War and Taxes

Two strikes against the new administration

by Victor Davis Hanson

NRO’s  The Corner

Look Back in Anger at Iraq

It is striking how Obama references past mistakes on Afghanistan and emphasizes the now-tired “reset”-button themes — striking because of what is left unsaid.

One, there seems little awareness that Putin’s increasing authoritarianism from 2002 onward (empowered by the increase in oil prices, and the harassment of pro-democracy advocates at home and abroad), not just George Bush’s strut and provocations, were mostly the reasons why a confident Russia now decides to be for whatever the U.S. is against.

By framing the relationship with the subtext of “let’s improve what Bush ruined,” we present an image of contriteness, while essentially affirming past Russian behavior as understandable. No need to add that no Russian ever shows remorse about anything, much less the souring of Russian-American relations, much, much less its own role in that estrangement.

When Obama says that things got worse in Afghanistan and that he now is trying to renew attention there and right things, fair enough. He deserves our support for his escalation. But at the same time, he is absolutely silent about the radical shift in Iraq, the once-“bad” war that is now far more encouraging than is its “good” counterpart in Afghanistan.

But someone, apparently to be forever unmentioned, did something right for Obama to inherit relative calm in Iraq, a democratic government that still survives and which is exposing the old shibboleth “we only empowered Iran by going into Iraq” to be a short-term truism at best; when, in fact, a multiparty, Shiite-majority democracy in Iraq that replaced Saddam is probably proving far more destablizing to nearby 8th-century clerics in Iran than are their own IEDs and bought terrorists in Iraq.

The theocracy has real problems when its own clerics begin questioning the recent fraudulent election and calling for more transparency, inasmuch as they see across their border a workable system with popular support in a way unknown for the last 30 years in their own country.

The Tipping Point on Taxes?

Reports that Representative Rangel (of recent tax-liability fame) and others are suggesting a new health-care surcharge on “top” incomes need to be put into context. The president has already assured everyone that the income tax rates will go up to about 40% on such people; but unlike the Clinton-era rates, this will also be accompanied by a lifting of the ceiling on exposure to FICA payroll taxes.

And if we were to factor in recent state income tax rate hikes that were similarly weighted, it is not hard in a state like California to see a self-employed small business person paying almost 70% of income in state, federal, payroll, and new surcharge taxes.

People are not dense, and the thought of such added exposure surely must already be making many small-business owners think carefully about investing in new equipment, hiring more employees, or expanding service, since the government, not they, now knows far better how to spend an extra 10–20% of their income.

So we can predict two reactions: One, businesses will constrict in anticipation of owing more in taxes; two, they will explore new methods (not all of them productive or healthy) of hiding and shielding income.

We are living in a surreal age of $2 trillion annual deficits, in which we just casually talk about “more stimulus”, “reforming health care”, “fixing education”, “cap-and-trade”, while fighting two wars abroad — all the while “not raising taxes on 95% of Americans” — all predicated on the idea that “they” will always be willing and able to create new wealth and now hand over two-thirds and more of it to an ever-expanding government.

The only mystery will be how long will the base of Obama’s support stay loyal among high-paid stockbrokers, CEOs, lawyers, financiers, academics, and journalists, who have enough money to get hit hard by new taxes, but not quite enough money not to care.

©2009 Victor Davis Hanson

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