If you look at statements made by Ben Bernanke over the last several years on the US economic outlook, they are not a model of consistency, let alone confidence building.  Indeed, they reflect an economy that appears to be stopping and starting – subject to the vagaries of the world not driving the world’s economy. Many other economists are similarly uncertain as to why our economy is in such trouble.  Real-world Americans, however, have no such confusion.

In April of 2010, the Federal Reserve Chairman said the economy had “staying power.” In August of 2010, Bernanke said, “The economy remains vulnerable to unexpected developments.”  Early last month he stated: “U.S. economic growth so far this year looks to have been somewhat slower than expected.”  Later in the month, he let us know that “We don’t have a precise read on why this slower pace of growth is persisting.”

On the other hand, we hear stories of banks and corporations flush with cash.  For his part, Obama appears focused on luxurious corporate jets and the Left tells us (falsely) that taxes are at the lowest they have been in 50 years.

So why is the economy underperforming to their great confusion or surprise?

There are many reasons – but one central one.  First, among the many reasons, are businesses’ fears of the costs of doing business in the future, including the costs of Obamacare. Adding to those fears are the costs of regulations (Obama’s and state regulators) and, of course, higher taxes.  Also among the many reasons are the national debt and the debt of our states.  Those amounts are so far past rationality and are paired with future entitlement requirements that are way beyond unsustainable.  Combined, they produce economic fear, which translates quickly into economic caution which equals less economic activity.

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We thought tax reform meant lowering rates and broadening the base by eliminating or cutting back on various deductions, credits, and loopholes. That’s what the Bowles-Simpson commission proposed. That’s what Paul Ryan and David Camp are working on. And that’s the pro-growth model.

But President Obama unveiled a much different tax-reform vision in his much-anticipated debt speech on Wednesday. He would raise tax rates on upper-income earners and small businesses. He also would eliminate deductions and credits, or so called “tax expenditures.” The president referred to these tax-expenditure reductions as “spending cuts.” In his context, they most certainly are not. They are more tax hikes.

Basically, the president is giving successful earners and small-business filers a double tax hike. That’s what it really is.

Of course, the president’s formula of estimating higher revenues to lower the deficit is completely wrong. The reality is that higher tax rates will slow the economy, inhibit new start-up companies, penalize investors, and may very well lose revenues and increase the deficit.

In the latter part of his speech the president did mention some kind of middle-class and corporate tax reform. But he gave no specifics.

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The White House has just announced its proposed budget for fiscal year 2011, with a projected deficit of a staggering $1.27 trillion.  Last year’s budget estimated a $1.17 trillion deficit, but the actual number now appears to be $1.60 trillion. Applying that same likely growth from projection to actual deficit, we are looking at a federal budget deficit closer to $1.74 trillion this year.

The size of the deficit is unconscionable and unsustainable. As a nation, we now owe more than $12 trillion, a number almost as large as the entire GDP of the United States.  Even worse, we are adding to this deficit at a rate of more than 10 percent of the GDP—an alarming rate that most economists consider dangerous for any economy.

To finance our deficit, we print money and spend it—or we borrow money and spend it.  When we print the money, we set the stage for massive inflation, which will occur as soon as the economy revives. When we borrow the money, we place a lever in the hands of citizens and governments of China and other nations, now our largest creditors (surpassing the 50 percent mark two years ago). It is morally wrong to spend money now and expect our children to pay the price—and it is hazardous to give to foreign sovereigns the tools to destroy our economy if they decide to “call in” their loans.

It is our responsibility and duty to stop this. We must not condemn the next generation to economic ruin because we lack the courage to do what must be done now. As President Reagan famously said, “If not us, who?  If not now, when?”  If we didn’t borrow another dollar, it will still take more than 300 years just to pay back what our country already owes.

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