LARRY KUDLOW: The economy is depressed

Congratulations to President Joe Biden, who continues to believe that he can tax the country into prosperity. I say "congrats, Joe" because the entire history of tax hikes shows the revenue increases never pan out. 

The economy is depressed. Investment falters and, if that weren't enough, you would be emulating western Europe which has been taxing itself into recession for many decades including now.  

If it's not exactly big government socialism, it sure comes close, doesn't it? Proud of you, Mr. President! You never miss a progressive beat. By the way, I don't want to ignore the spending increases in the president's budget, I just felt like starting with the tax hikes.  

Now, Mr. Biden flagged this in his bellicose, highly partisan, and over-caffeinated State of the Union speech last week, but in today's new Biden budget, it's all true blue. Raise the corporate tax from 21 to 28%. Let foreign governments also tax our corporations. 

Also bring back the phony so-called book-value tax hike, which ignores statutory credits, deductions or expensing. Raise the top income tax rate. Raise any number of investment income taxes. Go for the unconstitutional wealth tax on unrealized capital gains. 

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Jack up the Medicare tax and lots of other tax hike goodies, that come to roughly $6 trillion over the next 10 years. So, when you raise corporate taxes, you're hurting middle-class working folks the most. They will bear about 70% of the tax hike burden. Taxing other investments, or small businesses, who pay the top tax rate, or letting foreigners smash our first-in-class technology companies.

All this drains the animal spirits from the economy, curtails after-tax returns to work investment and risk-taking and blunts the supply side of the economy, which means higher taxes. 

Plus, the massive Biden regulatory state creates fiscal inflation pressures. The budget deficit will get worse – not better – under all these tax hikes and let it be known that revenues are not the problem in recent years, because they've been running steady at over 17% of GDP. 

The problem is with spending, which is running well over 24% of GDP, much higher than the average of the past half-century, and where Mr. Biden has already increased spending and borrowing by roughly $6 trillion, but in his new budget, he's got roughly $3 trillion in new spending proposals – that's brand new spending proposals. 

Childcare, education, training, earned income tax credits, Obamacare health subsidies, paid family and medical leave, mortgage credits for housing subsidies and plenty of other stuff that we don't know about yet. 

Oops, almost forgot: student loan cancellation, which the Supremes have ruled unconstitutional – but, Mr. President, congrats for ignoring that law as well! 

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No matter what you've been telling us, deficits are going to run $2 trillion per year as far as the eye can see, if not more and you've got a very good chance of achieving $50 trillion in publicly held federal debt over the next 10 years. That would come to about 120% of GDP in peace-time, with less than 4% unemployment. 

Turn Maynard Keynes on his head. I'm proud of you, Mr. President. You're breaking all known rules of all known economic schools, except the progressive socialist school, but really, taking a look at your economic polls in particular, and your overall performance polls in general, that progressive model you're clinging to doesn't seem to be working all that well for you.  

So, it's time for a change, sir and I happen to know somebody down in south Florida, who's chomping at the bit, ready to take another big bite out of the apple to finally straighten America out. 

This article is adapted from Larry Kudlow’s opening commentary on the March 11, 2023, edition of "Kudlow."