LIZ PEEK: Tax and Spend Is Back!

Americans are not stupid. We may be greedy, self-indulgent and strangely more fond of "Real Housewives" than of, well, real housewives, but at the end of the day we are pretty good at sizing up what works and what doesn't.

A Rasmussen poll conducted last week says that Americans now trust Republicans more than Democrats to manage our economy. That's right; while the Paul Krugman camp is still focused on blaming the Bush administration for the economic collapse (and nearly everything else including random earthquakes), ordinary Americans have begun to doubt that President Obama is on the right track.

Why the sudden change of heart? Despite a reassuring stock market surge over the past three months, there is growing concern that history is about to repeat itself. As the economy worsened last year, headlines invoked the Great Depression. Comparisons were made between the drop in output in early 2009 and the utter devastation of the 1930s. Though economists were, as ever, divided on the causes of that heartbreaking time, there was near-unanimous agreement that two things prolonged the downturn - higher taxes and protectionism. Talking heads nodded sagely in agreement; we could not afford to repeat those mistakes. And we are doing both.

As President Obama has promoted his health care program, his climate change plan, and the myriad other initiatives which excite this administration, it has become clear to even his most ardent supporters that while citizens are learning to live within their means, the government is racing in the other direction. There is no doubt -- no doubt whatsoever -- that taxes are going up. Moreover, they are going up for everybody.

Anyone who seriously thinks that only the wealthy will see their tax burden increase really needs to tune in. Right out of the box Obama raised taxes -- by over 150% -- on tobacco products. Who smokes? Not just the wealthy. In fact, the highest concentration of smokers is among those with the least education and the least income. The 62 cent per pack jump on cigarette taxes went to fund a $33 billion increase in children's health insurance -- not exactly chump change.

Like a kid at an Easter egg hunt, Obama is scouring the landscape, turning over rocks and reaching into tree trunks searching for revenues to fund his trillion dollar health care makeover. He has proposed taxing everything from soft drinks to cell phones. There is increasing talk of taxing benefits received under existing health insurance programs - on everyone, not just on rich people - an idea first launched by John McCain and scorned by candidate Obama. In one of his more creative moments, he has picked former Fed Chair Paul Volcker to "review" the tax code. I can't wait to see how that turns out.

Tax increases aren't unique to the federal government. Many state and local authorities are facing dire budget deficits. Most recently, Pennsylvania's Governor Rendell proposed a 16% hike in personal income taxes to fight a $2.3 billion budget shortfall. Because President Obama and Democrats across the land enjoyed a huge election-year boost from organized labor, lay-offs of unionized government employees are simply not on the table. Consequently, as an example, New York's state budget is up 9% for the current fiscal year. I ask you, what family in America plans to boost spending by 9%?

So far, states are being propped up by federal stimulus money. For example, the Web site lauds the billion dollar grant for Ohio which will "help save hundreds of thousands of teaching jobs at risk of state and local budget cuts." Ohio is not alone in receiving this injection of union rescue funds. Grants, trumpeted in typical government gobbledygook as funding to "save jobs and drive education reform", have also directed $363 million to Connecticut, $509 million to Colorado and $681 million to Arizona. What reform?

Once the federal stimulus money is spent, or is funneled into other kinds of projects, many states will raise taxes. There is no doubt about it. Some, like Massachusetts, have already begun to hike sales taxes on meals, hotels and alcohol, for instance. In New York there is an exodus underway to Florida by those who see the hit coming. Needless to say, losing wealthy citizens will only make New York's situation worse.

In short, tax increases will soon pop up in such profusion that they may crowd out green economic shoots like unwelcome weeds on a putting green. At the same time, protectionism, that other cramp in the side of the world economy, is blooming. The Obama administration's tie to organized labor makes pressure to limit imports and outsourcing almost irresistible. The "Buy American" provision that Congress foolishly threw into the $787 billion stimulus package has now elicited a tit-for-tat response by the Chinese. They have adopted a "buy Chinese" guideline for their $586 billion stimulus package. Why is anyone surprised?

These broad efforts to keep the money at home follow on the undermining of Mexican truckers in March, when Congress canceled a pilot program allowing rigs from south of the border to drive on U.S. highways. Mexico retaliated by slapping $2.4 billion in tariffs on U.S. goods imported into the country. The feud is raising costs of companies in Texas, especially, including cosmetics giant Mary Kay, which says the tariffs are costing $450,000 per month. Who's behind this confrontation? The Teamsters, of course.

As Americans assess the prospect of rising taxes and greater protectionism, they may conclude that a health care overhaul or cap-and-trade program with uncertain benefits is not worth risking a repeat of the 1930s. The good news? Americans are not stupid.