Following the recent budget discussions (and after announcing his intention to run for a second term) President Obama has dropped all pretense about uniting the country and being president of all the people and has instead pulled out his most comfortable tool - that of Class envy! He speaks with disdain of the wealthy and insists that they do not do enough, haven't worked hard or sacrificed, don't pay enough taxes, don't care about anyone else, blah, blah, blah. He intentionally distorts and disregards the role of capital in our society and speaks in terms that inflame tensions and divides the citizenry. He pretends that government is the only way that problems can be solved and insinuates that unless the rich support government (via taxes) they are playing no role in the betterment of society or of their fellow man. This is a false choice.
Consider the following diagram. It demonstrates a number of ways that the resources of the wealthy are made available to and helps to benefit the rest of society. It demonstrates a number of areas where the federal government ought not operate (like deciding who should get scholarships and who should not) or where it performs poorly (aid to the homeless). Additionally, it is hardly disputed that government programs are generally not the most efficient way to help many in society, that government cannot create long term jobs, and that government and innovation rarely occur together.
Presenting a false choice to the American people is a consistent strategy of President Obama. He took the same tack with the financial stimulus (either this or nothing), health care (either this or nothing), energy (either green energy or nothing). Given that we know him to be an intelligent man, his insistence on ignoring alternatives requires that we attribute to him more nefarious motives.
On another level, his constant ranting to tax the rich reveals an inability or unwillingness to address the real truth of his policies and rather to promote the snake oil of policies that appeal to his gullible followers. As stated in a recent WSJ article by Alan Reynolds:
“It is not as though we have never tried high tax rates before. From 1951 to 1963, the lowest tax rate was 20% to 22% and the highest was 91% to 92%. The top capital gains tax rate approached 40% in 1976-77. Aside from cyclical swings, however, the ratio of individual income tax receipts to GDP has always remained about 8% of GDP.
The individual income tax brought in 7.8% of GDP from 1952 to 1979 when the top tax rate ranged from 70% to 92%, 8% of GDP from 1993 to 1996 when the top tax rate was 39.6%, and 8.1% from 1988 to 1990 when the highest individual income tax rate was 28%. Mr. Obama's hope that raising only the highest tax rates could keep individual tax receipts well above 9% of GDP has been repeatedly tested for more than six decades. It has always failed.“ The article concludes this way: “Both individual income taxes and overall federal taxes have long been a surprisingly constant percentage of GDP—8% and 18%, respectively— regardless of top tax rates on salaries, small business and investors. It follows that the only reliable way to raise real federal revenues over time is to raise real GDP. “
Another aspect of this topic that Mr Obama deftly avoids is who pays taxes. Over 58% of federal tax revenues are paid by the top 5% of taxpayers (incomes greater than $158K) while the bottom 50%pay only 2.7%(incomes below 33K)[as of 2008-link]. Does anything motivate that same 50% when in the voting booth to support candidates desiring less government?
Benjamin Franklin said it best when he reminded us “When the people find that they can vote themselves money from the Treasury, that will herald the end of the republic."
Perhaps Mr. Obama knows (and likes) that quotation. It is difficult to conclude otherwise.
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Comments: 8
As far as the debt is concerned, America has received, early this week a warning from S&P.
Maybe you ignore how productivity works but its main component is, at the end of the day, CONFIDENCE.
Confidence in restoring a "bearable" debt level mostly ruined by the two wars the former administration went in, while lowering the taxes of the most wealthy people and among them, themselves.
The consequence of it - more than 80% of the people supported such wars - is the actual debt which has to be treated in full priority while STILL INSTATING CONFIDENCE.
And confidence could not be instated if:
The Dollar as universal currency is not enhanced (some countries are already refusing it from tourists)
The non-outsourced jobs are not enhanced as well (I mean infrastructures, home buildings, etc.)
If the employees have to keep their savings in cash because otherwise they may have health problems to cope with because of lack of insurance.
If the retired people have to face a too strong inflation.
If the dropping value of the dollar cannot buy oil at a fair price.
If foreign investors keep being afraid of the political situation and GOP/TP refusal to cooperate is FAR from helping. To the contrary.
The pretty drawing you present is far from accurate as the arrows are not proportionate to what is going on presently, neither takes into account transfers in between the sevral branches and states.
However, what the States and Counties can't receive any more money from Washington DC, the gap is being transferred in another way on the taxpayer; so, in resume, to these points, what the wealthies will not disburse - and most of them accept such tax reinstatement - the average taxpayer is going to disburse it and pay it cash.
On the other hand, you may not be aware of it, but most rich people can find ways to low there taxes in an absolute legal way and most people aware of it achieve this when they have a minimum of 2 millions.
Of course, some GOP/TP supporters believe that corporations are more competitive with lower taxes! It appears so. But this is not responding to reality:
In gross there are 3 types of corporations:
International which are organized in such a way they pay already the minimum taxes while, often, having outsourced jobs;
Inner several US states which are being organized to pay the already minimum having the head office in a defined and chosen State;
the local corporations, more or less private.
All of them keep invoicing their taxes to the end user having incorporated them into their selling price.
If competition is then concerned, locally, each corporation faces the same tax levels so taxes will not drive to more or less ability to compete.
As former financial VP of a huge company, it happens that I dealt with the matter directly. The then turnover exceeded 1.6 billions.
So the tax argument is not only fallacious but it means that some politicians don't believe that American managers are clever enough as to organize themselves. If so: no confidence is instated!
All of it is not driving in the confidence promoting the foreign investments America needs daily which will result, in a few months from now, for USA to face a drastic choice:
1) Either to have the dollar value looking South - which will mean inflation, higher energy prices, less imports (its equivalent to a tax on imports), less productivity and fewer jobs;
2) A drastic raise on interest rates (as under Ronald Reagan). The said rates will then raise to OVER 15% p.a. and this will not only penalize imports but also ALL the fellow citizens who have adjustable rate loans and the retired people due to the implied prices raise.
Home owners will have to fac, once more, bankruptcies while the value of homes will keep looking South.
In economy there are 2 axioms:
"Bad money drives out good money" which is related to inflation, and,
"Don't ask your neighbor for help if you don't start yourself previously"
I suppose you will end stating that economy is boring after such a long comment. Beg pardon for it.
These groups do not realize that the promises Obama is making to them will enslave them and bankrupt this nation.