Obama’s Guarantee to Crush the Economy

Posted on October 14, 2008. Filed under: B. Hussein Obama's real record as a "reformer", Obama's Grand Plan for Change |

There is an old theory of how the economy works that says, “If you want to encourage something, subsidize it. If you want to discourage something, tax it.” Currently, the economy is in a position where the next actions taken can either point it in the right direction for improvement, or the wrong economic policies could throw it in a deep recession that could take decades to fix. This economy will be fixed by the same sections of society that have fixed every other economic downturn in American history, corporations and small businesses. The government’s main source of income is the taxes it collects, which are ultimately paid by US citizens. Therefore, Obama’s plan to turn the economy around by expanding the government payrolls through increasing government spending on infrastructure is doomed from the beginning. By expanding government workers, Obama is only increasing the tax burden paid by the private sector. The true way out of an economic downturn is to foster business growth in the private sector. The corporations and small businesses which Obama claims will pay for his over $1 trillion in new spending will be required to take money they would usually use to expand operations and hire new employees and turn it over to the government. Obama does not stop with businesses. He also wants to raise taxes on any American making over $250,000 a year. Obama’s reasoning for targeting this class of Americans for tax increases was summed up in an answer he gave to a man who owned his own plumbing business who asked Obama why he wants to punish small business owners who expand their operations. Obama responded, “It’s not that I want to punish your success. I just want to make sure that everybody that is behind you, that they have a chance for success too.” As if the answer wasn’t telling enough, Obama even told the man that the tax policy goal was to, “spread the wealth around.” Not only are Americans responsible to improve their own lot in life, under Obama they will be also be responsible for the well-being of everyone else in America who does not, for whatever reason, reach the same level of success. This is socialism, no matter how it’s spun. Obama’s economic proposals are based in pure socialism.

Government of all levels pays for their spending through taxes. These taxes are collected through sales taxes, income taxes, property taxes, estate taxes, capital gains taxes, dividend taxes, and any other taxes that exist. Who pays the majority of these taxes? The majority of taxes are paid by those with the largest incomes. In fact, the top 50% of wage earners in the US pay over 96% of the total federal income tax liability. The top 10% of wage earners pay almost 65% of the tax burden. Therefore when Barack Obama says that he is going to give 95% of Americans a tax cut, he is actually talking about giving more money to people who do not even pay taxes. This is not a tax cut. This idea is plainly a government handout. Who pays for these handouts? The same people who are already shouldering all but less than 4% of the nation’s total tax bill. Obama’s statements to the man with his own plumbing business show that Obama’s idea of “fairness” is taken directly from his training in Saul Alinsky’s methods of activism to take from the “have’s” and give to the “have-nots.” This is an idea which was central to Karl Marx’s “Communist Manifesto.” In fact, the surest way proven throughout history to lower tax receipts to the US Treasury is to raise taxes on corporations and the highest marginal personal income tax rate. While Obama and his supporters consider the idea of paying higher taxes “patriotic,” people of all income levels seek to lower the taxes they must pay to the government while maximizing the amount of their own money they are able to keep for themselves. What is wrong with this strategy? While Obama and the Democrats keep claiming that the Bush tax cuts only worked to increase deficits, they conveniently ignore the fact that tax receipts have increased since the tax cuts were implemented. This is due to the fact that if the government decides they want to take a majority of the dollars earned after a certain level people are then less motivated to earn more dollars at that level. This is exactly the environment Obama is looking to foster through his plan of raising taxes on every American making over $250,000 a year.

Obama’s tax policy will stunt economic growth through confiscatory tax policies on small businesses. Small businesses are the backbone of economic growth in the United States, however, the impact they can have on growth is limited by how quickly they can expand their operations. As private sector businesses grow, they are able to hire more employees, employ the services of other businesses to help their expansion efforts, and create more revenue and spending which delivers more tax money to the US Treasury. All of this happens without a single rise in the tax rates. However, if the government decides to take more of businesses’ revenue through taxes, the government is taking the money that would be used to fund the growth of business operations. The higher taxes do not only prevent growth, they also can force companies to downsize through cutting profits which are used to pay employee salaries and fund capital growth projects. Who really pays for tax increases on businesses? Taxes are a business expense which must be covered through the revenues generated by business operations. Business expenses are all factored into the price a company charges for its goods or services. When expenses rise, businesses must charge its customers more to cover their costs and remain profitable. Obama and Biden want to classify this business practice as unpatriotic and greedy. Although, who would take the risk to start a business without the purpose of creating profits and increasing their own wealth?

Along with raising taxes on the businesses which will lead the country out of any economic downturn facing the US, Obama also has another toxic idea that is guaranteed to crush any economic growth. Obama has also promised to raise the federal minimum wage to $9.50 an hour by 2011. This is another horrible idea that will in no way help the economic problems facing America. Studies of the effects of increasing minimum wage have found more negatives than positives. One such study came from the National Center for Policy Analysis (NCPA,) a nonprofit public policy organization. One of the study’s findings is that the main negative effect of increasing the minimum wage comes from the law’s effects on the supply and demand of labor. A basic economic rule is that as the price for a good or service increases, the demand for that good or service decreases. When looking at minimum wage policies, labor is considered the service which is experiencing a price increase. As the price increases for labor, companies will decrease the amount of workers they seek to employ and pursue policies to make do with reduced workers. The NCPA’s study was done to examine a 2006 proposed increase in California’s minimum wage, but the findings can easily be used to understand the effects of a federal minimum wage increase. NCPA found that only 20% of workers making minimum wage were supporting a family. The majority of employees making minimum wage are teenagers and part-time workers. Other studies have also shown that full-time, unskilled workers that make minimum wage are only paid the minimum for less than nine months. After the nine-month period, most have developed enough skills to be promoted to higher-paying positions. The study also showed that increasing minimum wages ends up disproportionately hurting the very poor people it is designed to help. This is because the higher wages decrease the number of unskilled employees an employer is able to hire. In fact, NCPA found that previous minimum wage increases increased the incomes of some workers while more were laid off due to employers’ inability to employ their previous levels of workers at a higher rate. Another negative effect of the minimum wage increase that disproportionately affects the poor is that businesses must pass on their higher expenses to customers through price increases. The price increases are necessary for businesses to continue to be profitable while employing their workforce at higher wages. Even the most compassionate argument for increasing minimum wages is extremely flawed. Each time increases are proposed, the politicians making the proposals do so out of compassion for workers trying to support a family on current minimum salary levels. However, the workers they are looking to help are vulnerable to not being able to find any job after the increases take effect. Even those with jobs at the previous minimum wage level risk losing that job when the employer is not able to afford to maintain the number of employees hired before the wage increase. Along with raising taxes on the very people who are responsible for any economic growth in the US, Obama also wants to raise the minimum wage which further cuts into the corporate profits which are responsible for America’s economic health. He will not only drastically cut American business’s ability to grow. He will also guarantee there will not be as many jobs available to those people who need them the most.

The most offensive aspect of Obama’s tax plan is that he is working on the premise that anyone who is successful must subsidize those who are not. American taxpayers are already on the hook for $700 billion dollars which is required to pay for the outrageous number of mortgages taken out by people with no business receiving the loans. Obama is claiming that the loans were issued out of corporate greed and predatory lending, however, as discussed on the Anti-Obamassiah Refuge in the post, “Obama and ACORN: Another Obama Lie,” banks were bullied by groups like ACORN with help from Obama into lowering their lending requirements in order to issue the bad mortgages. American taxpayers are paying for other American’s mortgages because Obama and his cronies coerced banks to make these bad loans. Obama’s claims that corporate greed is what drove these loans makes absolutely no sense. No banker with any sense would ever seek to increase their levels of loans to people who could never be expected to pay them back. In fact, examples of the greed responsible for the mortgage crisis can be traced to two ex CEO’s of Fannie Mae, Jim Johnson and Franklin Raines, that Obama hired as advisors for his presidential campaign. Johnson and Raines used Fannie’s government backing to manipulate the company’s earnings in order to award themselves eight-figure bonuses. These men are responsible for giving the nation’s banks the idea that it was fine for them to make these bad loans. By using Fannie’s funds to buy the subprime mortgages from the banks making them, they were giving the impression that subprime loans were risk-free. Flooding Fannie with the subprime loans gave Johnson, Raines, and other Fannie executives the perfect opportunity to show increased revenues and draw their huge bonuses.  Now Obama wants to put a freeze on the foreclosures and use taxpayer money to bail out the irresponsible borrowers. Who pays for this? Responsible Americans who live within their means are the ones to shoulder this burden brought about, with Obama’s assistance, by groups such as ACORN.

When Ronald Reagan first came to the Oval Office, he inherited an awful economy. Inflation was in the double-digits, interest rates were over 20%, the top marginal tax rate was 70%, and unemployment was extremely high. How did Reagan turn the economy around? He gave a 25% tax cut across the board, drastically cut the top marginal tax rate from 70% to 29%, pushed for lower interest rates, and fostered an environment to encourage business expansion. One of Reagan’s most memorable quotes was, “Perhaps the scariest words anyone can hear are, I’m from the government and I’m here to help.” Unlike Obama’s economic proposals, Reagan decreased the government’s involvement in the private sector. By the time he left office, Reagan had overseen the longest and largest peace-time economic growth up to that point in American history. Now the United States is facing a potential economic disaster. The next president and congress will implement the strategies that will either point the country in the direction out of the economic mess, or they will implement policies that absolutely crush any prospects for economic growth. Barack Obama is only promoting confiscatory tax policies in order to take from those who already pay over 96% of the tax burden in order to give the fruits of their labor to millions who do not even currently pay taxes. He wants to claim that this is a tax cut. However, Obama’s tax policy is best described as one of the largest increases in history of the government welfare rolls. On the campaign trail, Obama is only promising to discourage any economic growth through penalizing individuals and businesses that exceed the level of income Obama deems to be fair. As Obama’s answer to the small plumbing business owner shows, he wants to implement a limit to how much success individuals can have in this country. Redistributing American wealth in order to promote a politician’s theory of fairness is completely out of line with the values that make America the, “shining city on the hill” that Reagan spoke about. After an Obama presidency, American will need a leader like Reagan more than any other time in history.

Update: Carl Rove wrote a very good column explaining how Obama’s supposed “tax cuts” are not tax cuts at all. Rather they are a huge increase in government welfare programs. The link to the article can be found below.














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    Is this really a new type of politician? Or is the Obama machine just using politics as usual in their campaign?


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