Recently I have heard some Democrats blame spending cuts for the fact that we are in the weakest economic recovery since recoveries began. Investor’s Business Daily has a different perspective. They posted an article today with the following chart:
The article explains:
Instead, the researchers found, “the excess fiscal drag on the horizon comes almost entirely from raising taxes.”
Taxes as a share of GDP are on track to rise well above historic averages and well above rates at comparable periods in previous recoveries.
And what explains this “super-cyclical” rise in taxes?
Well, let’s see. Obama forced through a $600 billion tax hike on upper-income families at the start of this year in the name of “fairness.”
Before that, he and his fellow Democrats imposed $1 trillion of new taxes for ObamaCare, taxes that are just now hitting the economy.
As a result, federal tax revenues as a share of GDP will hit 19.3% of GDP by 2015, a level reached just six times since World War II and well above the 17.9% average over the previous 40 years.
We’d only add that Obama’s other economic policies — an out-of-control regulatory state, the looming disaster known as ObamaCare, various attempts at industrial policy among them — have also weakened what should have been a robust recovery.
Increased taxes have taken spending money out of the pockets of all Americans. Even those people fortunate enough to get raises or bonuses this year found themselves with smaller paychecks because of the increases in taxes. The combination of less spending money for the average American and the confusion many companies are dealing with regarding ObamaCare has stalled our economy. Because many of the regulations in ObamaCare only apply to companies with fifty or more employees, we are going to see many companies stop hiring at forty-nine employees until they are certain of the impact of all these regulations. We are essentially in an economic holding pattern as we wait for the current paradigm of higher taxes and more regulation to settle in. Unfortunately, if that paradigm does permanently settle in, low growth and economic stagnation will be the new normal.
