Obamanomics Explained

 Lower tax rates caused the 2008 crisis, so higher tax rates will fix the fiscal cliff.

In a recent Wall Street Journal op-ed (November 2) President Obama wrote that “in the eight years after” Bill Clinton left office, “we followed a different path. Bigger tax cuts for the wealthy we couldn’t afford. . . . The result of this top-down economics? Falling incomes, record deficits, the slowest job growth in half a century, and an economic crisis . . .” Obama had taken up that theme during the first presidential debate, arguing that “The approach that Governor Romney’s talking about is the same sales pitch that was made in 2001 and 2003, and we ended up with . . . the worst financial crisis since the Great Depression.”

This is a remarkably imaginative theory — albeit one that reveals appalling economic illiteracy. Who else would have imagined that the housing bust and subprime-mortgage crisis were actually caused by cutting the top two tax rates in mid-2003?
In the second debate, Obama repeated that “The last thing we need to do is to go back to the very same policies that got us there” — meaning top marginal tax rates that were slightly reduced, yet still higher than in 1988–92. Instead, he proposed, “for [incomes] above $250,000, we can go back to the tax rates we had when Bill Clinton was president. . . . That’s part of what took us from deficits to surplus. It will be good for our economy and it will be good for job creation.”

Read more: http://www.nationalreview.com/articles/332613/obamanomics-explained-alan-reynolds