Obamanomics

The founding fathers would be rolling in their graves if they knew how big our federal government is. It was never meant to be this way. The thirteen colonies merged for the purpose of having a strong centralized government that existed only to serve the states, and to have limited powers that benefited the good of all states. Initially, the government was to run the Postal service, the U.S. Mint, and a Federalized Military for our protection; even the military is questionable considering the powers defined by the second amendment concerning a well armed militia. In short, government at the state level was to be the boss of federal and local governments. How we got turned around is a matter of sequential circumstance and arguably out of necessity; yet we may not be in our current economic crisis if individual states presided over what was in their best interests, instead of being told what was best for them by the federal government. There would certainly be more accountability, as it would be a shorter distance to drive to lynch a corrupt politician.

In any case we need to question where our government is going, and who will be at the helm of the flagship of our republic. It is our duty to examine the tax dollars that our government plans to spend on socialized programs such as national healthcare; monies that will undoubtedly come from taxpayers one way or the other. It is no secret that the money the government uses to pay for military expenses, welfare, civil servant salaries, government works programs, disaster relief, etc . . . is based on the money the government expects to collect from taxpayers and businesses. This money is not just sitting around waiting to be spent; it is a projected amount that we expect to collect. Since abandoning the gold standard, our deficit has grown exponentially, and should be of great concern as this debt will inevitably be passed on to the next generation of Americans.

Subsequently, we have all entered into the implied contract that we will make a better life for our children, and their children, and their children’s children. Leaving them with an individual debt of roughly 33,000 dollars each is something we need to address; it is something neither candidate has really focused on in their campaigns. Still, sometimes actions speak louder than words; the progressive idea of throwing money at all our problems surely won’t reduce our deficit. Especially now, that we have committed 700+ billion dollars to rescue all these corporations and defaulted home loans. Not to mention the 85 billion we spent bailing out AIG and the money for the other corporations we already helped and the 153 billion passed out under the guise of an “economic stimulus package” that didn’t help the economy one bit. The bottom line is we have a 10 trillion dollar plus deficit. Forty percent of which, is owned by foreign interests.

We need to ask where the Democratic Presidential hopeful is getting all this money he has committed to tax cuts, tax credits, education benefits, healthcare benefits, and other social reforms and how this will help to reduce the deficit. At the Saddleback debate, he said people making less than $150,000 will see a tax cut, those making over $250,000 will see an increase in taxes; he never mentioned the fate of those who fall in between. Also, Obama states he will cut taxes for 95% of all working families. The Tax Policy Center says that when retirees and children are included only 81% of Americans would get a tax cut under Obama’s plan.

We should also keep in mind that Clinton said he was going to cut taxes during his initial run for the White House, and he raised them in 1993 to 39%. Politicians habitually make unrealistic promises that cannot be enacted without the approval of congress. Because of our economic circumstance, there is a good chance he’ll do the same as McCain and leave taxes in their present state. It is no secret that our economy is in rough shape. However, we should be concerned that not once has Obama mentioned a time frame in which he expects to balance our federal budget. Shouldn’t a detail of such magnitude be included in any good economic proposal? It’s understandable that we may be in the red for a few years, but he needs to at least make an effort. Anything else is a direct indication of what kind of president he will be. This is typical Obama-speak, lying by omission; if he doesn’t state his intentions, he will not have to account for them at a later period in time. How hard is it to nail down the expected amount of revenue and project the amount you intend to spend? It may not be balanced immediately, but one should at least have a plan and divulge it if they expect to be elected to the highest office in the land. McCain has predicted it will take him until the end of his term to get a grip on the budget.

Brian Riedl of the Heritage Foundation says Obama has proposed nearly $350 billion per year in new spending; in all actuality his budget is looking closer to $850 billion. No matter the amount, at this point in time, the entire corporate tax code only raises about $350 billion annually. Even if Obama doubles the taxes on those making $250,000.00 or more he would still fall short of his goal. Not to mention, in our current economic downturn the tax base will not reach the projected $350 billion. So, it’s unrealistic to think the extra tax dollars collected will be enough to pay for all these things, and it’s unrealistic that he will be able to achieve all the promises he has committed to. For certain he knows this, and is aware that honoring all his promises is not a feasible proposition; so he is in fact, just stringing everybody along. More of the same is that, not only has he committed his administration to providing all those benefits to the voters and raising taxes on businesses, but he committed to raising the minimum wage again after it was just raised a few months ago.

His claims that he is going to gain tax dollars by making businesses pay capital gains tax is pure nonsense, because businesses don’t pay capital gains taxes, they pay income taxes. Further, by raising taxes on businesses and raising the minimum wage, it just makes it that much harder for small businesses to remain in business. In the end, his plans to tax those making $250,000 is just going to inspire people to duck the tax by stopping short of those earnings, and impede commerce. People aren’t idiots; it will especially affect start-up businesses, as they will choose to not put the extra effort forth if they know they will not benefit from it. Likewise, people are notorious for getting over on the system, where is the incentive to bump earnings into the next tax bracket and have the hassle of dealing with more employees if you’re comfortable where you are at? What he is creating, is an insurmountable hump that will deter people from growing their businesses beyond $250,000 in yearly gross sales.

Otherwise, a business cannot be viable if there is not enough cash flow to keep it solvent. By adding more overhead in the form of another wage increase, and a reduction in cash flow from an increase taxes, margins of profit start shrinking, which in turn reduces cash flow. Small businesses are the heart and soul of America; more people are employed by small businesses than large businesses. In order to stay in business, they would have to raise their prices, which would in turn be passed on to the public. So nobody will truly benefit from his economic plan in that aspect.

Raising the minimum wage might increase the amount of money in your paycheck, but the IRS will just take more tax to build their coffers. Again, Business owners are the only ones who get hurt. If the business fails, and the people are left unemployed, another burden is placed on the tax payers in the form of unemployment or health & welfare assistance. As for his healthcare plan, he claims it will not be socialized; yet, when the insurance companies no longer are in the loop, because everyone jumped on the government bandwagon, the feds will either have to oversee it themselves by forming a new federal agency or sub-contract it out to others. Either way, wastefulness and sloth, at the expense of the taxpayer, will be the ultimate outcome. All we have to do is look around us to see the many fine examples of government run agencies, and programs that are subsidized by the government to evidence the inefficiency of such organizations. Fannie Mae and Freddie Mac are a few great examples.

Additionally, Obama wants to restrict trade. Restricting trade is idiotic, as the value of the goods we export is almost 95% of what we produce. His fiscal philosophy, cast from the JFK administration, may have been great during JFK’s short tenure, but in our current dilemma we cannot afford to go that route. Obama’s economic plan looks like Swiss cheese. Take note that in the Tennessee debate in, he dodged the question, when asked what he would sacrifice. What scares me most about lawyers who seek the presidential office is that they are indoctrinated in the ways of twisting the truth and the law in a most convincing way; undoubtedly Obama fits the bill, as he lacks transparency on economic matters. How can we elect a guy that will not be upfront on the issues?

Barack Obama continues to state he will only tax incomes over $250,000 and that 95% of taxpayers will get a tax cut. Does it make sense to you that Obama will increase spending by more than a trillion dollars, increase taxes on business and that will be good for the economy? If you think about it for just a minute you will agree that it does not pass the common sense test.

The following data comes from the IRS for the year 2003 and reveals the number of businesses with revenue over $250,000 in 2003.

 

Revenue Range	Number of businesses
$50,000,000 – Above	32,040
$250,000 – $500,000	1,331,692
$500,000 – $1,000,000	932,914
$1,000,000 – $2,500,000	686,257
$2,500,000 – $5,000,000	263,211
$5,000,000 – $10,000,000	143,693
$10,000,000 – $50,000,000	124,568

 

Many of us work for a company that falls into one of those categories. Now let’s examine the practical consequences of Obama raising taxes on these companies. Obama states that he will raise taxes on incomes above $250,000. The above statistics approximate the number of businesses that will actually be affected. What does all this mean? In short, when businesses pay more taxes, they must do one or more of the following:

·        An increase in the price of products or services may affect a business’ ability to maintain their current number of employees, thus it has the potential to affect consumers, who would see a raise in the costs of goods and services? It may cause businesses to cut other costs . . . such as salaries, jobs, investments in new technologies, manufacturing processes, or efforts to invest in green energy sources.

·        They may move to a country with a lower tax rate, or outsource jobs to cheaper labor sources outside of the U.S.

·        Some companies may simply go out of business. The potential for a domino effect set off by declining profits, increased taxes and lower sales will be present under Obama’s tax plan.

·        Corporations are primarily taxed three ways: once on the corporate income, next on dividends and then on the sale of stock. If you are a retiree and own stock, you will have less money because the corporation will have less profit and if you sell the stock you will pay more tax on the sale.

 

It is a given that our government is extremely inefficient. An extra $1,000 taken from a business will remove essential money that drives the economy and it will reduce the number of available jobs, which ultimately bring more revenue to the government. In the end, we need to question how much of that $1,000 will be wasted in bureaucratic overhead, when it would do better if it were directly infused into the market without government intervention. That line of reasoning must be taken into account when it comes to stimulating a sluggish economy.

Something else we need to question is the idea that Obama has a greater command of the economy than McCain. Is in not factual that they both consult financial experts before they make economic policy? Do they not both rely on their Secretaries of the Treasury and their Chairpersons of the Federal Reserve? During the democratic primaries Barack Obama and Hillary Clinton took part in a debate hosted by Charlie Gibson. Gibson asked Obama about his plan to raise the capital gains tax. Then Gibson pointed out that studies have shown that lowering the capital gains tax increases government revenues and is good for the economy. Obama began stammering and stuttering and in one of the most revealing moments of the election, Obama’s lack of understanding of the economy and taxes was made clear.

Obama was unable to rely on a canned teleprompter response and his lack of economic prowess was exposed. Since then has he gained that much understanding, or is he relying on his advisors? Obama is just another modern day snake oil salesman. If we let him steal this election, Obama and the out of control Democrat congress, will ruin this economy and this country. If we allow the White House, the Senate, and the House of Representatives come under the control of the Democratic Party we are writing a blank check that we cannot simply call the bank to stop payment.