The President's catch 22

All rational economists agree that there is a rate of taxation that raises the maximum amount of revenue for the government. If the rate is too low private economic activity is not inhibited but revenue is reduced. If the rate is too high, economic activity is inhibited and again revenue is reduced. We can have a spirited debate about the rate of taxation that will produce maximum revenue, but that rate does indeed exist.

And that brings us to this from the Financial Times of London:

Obama must break his tax promise

"Between now and the November elections, the biggest political fight in the US is likely to be about taxes. Unless Congress acts, big tax cuts enacted in 2001 and 2003 during George Bush’s presidency will expire at the end of the year. With the recovery faltering, Republicans and Democrats understand that reversing all of the cuts so soon is a bad idea, but this is where their agreement stops."

The President is screwed. It's not all his fault, but he shoulders the blame for making the current situation exponentially worse.

We have an explosion of debt. Don't take my word for it. Go take a look at the US Debt Clock. Something has to change.

Economic activity is already inhibited. It's called recession, and it's about to take its long-anticipated double dip. Raising taxes will put us way to the right of the equilibrium point on the curve at the top of this entry.

I will argue that the only hope is to lower taxes and spur private economic growth. And we've got to cut spending. We've got to cut it a lot.

Yes, the President is screwed. He has his hand stuck in the cookie jar and he's too damned spend-happy to unclench his fist. Thus we are all collectively screwed.

Things are going to get much worse before anything begins to look better.