Fresh paint in the corner

The Democrats - and some of the Republicans have painted themselves into a corner.

First, they tell us the economy stinks. You surely have heard them on this subject. Were shipping jobs overseas by the tens of thousands. (Thank you, Lou Dobbs.) Were losing our manufacturing. The middle class has taken a huge whack. Only the rich are happy.

The good news on the economy? Its all smoke and mirrors. And more lies from Bush. This economy is in recession. And if it is not, technically, most Americans feel it is. People are depriving their kids of extra sandwiches so they can afford to buy gas. Worst economy since the Depression.

And all of that.

I dont buy it. The economy has been doing well. But let us suppose they are right. Let us suppose they are not just saying the economy stinks in order to frighten voters. Let us assume they really mean it. The economy is for the dogs.

For the moment, then, let us look at another big idea the Democrats are pushing. Raising taxes.

They are lining up immense tax increases. New taxes. As well as old taxes coming back to whack us. The old taxes will come back when the Democrats let the Bush tax cuts expire. Which they promise they will do.

We need the new taxes, they tell us. Government needs more revenue. Lord knows why. Government needs to shrink its deficit. It has been doing that nicely. But never mind that. Let us assume the Democrats have got this right. That we need to burden ourselves with tons of new taxes.

This is the corner. The fresh paint are the two issues I outlined above.

Economists from the Left and the Right fight over many things. But one thing they pretty much agree on is this: It is stupid for a country to raise taxes when its economy is taking the gas.

The reasons for this are simple. To recover from the blues, the economy needs for businesses and entrepreneurs to invest more. To invest in new technologies, new equipment, new models, new plants. Those investments create more wealth. And more jobs.

Well, those businesses and entrepreneurs do NOT invest more when we sock them with new taxes. Instead, they lick their wounds. To pay the taxes they dip into the profits they would have used for investment. They also raise their prices. To pass some of the taxes on to customers.

And since they are paying more taxes instead of investing, the economy slows. And since customers are socked with higher prices, they slow down their spending. Bad news for an economy. And that is why when we have a sluggish economy we do not raise taxes. It is the equivalent of forcing the flu patient to jog around the block.

Democrats cannot have it both ways.

If indeed the economy is as bad as they paint it, are they telling us the solution is to tax it more?

Economies need to be healthy to absorb more taxes. So, are they telling us the economy is healthy? Healthy enough to take a hit from the new taxes they propose? The mountain of new taxes they propose?

So, which is it? Bad economy, so no tax increases? Maybe some tax cuts to help stimulate the bad economy?

Or is it good economy and bring on the tax increases?

The scenario that the economy is bad and deserves a massive tax increase? That does not work, does not compute. So I suspect Democrats are going to have to drop one of these issues. Presidential candidates will have to choose one over the other. And when they do, they are going to tick off one constituency or another.

Interesting situation. Stay tuned.

From Tom ... as in Morgan.

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