Obamanomics Is A Recipe For Recession And John McCain Backs Off His ‘No-New-Taxes’ Pledge

I understand what Barack Obama wants to do. He is a leftist, a collectivist Marxist if you will, and his plan is to confiscate money from those who earned it and then turn around and give that money to those who did not earn it. His message is very clear on that point. Further, he is pledging a trillion dollars in new spending over the next four years.

That is what Marxists do and it always ends up in economic disaster. Writing for the Wall Street Journal, Michael J. Boskin, a professor of economics at Stanford University, gives some detailed numbers in describing what would happen under Obama’s Marxist plans.

From his column:

First, taxes. The table nearby demonstrates what could happen to marginal tax rates in an Obama administration. Mr. Obama would raise the top marginal rates on earnings, dividends and capital gains passed in 2001 and 2003, and phase out itemized deductions for high income taxpayers. He would uncap Social Security taxes, which currently are levied on the first $102,000 of earnings. The result is a remarkable reduction in work incentives for our most economically productive citizens.

The top 35% marginal income tax rate rises to 39.6%; adding the state income tax, the Medicare tax, the effect of the deduction phase-out and Mr. Obama’s new Social Security tax (of up to 12.4%) increases the total combined marginal tax rate on additional labor earnings (or small business income) from 44.6% to a whopping 62.8%. People respond to what they get to keep after tax, which the Obama plan reduces from 55.4 cents on the dollar to 37.2 cents — a reduction of one-third in the after-tax wage!

Despite the rhetoric, that’s not just on “rich” individuals. It’s also on a lot of small businesses and two-earner middle-aged middle-class couples in their peak earnings years in high cost-of-living areas. (His large increase in energy taxes, not documented here, would disproportionately harm low-income Americans. And, while he says he will not raise taxes on the middle class, he’ll need many more tax hikes to pay for his big increase in spending.)

On dividends the story is about as bad, with rates rising from 50.4% to 65.6%, and after-tax returns falling over 30%. Even a small response of work and investment to these lower returns means such tax rates, sooner or later, would seriously damage the economy.

On economic policy, the president proposes and Congress disposes, so presidents often wind up getting the favorite policy of powerful senators or congressmen. Thus, while Mr. Obama also proposes an alternative minimum tax (AMT) patch, he could instead wind up with the permanent abolition plan for the AMT proposed by the Ways and Means Committee Chairman Charlie Rangel (D., N.Y.) — a 4.6% additional hike in the marginal rate with no deductibility of state income taxes. Marginal tax rates would then approach 70%, levels not seen since the 1970s and among the highest in the world. The after-tax return to work — the take-home wage for more time or effort — would be cut by more than 40%.

[Boskin]

This isn’t some scare tactic. It is legitimate analysis by professional economists and those numbers are accurate for Obama’s proposed economic policy.

It should give everyone pause to think: Is this really the “change” we want? Is the prospect of a wrecked economy what sent a tingle up Chris Matthews’ leg (i.e. his Obamagasm)? Is this what pushed the Obama Girl to sing “I’ve got a crush on Barack Obama?”

Mr. Boskin’s parting shot is especially noteworthy. It shows why we must study history in order to learn from it and not repeat it:

History teaches us that high taxes and protectionism are not conducive to a thriving economy, the extreme case being the higher taxes and tariffs that deepened the Great Depression. While such a policy mix would be a real change, as philosophers remind us, change is not always progress.

You can access the complete column on-line here:

Obamanomics Is a Recipe for Recession
Michael J. Boskin
Wall Street Journal
July 29, 2008


But on the Republican side, things are not all bright and cheery, especially with some disturbing comments coming from Senator John McCain. Recently, he made overtures to the idea that his “no new taxes” pledge may not be followed. He told the Club for Growth: “I don’t want tax increases. but that doesn’t mean that any thing is off the table.”

It doesn’t? Then why did Mr. McCain tell Sean Hannity that there would be no new taxes and no tax increases?

From Charles Babington at TownHall:

At a July 7 town-hall meeting in Denver, he said voters faced a stark choice between him and Democrat Barack Obama.

“Sen. Obama will raise your taxes,” McCain said. “I won’t.”

In a March 16 interview with Fox News’ Sean Hannity, McCain said he would cut taxes where possible, and not raise them.

“Do you mean none?” Hannity asked.

“None,” McCain replied.

But McCain has backed off of those pledges:

McCain’s shift has come in stages, catching some Republicans by surprise. Speaking with reporters on his campaign bus on July 9, he cited a need to shore up Social Security. “I cannot tell you what I would do, except to put everything on the table,” he said.

He went a step farther Sunday on ABC’s “This Week,” in response to a question about payroll tax increases.

“There is nothing that’s off the table. I have my positions, and I’ll articulate them. But nothing’s off the table,” McCain said.

This is one of those times when it becomes very difficult to be a McCain supporter.

You can access the complete article on-line here:

McCain Backs Off His No-New-Tax Pledge
Charles Babington
TownHall.com
July 29, 2008

Update:

Analysis: McCain Tries To Soothe Tax-Hike Fears
David Espo
TownHall.com
July 30, 2008

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