Five more days to hear about how people think the president should affect the economy and create jobs.
We have five more days to realize the president does neither thing without the action and consent of the Congress. The thought of what a Democrat Congress and a socialist president might do to the economy should have intelligent people voting against Obama in unprecedented numbers, yet somehow the polls show people continuing to support him.
Taxes
Consider Obama’s claim that he will improve the economic conditions for the middle class. His primary method for achieving this claim is increasing taxes on people who make more than $250,000 per year, increasing taxes on capital gains, and increasing taxes on businesses he deems to be making too much profit.
The problem with all of these ideas is that they target the very people primarily responsible for there even being a middle class. People who make more than $250,000 a year tend to be people who invest in, own, or run successful business that employ millions of middle class workers. Capital gains come from investments in the businesses owned or run by the people who make more than $250,000 per year. Businesses making profits, even oil companies, employ millions and create thousands upon thousands of jobs with those profits.
Jobs
Meanwhile, the people who will theoretically benefit from these taxes on the wealthy produce none of the jobs that make them middle class. Except for the relatively small number of people who employ themselves as sole-proprietors, most middle class workers work for the people who make more than $250,000 per year, for companies that benefit from the continued investment of capital, and for companies that always hope to generate profits through their goods or services.
The middle class does not work for its neighbors or peers, but for the very people Barack Obama promises to punish for being ambitious and successful. He calls increasing taxes on these people forcing them to pay their “fair share”. Their fair share of what? Their fair share of the businesses the create and run? Their fair share of the retirement accounts funded by investments in their profitable companies? Therein lies the ultimate failure of Obama’s taxation and job programs.
Feedback loop
The government does not create jobs or wealth. By definition, the government consumes from the jobs and wealth of the people. Among those people, there are some who work hard and achieve success at a higher level than others. Typically those people do so by growing their assets through investments in the enterprises of other successful people or by creating successful enterprises on their own. Either way, these enterprises create jobs that are worked by the middle class.
By increasing taxes on the successful, the government reduces the amount of assets available for investment. If that reduction is big enough, even jobs that already exist begin to go away due to lack of investment. Why? Because successful people look out for their own standard of living first just like everyone else. If the government taxes the successful more, it will be their capacity for investment that suffers. Without investment, business no longer create jobs and eliminate the ones already created. Once this cycle is underway, tax revenues begin to drop, unemployment increases, and the economy shrinks.
Four years of Democrats
Now consider what will happen with Barack Obama in the White House, Nancy Pelosi in the House of Representatives, and Harry Reid in the Sentate. Reid and Pelosi have already stated that they want to repeal the “Bush” tax cuts, which includes eliminating the 10 percent tax bracket, thereby increasing the taxes on everyone’s first $8,000 per year by 50 percent. Obama has an abitious $1 trillion plus package of new spending he wants to enact that threatens to increase the annual government spending deficit to a trillion dollars and beyond every year.
The Democrat Congress will be unwilling to increase spending to that level without increased revenue. Obama will be unwilling to pass tax increases unless he receives some kind of guarantee that his pet programs will pass. The solution will be increased taxes across the board. Look for the return of pre-2001 tax rates only with all of the top ends adjusted downward to include more people in the higher rates. Look for attempts to tax income and investments previously exempted from taxation. Look for reductions in government services like Medicare and Social Security to cover the cost of expanded payouts.
Our choice
The choice between Barack Obama and John McCain could not be more clear when it comes to the economy. Obama represents the desire to constrain the entire economy for the benefit of its least well off few. Obama’s policies and a Democrat Congress will choke investment and ensure a weak economy for years to come. While John McCain’s economic program is not perfect, it represents one thing in the face of a Democrat Congress: the foil to that Democrat Congress. If you want a good economy in the next four years, spite Congress and vote McCain.
