Dems' class warfare theater a flop in the Senate

By Thomas Lifson

As the nation agonizes with high unemployment, the lame duck Senate Democrats play class warfare games. Yesterday, in an unusual Saturday session, the Senate refused to go along with a scheme to target tax hikes on employers -- economic insanity -- with four Democrats and one independent joining in a Republican filibuster of a scheme to raise taxes on those families earning over $250,000, while protecting other taxpayers from expiration of the Bush tax rates. The Senate then rejected cloture on a proposal by Sen. Charles Schumer to raise taxes on those with an income above one million dollars, another class warfare target.

The rhetoric is transparent demagoguery. Schumer:

"Republicans are willing to hold hostage the middle class tax cut so they can get a tax cut for the very wealthy."

It is, of course, the Democrats who are holding themselves hostage, threatening ruinous tax increases during a recession, simply to score political points bating resentment of the rich, who would not receive a tax cut, but merely continuation of current tax rates. "Raise taxes on employers in a time of high unemployment" doesn't sound quite as good as a political slogan, bit that is what the Dems propose to do.

Even more despicable is the gimmick of linking extension of the tax rates for all to extension of unemployment benefits beyond the current 99 week cap. On the one hand, the claim is made that the count can't "afford" not to raise taxes on employers because of deficit concerns. But aggravating the deficit with multiyear payouts to those who do not work makes no sense if there is genuine concern about the deficit. It is transparently clear that the Democrats are merely trying to score political points, not matter what the cost to the economy and jobless.

The dirty secret underlying the entire debate is that calculations of tax revenue are based on static analysis -- as if people don't adjust their behavior to take account of tax rates. The truth is that lowering taxes can increase tax revenue by stimulating economic activity (including hiring), while tax increases depress revenue, by making it difficult for businesses to expand.

As a result of the Democrats' feckless political posturing, businesses face continued uncertainty over their tax rates, and will not hire. The economy continues to stagnate. And even five members of the Senate caucusing with the Democrats are too disgusted to support this pathetic exercise on class warfare at the expense of the nation's economy.