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While in my opinion “The Daily Show” has been totally eclipsed by “The Colbert Report”, there is still one segment of the show I consistently enjoy. Basically, The Daily Show’s editors put together a string of news clips (mainly Fox News) of different members of the media stating the very same phrase or idea over and over again. This is usually followed by a wacky reaction or one-liner by Jon Stewart and always gets a great response from the audience. It got me thinking about all of the words and phrases that periodically dominate partisan vocabulary in the news cycle. One great opportunity for the show to exploit (forgive me if they have already) would be conservative commentators’ insistence that Obama and the Democrats are turning America into France.
That talking heads manage to slip the predicable line into their analysis lately is unsurprising. What is surprising is that they usually ignore one unalterable difference between the U.S. and France. U.S. taxpayers would never consider allowing their elected representatives to tax them as heavily as the French do. France’s overall tax rate as a percentage of GDP is 43.6%, compared to the U.S. at 28.3%. Obama’s version of the FY 2010 budget would modestly increase the top income tax rate for couples making more than $250,000 per year from 35% to 39.6%. The hike would not occur until 2011, by which point the administration is betting the economy will be back on the uptick. Even if inflation continues at its current rate, $250,000 will not buy what it used to by the year 2011. As many are predicting, the dollar could slide even further as a result of the government’s attempt to stop the bleeding by printing more currency.
If the economy should improve and more tax-averse American couples reach the $250,000 mark, outrage will escalate among “high earners”. Americans are simply not willing to be taxed at the rate the French are. While Obama has certainly inspired goodwill and increased support for a social welfare state, most Americans still have a breaking point. Assuming high earners are able to cope with the 2011 tax increases without revolting, the question remains whether the planned increases will be enough to offset the aggregation of bailout and stimulus spending. If not, taxes will not increase further – foreign investment in the U.S. government will.
The enormous deficit gap resulting from recent government spending will be alleviated by foreign governments, not U.S. tax revenues. When 2011 rolls around, the administration will start to realize that Americans’ tolerance for higher taxes has not reached French levels. China is currently the largest foreign holder of U.S. Treasury Bills, while Russia is the 6th largest. Democrats are generally not as worried about the ascendance of China and Russia as Republicans are, but both parties will soon face a hard choice on the issue. The U.S. will be forced to unload an even greater portion of U.S. government backed securities on traditionally unfriendly countries like China and Russia. If they want to stay in office, both Democrats and Republicans are going to need to get used to the idea of a more heavily leveraged America. Our “adversaries” will be ready and willing to narrow the gap. American Taxpayers will not.
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