imageRepublicans have apparently decided that when one of them says an embarrassingly stupid thing about the economy, the best thing to do is keep saying it over and over and over again.

“All-Star” and Weekly Standard executive editor Fred Barnes wholeheartedly endorsed Gramm’s assessment, saying he was giving “straight talk” and that “America has become a nation of whiners.” But Barnes took Gramm one step further, acknowledging the economy is “weak,” but that Americans are “whining all the way through it”:

Transcendently dumb, obviously, but oddly enough not the dumbest and most dishonest thing on the economy that the McCain stamp has been on this week.

The McCain camp decided to bring this Grover Norquist article to all of our attentions in case we weren't quite yet sure that they've got the economic instincts of the people who thought that spray-on hair was their ticket to fame and fortune.

The Tax Policy Center and the Barack Obama campaign used some sleight of hand this week in Politico. To quote Eric Tolder of the TPC, "Most small-business people, like most everyone else, are not really high-income." While this is true, it completely and totally misses the point.

The point, of course, being that when you're dealing with promoting small business activity in America, we need to ensure that current success is continued rather than new successes encouraged and built upon. Our economy will only be strong if everything we do now is done forever with no alteration but tax reduction, with a particular focus on preserving the lifestyles and fortunes of our richest and, preferably, most ridiculous.

Let's start with the definition of a "small business." Most will tell you that small-business income constitutes income derived from sole proprietorships, partnerships and Subchapter S corporations.

The conservative argument (and that of the John McCain campaign) is that Obama's stated plan to raise taxes on households making $250,000 or more in income is a tax increase on small business. The simple answer to this dilemma can be found in the IRS Statistics of Income Bulletin (Table 1.4, for those who are interested).

So what do the data say?

In 2006 (the latest year available), $706 billion of such income was reported to the Internal Revenue Service. Of this, about half was reported by households in the top marginal income tax rate. Interestingly, two-thirds of this income was reported by households making $250,000 per year or more -- the very same households that Obama wants to increase taxes on.

The Obama campaign maintains that the number of small-business owners is what's important. Economists know what matters is the tax rate that's applied to the bulk of small-business income. Make no mistake about it: Obama's plan to raise taxes on households making more than $250,000 will raise taxes on most small-business profits in America.

There's one teensy problem - the overwhelming majority of small business activity occurs well below that $250,000 mark. The "bulk of small business income" goes to very, very few people, which tends to be how these sorts of things work. In order for small business to work, the primary policy focus has to be on the newer and smaller entrepreneurs, as they're the ones who are more likely to be creating and expanding jobs. Few small business owners are likely to give up the ghost because once they're clearing a quarter million dollars they might have to...

Under Obama's plan to let the scheduled 2011 tax rate hikes occur, and his plan to raise the self-employment tax on those making more than $250,000, the S corporation rate would rise from 35 percent to 39.6 percent. The sole proprietor and partner rate would rise from 37.9 percent all the way up to a staggering 50.3 percent. Many Democrats in Congress have proposed making all small businesses (including S corporations) pay this 50-plus percent rate. A small business tax rate that high would be the highest marginal rate faced by them in nearly a quarter-century.

What would a world look like where two-thirds of all small-business income would be taxed at a 50 percent rate? The economic law that "taxing something more and getting less of it" would apply. Fewer Americans would be interested in opening or expanding small businesses. Tax evasion and legal tax avoidance would spike, as tax shelters would once again become a booming industry. Since small businesses create a majority of jobs in America, Main Street closing up shop will have a direct impact on the family budget, as well. Plants and equipment will go unused. Despite the misguided opinions of static scorers in Washington, federal tax revenues will likely decline as the economy staggers into a full-on recession.

I hate it when they step over my lines.

Note the trick here - Norquist, who's been talking almost entirely about the income of the top small businesses in America, immediately leaps again to talking about all small businesses and starts theorizing that a tax rate that the vast majority of small business owners will never reach would somehow stop them from starting small businesses in the first place. (This is, of course, provided that Obama's plan goes through, which I highly doubt on the expansion of the payroll tax.) What it really makes you wonder is how America persisted for all those years before JFK started lowering tax rates in 1960 - that constituted decades of small-business killing.

Basically, the McCain camp is really, really concerned with less than 5% of small businesses in the nation, to the point where they're openly telling the vast majority of small businesses that they're simply unworthy of consideration as serious contributors to our economy.

John McCain's America: it begins and ends with the fucking of you by them.