Bad Economics

By Elizabeth Woods
For those who thought Obama was going to win this election by a landslide, recent polls are sure to scare them. With the “Palin effect” still sweeping across the country, polls are swinging in the direction of McCain, and with only 49 days left until a candidate is selected, Obama supporters should indeed be worried. Obama’s campaign has responded by trying to reinforce the message of “change” and the bad economy, emphasizing it’s likely to get worse under the McCain administration. In his speeches given today in Grand Junction and Pueblo Colorado, Obama focused on the economy and attacked McCain’s position on this issue. It seems that this has become his major tactic to fight against the “Palin effect.” I can’t help but ask: is this a good tactic or a bad one for the Obama camp? That all depends on what people know about the economy and what they know about the economics Obama is really subscribing to.
The economy is definitely a main issue that voters are paying attention to this election, and for those who think the economy under McCain will likely be a repeat of the Bush years, this tactic will probably bode well. But, to those who are paying attention to the election, we have also noticed an increase in T.V. ads that also show Palin and McCain hitting on the economy and what they will do to reform it. Their policies also agree with lowering taxes, lower health care costs, and opening new markets to create more jobs for Americans.
Obama’s tactic of blaming all the economic problems on the Bush administration won’t go over well for some who are knowledgeable of how the economy works. A lot of the economy’s problem can be blamed on high gas prices and widespread foreclosures. The rise of gas prices doesn’t necessarily put Democrats in a positive light, considering they have consistently been against offshore drilling, drilling in Alaska, and have been opposed to nuclear energy. The mortgage crises is more of a result of legislative congress than actions by Bush, and was inevitably progressed by greedy lenders . May I point out that congress control most of federal spending and legislation, and Democrats have controlled congress for the past two years, so where is their accountability when it comes to our financial problems?
Obama wants to decrease taxes for the lower income earners and tax the top 5-10% of high income earners. To 90% of Americans this sounds good, but where is he going to get all of the money for all of his big changes? While Obama talks of change, what he really wants to do is subscribe to the same old “liberal” agenda, incorporating more government into society, and increasing taxes. Under Obama’s plan, people who earn over $250,000 a year will see significant tax increases, not just the super rich.
According to the website of fiscal facts, in 2006, the most recent available data showed that under the Bush Administration the economy was robust. Hmm… a time when congress wasn’t dominated by the Democrats. From this website we can see that the top 1% of earners paid 40% of all federal income taxes, and we also see that there was an overall increase in individual incomes across all income groups. The top 25% earners, classified as people earning over $65,000, paid 86.3% of federal income tax. People with an AGI (adjusted gross income) of $154,000 or more were constituted the nations top 5% earners. So just who is Obama going to tax? According to this it‘s middle class Americans who make around $154,000. You can also compare the two candidates and where each one stands on taxation. You can see that Obama is planning to significantly raise the taxes on those people that are already paying 80% of the federal income taxes. Obama is also planning on increasing the estate tax. Nearly 50% of a persons estate will be taken after death. This person who has worked hard their entire life, and who has paid the majority of the federal income tax will get half of it taken away by the government. This is an absurd form of double taxation. Why should the government be entitled to this persons money?
Maybe the cornerstone of Obama’s economic plan is to redistribute the wealth to help those who need it, but what about the people that have worked hard for their money. Should they be punished for having ambition and motivation to succeed? Some people do need government aid, but that is not the majority of Americans. If people take a closer look at the economic plan of Obama, it may not be a very good strategy for him after all.

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4 Comments

Filed under Colorado, Democratic Party, McCain, Obama, Uncategorized

4 responses to “Bad Economics

  1. Brian Bohnert

    Elizabeth, I also agree that the voters will be turning their attention to the the economy as we move closer to November. Regardless of one’s education on economic indicators it does not take a Phd. to figure out that the value of a dollar is shrinking as it takes more of said dollars to fill a gas tank, stock your shelves or buy that shiny new trinket in the store some advertising firm convinced you that you NEED to have. Your post seems to indicate that much of the blame for this diminished purchasing power should be placed on the Democrats because they have had control over congress for the last two years. What you failed to mention is that Bush and his rubber stamp congress were behind the wheel for six years prior. If you count the final Clinton term, until 2006 the Dems have not been in the congressional driver seat for a DECADE, which seems to me places the burden of proof solidly on the right side of the isle. Why? Because no one is talking about the out of control spending coupled with the across the board tax cuts under Republican leadership which has created the biggest deficit in U.S. history! The larger this divide gets, the weaker the dollar gets, and the crankier the American people get. During their time at the helm, the “conservative” republicans went on an unfettered spending spree that would make Paris Hilton blush and Brittany Spears jealous. Speaking of Paris Hilton, she is exactly the type of person who has not earned her place in society through “working hard her entire life” so yes she should be taxed when she inherits hummers full of cash from her grandfather. By the way, the estate tax only kicks in after a 3.5 million dollar inheritance which by most people’s standards is far from middle class. So even under McCain’s plan this income would be taxed to help pay for things like hurricane recovery, infrastructure, new energy supplies and oh yeah, that 1billion/week adventure in the middle east. It is clear that we need an ideological shift in Washington. While Bush promoted an “ownership society,” he did so at the cost of common sense regulations for the mortgage industry. While he promoted job growth, he did so while ignoring the most vulnerable members of society and the divide between the rich and the poor has quadrupled within the last decade. A tax policy that favors only the rich has a shocking consequence – the rich get richer and it does not seem to trickle as is should. The bottom line is that the both McCain and Obama’s plans will lower the tax burden on the majority of individuals in America – making the old “tax and spend liberal argument” as weak as Sarah Palin’s foreign policy experience.

  2. ewoods37

    Brian:

    I appreciate your comments. There are several points in your blog that I could reply to, but I will focus on just two: As I indicated in my blog, Obama’s tax plan will significantly raise taxes on the top two tiers of income earners. Under his plan, households that have an AGI of $250,000 can expect to pay nearly 40% of their income in federal income tax. Add social security taxes, state income tax, sales taxes, etc. and these hardworking professionals are paying nearly 50% of their income in taxation (so that Uncle Sam spend more on wasteful government programs). Many people in this income group are hardworking, college-educated professionals. Typically, they work 60-80 hour work weeks (not a 40-hour week) and they have gotten to where they are through years of hard work and sacrifice.

    Paris Hilton may not have worked hard for the millions she will inherit, but what about the people who have lived the American dream. Small business owners who had a dream, took on debt, built a business, hired employees, worked endless hours and after years of struggles and tireless effort built up a successful business valued at $3MM – $5MM (of course through the decades that it took to build this business, the successful entrepreneur dutifully paid Uncle Sam his share). When this man dies, he leaves the business to his family to carry on the dream. The government, however, abruptly steps in and confiscates 50% of the value of the business (again to spend on government programs). More often than not, the business must be liquidated to pay off the government. I don’t know about you, but to me there is something grossly unfair about this form of double taxation and it also strikes me as poor economic policy.

  3. Stephen Noriega

    Thanks for the post. I found it energizing in disagreement.

    First, I don’t think anybody believes Barack Obama will win in a landslide. If the electorate were comprised of the Elections 2008 class, he would. Otherwise, he will be lucky to win.

    Second, I challenge your perception of who is middle class and who is rich. Someone making 154,000 a year is upper middle class at least in my view. Someone making 250,000 is rich as I would assume they have assets far greater than their annual salary. I’m sure these people work hard for their money. I have friends in this range and they do work hard. There are many people who work very hard (60-80 hours a week) and only earn 60,000 a year or maybe even less. The top tiers of hard workers have received a tax break over the last 8 years. Maybe the hard worker making 60,000 should get a break now.

    I agree with you that Democrats should have some culpability in this market meltdown mess. The ownership society, although coined by George Bush, started in the Clinton years. The Republicans did continue with dangerous deregulating while in Congress and the Democrats did nothing to fix it these last two years. Then the secretary of the treasury waits until we are days away from a depression to burden the tax payers with a huge bail out program this planet has never seen.

    I appreciate your effort on this post but the financial meltdown is not just a Democratic effort. I could argue blame on the Republicans but that is not accurate either. The convolution of financial strategies around mortgages, short selling and capital movement are to blame. The Republicans are more ideologically in favor of free markets. Free markets can produce great boons to the economy when things are going well. However, when financial institutions become corrupt or overreaching, the free market can also give birth to monsters. It is just not accurate to blame Democrats for deregulation. However, Democrats did also fall in love with this “mortgage in every pot” mentality and this has led to terrible consequences.

    I would like to read an actual example of the “death tax” resulting in a healthy business having to be liquidated. I’m sure there are examples but I’d like to read them.

  4. Tony Robinson

    Elizabeth, et. al.

    I really enjoyed the detail, energy, and perspective of your post, Elizabeth. I won’t have time to say too much here, but wanted to add a few little thoughts:

    1) Brian is right about the Repubs controlling Congress for much of the preceding decade. It’s simply not persuasive to blame Dems for economic ills when they have held (bare) power in Congress for the last two years. Even more vital, Repubs have controlled the ideological debate and general tax and spend priorities ever since Reagan. Dems have been the “me-too” party in terms of deregulating corps and financial industry, offering big tax cuts to corporations, etc. They have been very willing to go along with Republican inspired tax cuts, deregulation, corporate empowerment. But lets be clear, such things are Republican inspired, not Democratic, and its just not completely accurate to say (as Stephen’s comments somewhat suggest) that the Dems have plenty of blame too… When the moderate Repubs went along with the FDR revolution in the 40s and 50s, history doesn’t remember that period as being “both Democratic and Republican,” but as being driven and dominated by Dems. The same is true for the last twenty plus years–Republicans have owned the ideological high ground, they have controlled the presidency for 28 of the last 36 years, controlled Congress since 1994, taken over the Supreme Court, etc. Just because some Dems go along doesn’t mean that the crisis of the day is both Dem and Rep causes. We are living in the world the Republicans built, for better or worse. Just as we were living in the world that the Democrats built when Reagan was elected, even though there were plenty of moderate repubs who helped them over the years.

    2) $154,000 in annual income is upper class. Not middle class, not even upper middle class. Less than 10% of American families earn that much–its closer to 5% than 10%, by census numbers I just googled. When you are talking about the top 5-10% of American earners, its fooling yourself to call this “middle” class. Middle class is the middle–and $150,000 is not the middle. It’s the upper. $50,000 is closer to the middle.

    Tony

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