A government big enough to give you everything you want is a government big enough to take from you everything you have.
-- Gerald Ford
On some of the talking head shows over the weekend, several Obama administration economists floated the idea of a middle class tax hike. After a sharp negative reaction, this idea was immediately denied by the politicians in the administration. But to me this is the inevitable conclusion to all the spending that is going on in Washington these days and the economists were simply being rational. The rich in this country simply don’t have enough money to shrink these deficits and sooner or later the politicians are going to come after the cash cow of the middle class. But Obama is no dummy and doesn’t want to end up like Bush 41 breaking his vow of no new taxes for those making less than $250K. That would be political suicide.
Yet, on the other hand, the Obama deficits are unsustainable and will eventually undermine the economy and the dollar if something is not done. The ChiComs will not continue to loan dollars to the US indefinitely if we don’t get our fiscal house in order. And cranking up the printing presses will leave too few dollars chasing too many goods and give the US a good dose of inflation.
That’s why I think middle class tax hikes are inevitable. But they won’t be done in a straightforward fashion. They will be done in a roundabout way to leave the President enough room for plausible deniability. Cap and Trade and Health Care Reform come to mind as two golden opportunities to hike middle class taxes without appearing to do so. In addition to these items, there will be other fees and taxes levied in circumspect ways so people don’t actually see the impact on their tax returns.
To address the deficit, middle class tax hikes and a dose of inflation are almost a foregone conclusion because there just aren’t enough rich people to soak to pay for years and years of the government living beyond its means.