Obama’s Tax Hikes, Not GOP Spending Cuts, Are Killing Growth – Investors.com
Liberals are apoplectic about “austerity,” claiming that draconian spending cuts are killing jobs and economic growth. But it’s President Obama’s tax hikes, not spending restraint, that are hurting growth prospects.
… researchers at the Federal Reserve Bank of San Francisco looked at the data and came to a completely different conclusion. They find that it’s not the modest spending restraint pushed by Republicans that’s harming growth prospects, it’s the massive tax cuts Obama has engineered — tax hikes that liberals and the mainstream press ignore when they whine about austerity.
The researchers compared recent and projected spending and taxes to the historic norms at similar points in a business cycle. They found while deficits have fallen of late, spending is still higher, and tax receipts lower, than the norm at this point in a recovery. Fiscal policy, they say, has held back the recovery only “slightly to date.”
Over the next three years, however, the fiscal drag on the economy is “much bigger” — cutting projected growth by about 1 percentage point. But that’s not because of sequester-forced spending cuts.
“Despite all the attention federal spending cuts and sequestration have received, our calculations suggest they are not the main contributors to this projected drag,” they wrote. Even with the sequester, they found, outlays will stay above historic norms over the next three years.
Instead, the researchers found, “the excess fiscal drag on the horizon comes almost entirely from raising taxes.”