The Clinton and Obama economic plans

Alan Reynolds takes a look at the tax plans of Hillary Clinton and Barack Obama in a column titled Tax Delusions

Hillary Clinton and Barack Obama both propose to "turn the economy around" in a novel way - by raising tax rates on small businesses, working couples and stockholders in general, including retirees.

Of course, their plans are also meant to raise revenue for their various hundreds of billions in new spending - but the move would fall flat on that front, too.

Start with the deficit. The Bush administration predicts a $409 billion budget shortfall for fiscal 2009. But that rests on absurd assumptions - a sudden $104 billion drop in the price of war in Iraq and Afghanistan, a freeze in non-security discretionary spending - and a speeding up of economic growth.

In fact, this election year's "stimulus" bills are likelier to slow things down in 2009. Seven of the 10 postwar recessions began in the year after a presidential race, including 2001 and 1981.

So, with luck, the next president may start out with an economy that is only fragile or feeble and a deficit not much above $500 billion.

Now, on to tax hikes.

The federal government now takes 33 percent of taxable income above $200,000 on a joint return and 35 percent of income above $357,700. Both Democrats would raise those tax rates to 36 percent and 39.6 percent, respectively.

Even the Tax Policy Center (a think tank famously friendly to tax hikes and Democrats) estimates that raising the top two tax rates might bring in a mere $32 billion in 2010. That's 6 percent of the likely deficit - not a license to start a dozen new programs.

If one of these two Democrats get elected, we will see how well "tax and spend" policies help the economy or how much those policies will hurt it.