference yesterday-in which he only took questions from left-leaning reporters apparently-contained an amazing statement. It should be noted the first two instances of the first person singular pronoun in the sentence refer to Barack Obama, President of the United States. The second two refer to Barack Obama, taxpaying citizen:
And I do not want, and I will not accept, a deal in which I am asked to do nothing, in fact, I'm able to keep hundreds of thousands of dollars in additional income that I don't need, while a parent out there who is struggling to figure out how to send their kid to college suddenly finds that they've got a couple thousand dollars less in grants or student loans.
There is, of course, nothing whatever stopping Barack Obama, taxpaying citizen, from donating his excess income to the United States Treasury. But his statement demonstrates an astonishing economic illiteracy. To be sure, someone earning a great deal of money has an income greater than what he spends. You can only spend so much on luxurious living however hard you try, a reality so rich with comic possibilities that a 1902 novel called Brewster's Millions has been made into a movie no fewer than nine times.
But, unlike Scrooge McDuck, the rich do not put the excess in a vast money bin and frolic about in it. They invest it. What a concept! Where does Obama think new capital comes from, the tooth fairy? It's nothing more than the excess of income over outgo. Take away the income the rich "don't need" and spend it on social programs, and capital formation in this country drops to zero.
So determined is Obama to deprive "the rich" of excess income-as defined by him, of course-he is even willing to adversely impact government income in order to do so. Read this colloquy between Obama and ABC's Charlie Gibson in a 2008 debate with Hillary Clinton:
MR. GIBSON: And in each instance, when the [capital gains tax] rate dropped, revenues from the tax increased. The government took in more money. And in the 1980s, when the tax was increased to 28 percent, the revenues went down. So why raise it at all, especially given the fact that 100 million people in this country own stock and would be affected?
SENATOR OBAMA: Well, Charlie, what I''ve said is that I would look at raising the capital gains tax for purposes of fairness.
MR. GIBSON: But history shows that when you drop the capital gains tax, the revenues go up.
SENATOR OBAMA: Well, that might happen or it might not. It depends on what''s happening on Wall Street and how business is going.
Actually, it doesn't. Every time capital gains tax rates have gone up, revenues have gone down and vice versa. High capital gains tax rates, because the tax liability is only incurred when an asset is sold, have the effect of locking in capital, which is economically pernicious, preventing capital from flowing to its most productive, i.e wealth creating, use.
Shortly after Obama's election in 2008, I wrote a piece for the Wall Street Journal (irritatingly no longer available on their website, which archives back only two years) saying Obama might not turn out to be the vanguard of the future but rather the last liberal president. I am more confident in that prediction every day.