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The biggest lie of Campaign 2012

Fact-checking of political speeches, interviews and campaign ads is all the rage in journalism.

Squads of reporters are dissecting the details of this year’s election, day by day, policy by policy. In the presidential race, especially, every attack and counterattack goes through some kind of lie detector test. It’s a great, albeit imperfect, trend that helps hold candidates accountable – assuming voters actually pay attention.

It’s too bad those fact checkers can’t see the forest for the trees.

We got hundreds of stories and columns on the Mitt Romney ad alleging President Obama wants to "gut welfare reform." Yet the biggest lie of Campaign 2012 has been told over and over and over, in ads and speeches, without so much as a mention from the press. And it’s about one of the most important issues of the election.

The Whopper to End All Whoppers is President Obama’s claim that his tax plan will pay down the country’s staggering $16 trillion national debt.

Not merely balance the budget. The Democrat who has piled up $5 trillion in new debt in less than four years and can’t get a single lawmaker of his own party to vote for his budget blueprint says he’ll pay down the debt, something that requires a budget surplus.

The Congressional Budget Office estimates the budget deficit for the fiscal year ending Sept. 30 will be $1.1 trillion.

"I will use the money we’re no longer spending on war to pay down our debt and put more people back to work," Obama said during his nomination acceptance speech at this month’s Democratic National Convention.

"I believe the only way to create an economy built to last is to strengthen the middle class, asking the wealthy to pay a little more so we can pay down our debt in a balanced way," the president says in one of his most widely aired campaign TV ads, titled "The Choice." The spot includes text for added emphasis. "The President’s Plan: Pay Down Our Debt."

Where in the world are the "Pants on Fire" and "Four Pinocchios" ratings?

Obama says we can get there by making the wealthy "pay a little more." "Millionaires and billionaires" will cover the bill, he says. But his plan, as represented, doesn’t even come close.

The president wants to sunset the Bush tax cuts for individuals earning at least $200,000 and households earning at least $250,000, but keep the lower rates for everyone else. He also wants to reduce the deductions available to those households, raising their income taxes even higher. He proposes increases in the capital gains and dividends tax rates on top of the 3.8 percent Medicare tax on investment income that’s part of ObamaCare.

All those tax increases combined will yield an estimated $140 billion per year in new federal revenue, getting the president almost 13 percent toward a balanced budget.

Ah, but we’re forgetting all those vile millionaires and billionaires, the biggest targets of Obama’s class-warfare rhetoric. For them, Obama has proposed the "Buffett Rule," named for guilt-ridden billionaire Warren Buffett and his desire to flush more of his fortune down the federal latrine. The Buffett Rule would require everyone with an adjusted gross income of at least $1 million to pay at least a 30 percent tax rate. Surely, that will get us a budget surplus.

Wrong. It’s a political gimmick. The Buffett Rule would generate less than $5 billion per year in federal tax revenue, assuming the Bush tax cuts expire. If the Bush tax cuts were extended, the Buffett Rule would add about $16 billion in new revenue.

Worse, Obama has said he wants the Buffett Rule to replace the Alternative Minimum Tax, which is projected to generate more than $100 billion per year over the next 10 years. If he sticks by that promise, the Buffett Rule-for-AMT trade would be a net tax cut, and shift the math even farther away from the surplus needed to pay down the debt.

Obama purrs that he’s open to a spending compromise, but we know that’s not the case. He rejected the modest proposals of his own bipartisan deficit-reduction commission. He opposes even minor reforms to make Medicare and Social Security more sustainable.

The Obama lie is that we can tax our way out of the current budget deficit, tax our way out of debt, maintain spending levels and meet future obligations.

It’s economically impossible.

In theory, we could declare a national household income limit of $200,000, keeping current tax rates in place but ordering the IRS to seize every dollar anyone makes beyond that amount. On paper, that would produce an additional $1.2 trillion in federal tax revenue. Budget surplus, here we come!

In reality, it would end investment in American businesses, punish productivity and drive American capital and jobs overseas. Curtis Dubay, a senior tax policy analyst at The Heritage Foundation, rightly points out that tax changes drive corresponding changes in behavior. Dubay says the likely gain to the Treasury from this hypothetical tax increase would be zero.

So let’s say, for the sake of argument, that Republicans and Democrats agree on grand budget bargain, with $600 billion in spending cuts and $600 billion in tax increases to fulfill Obama’s promise to start paying down the national debt. Dubay says such a deal would require a 55 percent increase in all marginal tax rates, bumping the 25 percent middle-class bracket to 39 percent, and the 35 percent upper-class rate to 55 percent.

Of course, under this plan, the economy would plunge into depression.

And did I mention the $46 trillion in unfunded entitlement liabilities? Taxpayers owe this much in promised Medicare and Social Security benefits over the next 75 years, but there’s no money to pay for it. Even if Washington seized the roughly $20 trillion in total U.S. retirement assets (pension funds, 401(k)s, IRAs, etc.) and another $20 trillion in securities, we couldn’t keep federal spending on its current trajectory.

The CBO reports the country’s debt-to-GDP ratio is on course to hit 200 percent by 2037, just 25 years from now.

"Greece is at 150 percent right now," says Robert Moffit, The Heritage Foundation’s senior fellow in domestic and economic policy studies. "At 200 percent, that’s the end of the United States."

The solution is to cut, cut, cut and then cut some more. But for presenting a barely adequate plan to address this coming catastrophe, GOP vice presidential nominee Paul Ryan has been labeled an extremist. Tea Party Republicans are treated as fringe wackos. And Romney, for promoting pro-growth economic policies that will close the deficit by putting people back to work, is called a fraud without a plan.

But the president insists he’ll pay down the debt, and no one says a word.

Glenn Cook (gcook@reviewjournal.com) is a Review-Journal editorial writer. Follow him on Twitter: @Glenn_CookNV.

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