President Obama Takes Middle Class Hostage: Opinion

NEW YORK ( TheStreet) -- President Obama has taken the middle class hostage in a thinly veiled bid to hike their taxes.

Having refused to work with Congress to reduce spending by $1.2 trillion over 10 years, as he agreed to do when drafting the Budget Act of 2011, the President must now implement $85 billion in across-the-board cuts to defense and nonentitlement government spending.

House Republicans have offered to ease burdens on the public -- by increasing administration flexibility in implementing those cuts in the continuing resolution to keep the government funded past March 27 -- but the president wants no part in that.

Instead, he campaigns across the country, painting the dire consequences sequestration will impose if new revenues are not raised, as he proposes, by limiting tax deductions benefiting the wealthy. That is a cynical ploy -- Mr. Obama talks like President Truman but taxes like King George.

Taxes imposed at his insistence on Jan. 1 eliminated 80% of the benefits of tax deductions -- mortgage interest, state income taxes, local property levies, and the like -- for wealthier households. Any substantial gains from further tightening deductions must come from similarly limiting their use by middle-class taxpayers.

The majority of the $150 billion in additional revenue obtained on Jan. 1 was extracted from working-poor and middle-class families when the government allowed the temporary reduction in the social security tax rate to expire. What's more, federal revenues' share of GDP will now substantially exceed its average for the last 40 years.

And the president is unwilling to acknowledge that government spending is flying out of control. Over the last five years, outlays are up $1 trillion -- three times the amount required by inflation -- and revenues are short because high taxes and burdensome regulations are choking economic growth and job creation.

Instead, the president threatens furloughed meat inspectors, food shortages and streets without police. His cabinet secretaries threaten three-hour waits at airport security, reduced embassy protection and border patrols, and the list goes on...

Appropriation legislation does limit the president's ability to allocate cuts among departments. However, even without additional legislation, he has considerable discretion in allocating the 10% spending cuts within departments, but the president has refused to entertain options that would limit the pain in his pursuit of higher taxes.

For example, the Agriculture Department has one of the largest staffs of economists in the world. Surely, safe food is more important than yet another dull research paper. Military bands could stand down to maintain Marine guards at embassies.

Repeatedly, the President has exclaimed that if Congressional Republicans don't cooperate, spending cuts now could derail the hard-won recovery. It puzzles why he believes $85 billion in spending cuts could make such a difference, when avoiding those cuts through higher taxes would not.

Whether a second recession occurs is already baked in the cake. Obama's $150 billion in January tax increases, and rate hikes imposed by Democratic governors from Maryland to California, have forced consumers to trim purchases.

Retailers and wholesalers are reporting weaker traffic and are trimming inventories, and corporate leaders have announced plans to cut new investments and hiring owing to weak demand and more burdensome health care costs and regulations.

When Americans can't get hamburger at the supermarket and unemployment rises this spring, the President will blame Republicans for permitting sequestration, but it is the American people that bear the burden of his inflexibility, disregard for the facts and neglect in undertaking the responsibilities of his office.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

Professor Peter Morici, of the Robert H. Smith School of Business at the University of Maryland, is a recognized expert on economic policy and international economics. Prior to joining the university, he served as director of the Office of Economics at the U.S. International Trade Commission. He is the author of 18 books and monographs and has published widely in leading public policy and business journals, including the Harvard Business Review and Foreign Policy. Morici has lectured and offered executive programs at more than 100 institutions, including Columbia University, the Harvard Business School and Oxford University. His views are frequently featured on CNN, CBS, BBC, FOX, ABC, CNBC, NPR, NPB and national broadcast networks around the world.

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