Should we raise taxes to increase the debt limit?

Should the Republicans compromise with President Obama and agree to cut taxes because he is willing to cut some spending?

Many people are saying the Republicans should compromise with President Obama and raise taxes.  Some of the defenders of the Republicans say, “You just don’t raise taxes in a recession.”  Where does that maxim come from?

Imagine Joe has a great idea for a business but has no money.  The business will employ 20 people.  He goes to Bob and says, “Bob, invest $1 million in my business and I will give you 25% ownership.  Bob knows that the worst that can happen is that he lose his $1 million but he asks Joe what the upside is.  Joe says the business could make a million dollars in the first year so Bob would get $250,000 or 25% on his money.  Now imagine the top tax rate is 90% (it was 94% in 1944.)  Now Bob’s upside is 10% of $250,000 or $25,000 and his downside is losing a million dollars.  Obviously Bob will not invest and 20 jobs will not be created.

Currently the top tax rate is between 40% and 50% when you combine state and federal income tax.  If you raise it just a little, say 5% or 10%, you would certainly be nowhere near 90%.  BUT each increase is a discouragement and out of every 100 business start-ups a few would have reached the tipping point with the new taxes and those few start-ups would not happen.  The jobs that would be created by those few are LOST because of the tax increases.  

As Christians we care about people being hurt by the economy and we care about people who need jobs.  We should oppose tax increases, not because we want to help the rich.  Our opposition is because we care about ordinary Americans and people who need jobs.

Today President Obama announced that he cannot guarantee that August social security checks will go out because Republicans are not compromising.  Unfortunately the president is playing politics with retirees.  In August the federal government will have income of about $200 billion.  Even if the debt ceiling is not raised that is plenty of money to pay the military and pay social security.  If we cannot borrow more money only about half of the government would have to be shut down.  I cannot imagine that President Obama would choose to not pay retirees with the available $200 billion.