Economy

Obama and the Tax Tipping Point

Another great WSJ op-ed piece…

Other nations have tried the ideology of fairness in the place of incentives and found that reward without work is a recipe for decline. In the late 1970s and throughout the 1980s, Margaret Thatcher took on the unions and slashed taxes to restore growth and jobs in Great Britain. In Germany a few years ago, Social Democrat Gerhard Schroeder defied his party’s dogma and loosened labor’s grip on the economy to end stagnation. And more recently in France, Nicolas Sarkozy was swept to power on a platform of restoring flexibility to the economy.

The sequence is always the same. High-tax, big-spending policies force the economy to lose momentum. Then growth in government spending outstrips revenues. Fiscal and trade deficits soar. Public debt, excessive taxation and unemployment follow. The central bank tries to solve the problem by printing money. International competitiveness is lost and the currency depreciates. The system stagnates. And then a frightened electorate returns conservatives to power.

The economic tides will not stand still while Washington experiments with European-type social democracy, even though the dollar’s role as the global reserve currency will buy some time. Our trademark competitive advantage will be lost, and once lost, it will be hard to regain. There are too many emerging economies focused on prosperity and not redistribution for the U.S. to easily recapture its role of global economic leader.

Tomorrow’s children may come to question why their parents sold their birthright for a mess of “fairness” — whatever that will signify when jobs are scarce and American opportunity is no longer the envy of the world.

READ IT HERE

Obama Plans To Sock It To Small Business

More clear evidence of his advisors’ lack of understanding from another Wall Street Journal article…

Mr. Obama’s tax increase would hit the bottom line of small businesses in three direct ways. First, because 85% of small business owners are taxed at the personal income tax rate, any moderately successful business with an income above as little as $165,000 a year could face a higher tax liability. That’s the income level at which the 33% income tax bracket now phases in for individuals, and Mr. Obama would raise that tax rate for those businesses to 36%…

Second, the Obama plan phases out tax deductions (the so-called PEP and Pease provisions), thus raising tax rates imposed on this group by another 1.5 percentage points. Finally, Mr. Obama would require many small business owners to pay as much as a four-percentage-point payroll tax surcharge on net income above $250,000. All of this would bring the federal marginal small business tax rate up to nearly 45%, while big business would continue to pay the 35% corporate tax rate…

Mr. Obama responds that more than nine of 10 small businesses would not pay these higher taxes. Last Thursday he scoffed in response to the debate over Joe the Plumber, saying that not too many plumbers “make more than $250,000 a year.” He’s right that most of the 35 million small businesses in America have a net income of less than $250,000, hire only a few workers, and stay in business for less than four years…

However, the point is that it is the most successful small- and medium-sized businesses that create most of the new jobs in our dynamic society. And they are precisely the businesses that will be slammed by Mr. Obama’s tax increase. Joe the Plumber would get hit if he expanded his business and hired 10 to 15 other plumbers. An analysis by the Senate Finance Committee found that of the filers in the highest two tax brackets, three out of four are small business owners. A typical firm with a net income of $500,000 would see its tax burden rise to $166,000 a year under the Obama plan from $146,000 today.

READ IT HERE

FT: Most Americans Do Better with McCain Tax Plan

The Financial Times posted a piece comparing the McCain and Obama tax plans in a clearer and more concise way, called “McCain is no salesman on tax proposals”. Here are some highlights…

So much has gone wrong for John McCain that it is surprising he is not further behind in the polls. He has been a victim of circumstances and his own bad judgment. Some of his errors, however, are more perplexing than others. How is it, for example, that Mr McCain has been so thoroughly outmanoeuvred on tax policy?

Both candidates have offered complex tax proposals. Proliferating alternative baselines (with or without the extension of the Bush tax cuts, with or without a “patch” for the alternative minimum tax, and so forth) deepen the confusion. Unable to fathom the details, voters are left to weigh the competing slogans. Mr Obama promises to cut taxes for 95 per cent of working families. Mr McCain says the rich need a tax cut, too. Guess who wins that argument.

Here is a fact you might not have noticed. It certainly seems to have slipped by most Americans. The typical US household would get a bigger tax cut under Mr McCain’s proposals than under Mr Obama’s. I know a few politicians who could do something with that…

Mr McCain wants to abolish the tax-break for employer-provided healthcare and replace it with a refundable $5,000 credit. Mr Obama says that a family health plan might cost $12,000 a year – leaving families who buy their own policy $7,000 worse off. This is incorrect. So far as I know, Mr McCain has never taken the trouble to explain why.

Suppose a family currently has a $12,000 policy provided by an employer. Under the McCain proposal, instead of attracting relief as at present, this benefit would be taxed as ordinary employment income – but the extra tax paid would be more than offset by the new $5,000 credit. In the first analysis, nothing changes so far as employers are concerned: all the action is on the employee’s pay cheque. The policy delivers a net tax cut to middle-income households and is enough to make the McCain tax plan on average a better overall deal for them than the Obama plan

As well as failing to drive this home, Mr McCain has only weakly resisted his opponent’s notion that “wealthy companies” can afford to pay more. Business taxes, in the end, are paid by people – in lower wages, higher prices and lower dividends in their 401k plans. The point is not just that US corporate taxes are high by international standards and that this discourages investment and employment but that the burden eventually falls on ordinary Americans. Perhaps Mr McCain’s recent emphasis on corporate greed makes it difficult for him to point this out.

When Mr McCain misrepresents Mr Obama, he cannot even do it plausibly. Mr Obama is indeed planning to cut taxes for 95 per cent of working families. Rather than saying, “No he isn’t”, Mr McCain could have said: “Look at what his changes do to marginal tax rates, at the bottom of the income scale (as benefits are phased out), as well as at the top.” Rather than saying, “He wants to raise your taxes,” he could have said, “His spending plans will force him to raise your taxes.”

Critical reading…READ IT HERE

Video: Escaped The Plantation, Voting McCain

Perhaps the best speech given during this entire campaign cycle.

The O-Team
More genius by ZO. See more great clips here

Would the Last Honest Reporter Please Turn On the Lights?

In a piece entitled “Would the Last Honest Reporter Please Turn On the Lights?” columnist and novelist Orson Scott Card chastises members of the liberal media for failing to report on the sources of the financial crisis we’re suffering through right now…

This housing crisis didn’t come out of nowhere. It was not a vague emanation of the evil Bush administration.

It was a direct result of the political decision, back in the late 1990s, to loosen the rules of lending so that home loans would be more accessible to poor people. Fannie Mae and Freddie Mac were authorized to approve risky loans.

What is a risky loan? It’s a loan that the recipient is likely not to be able to repay.

The goal of this rule change was to help the poor – which especially would help members of minority groups. But how does it help these people to give them a loan that they can’t repay? They get into a house, yes, but when they can’t make the payments, they lose the house – along with their credit rating.

They end up worse off than before.

This was completely foreseeable and in fact many people did foresee it. One political party, in Congress and in the executive branch, tried repeatedly to tighten up the rules. The other party blocked every such attempt and tried to loosen them.

READ IT HERE

Tickler’s Letter to Thomas Friedman

I sent a note to Thomas Friedman today, about the protectionist position Obama is taking on jobs, just to win the votes of down-and-out lower middle class families. He’s a wily and sinister candidate, but certainly a thoroughly say-anything-to-get-a-vote politician.

Mr. Friedman,

I’ve been enjoying your book The World Is Flat for the many points of data and interviews you conducted with the various organizations. I haven’t appreciated your pot shots at George Bush and the republicans as much. As you must know, with so much knowledge of the world and things, that both parties share the blame for what’s wrong with America and why our lead is dwindling.

One thing you point out, and I wholeheartedly agree with, is that we cannot be protectionist when it comes to non-think jobs. However, the candidate you’re likely voting for, Obama, is campaigning on a protectionist platform and has made more comments about penalizing companies for off-shoring than anyone this election season. He’s appealing to the lower-middle class masses just to get elected and it’s dishonest and disingenuous.

I admit to avoiding the New York Times, and in keeping with that have not read your regular columns, but as one on the left who I know understands the challenges we have, it would be nice to have you do the right thing and come out in writing about Obama’s stance and it’s dangerous isolationist campaign-season air.

Tickler

I hope Friedman loves this country more than he can tolerate Obama blowing smoke about jobs that have long gone away, and will never come back.

We need to build up thinking jobs in this country. We need to build up managers and orchestrators and leaders in this country. Allentown and Detroit as they were are gone and we need to make the changes in the education system and structure of business in this country to build world business leaders of Americans or we’ll have to watch China and others as they pass us by.

Obama Votes Present on Fannie/Freddie

Again, the WSJ is on the ball today…

If Sen. Obama were truly looking for a kind of deregulation that might be responsible for the current financial crisis, he need only look back to 1998, when the Clinton administration ruled that Fannie Mae and Freddie Mac could satisfy their affordable housing obligations by purchasing subprime mortgages. This ultimately made it possible for Fannie and Freddie to add a trillion dollars in junk loans to their balance sheets. This led to their own collapse, and to the development of a market in these mortgages that is the source of the financial crisis we are wrestling with today.

Finally, on the matter of deregulation and the financial crisis, Sen. Obama should consider his own complicity in the failure of Congress to adopt legislation that might have prevented the subprime meltdown.

In the summer of 2005, a bill emerged from the Senate Banking Committee that considerably tightened regulations on Fannie and Freddie, including controls over their capital and their ability to hold portfolios of mortgages or mortgage-backed securities. All the Republicans voted for the bill in committee; all the Democrats voted against it. To get the bill to a vote in the Senate, a few Democratic votes were necessary to limit debate. This was a time for the leadership Sen. Obama says he can offer, but neither he nor any other Democrat stepped forward.

Instead, by his own account, Mr. Obama wrote a letter to the Treasury Secretary, allegedly putting himself on record that subprime loans were dangerous and had to be dealt with. This is revealing; if true, it indicates Sen. Obama knew there was a problem with subprime lending — but was unwilling to confront his own party by pressing for legislation to control it. As a demonstration of character and leadership capacity, it bears a strong resemblance to something else in Sen. Obama’s past: voting present.

READ IT HERE

The Nobel Prize of Obliviousness

Third time’s the charm…

First there was Jimmy Carter… sorry, just got back up from the floor. Jimmy freaking Carter got the Nobel Prize for his bang up job of bringing peace to the middle east. We should give him credit, it lasted thirty seconds longer than the previous cease fire. Not to oversimplify, but this is a former president who has broken with history and openly and repeatedly criticized a sitting president. It would matter if he had a single proud moment in office himself.

As if Carter wasn’t enough, next there came one of this generation’s greatest opportunist hypocrites, Albert Gore, inventor of Al-Gore-Tex, the fabric that allows abject failure in the political arena and a running and disturbingly accurate imitation of everyone’s grandmother (wonder if there’s more to that) to bead up and slide right off his career.

Taking a page from his own rain shedding fabric days, he figured there would be serious money in global warming (or is it global cooling this decade?) The smart thing his advisers came up with (we know he didn’t come up with it because he’s just a card reader like Obama) is the idea that instead of actually doing something about the “crisis” — like creating a green energy company or simply reducing the energy footprint of his mansion in Tennessee, or maybe leaving the private jet at home, or maybe dropping his convoy to a skeletal 10 gas-guzzling SUVs and Towncars burning ozone to and from every possible speaking engagement his handlers can schedule — anyway, instead of doing anything real about the “crisis”, his sage advisors said “hey, you could try your hand in the scary and accountable private sector for the first time since that 5 year stint at The Tennessean newspaper after college, or you could turn this lemon stretch of the natural environmental cycle into hysterically sweet solid gold lemonade in the bank.” And rain gold it has for the sweet talker from Tennessee. But a funny thing happened on the way to selling the Brooklyn Bridge…

Even Gore never imagined the clueless in Norway, adorned with nose rings of popular hysteria, could possibly be taken in by the shameless and insincere opportunism he embodied with the acting talent of, well, Al Gore. But they did. And those of us who thought that the Jimmy Carter prize was the last straw, certainly lost faith entirely in the judgment of the Norwegian Nobel Committee.

Which bring us to the third of the infamous leftists: Paul (“Bush would be Satan, if there was a God”) Krugman. He’s the nerdy kid who used to cry just being near a fight in school, let alone being in one. He’s a lone beacon to the dwindling pseudo-intellectual self-obsessed New York readership, and the formerly somewhat respectable paper that prints his vile bile. I imagine him at his desk, crying at the violence of his blind fury (because fury is scary) and yet smiling through his tears for the self-congratulatory vengeance he feels his words get him on the conservative that stomped his frailty or stole his girl in some former time. His bully pulpit provides a thick network of flaming and smoldering leftists to insulate his frantic and desperate anger, so he’s safe to blather on, reciting the socialist and leftist talking points like a male version of Surrender Poodle Pelosi but without the stones.

I imagine Alfred Nobel would certainly take his mighty invention and blow all of Scandinavia to the judgment seat of the Almighty if he were alive to be ashamed of the state to which this prize has devolved: prizes awarded to a forgettable president, a transparent money-grubber, and the poster child of desperately shrill.

With these offenses, the Nobel Prize is certainly less fair and reasonable but closely resembling an Oscar these days, as Oscars are won solely on crony or agenda popularity, rather than by merit as awards should be.

I guess that’s why Gore’s won both.

Krugman could win an oscar for crying on cue, but for him it wouldn’t be acting.