Posts Tagged ‘obama’
In the latest (to November 2, 2011) average of polls of head-to-head match ups against President Obama, Republican Presidential nominee hopefuls Mitt Romney, Ron Paul and Herman Cain have the greatest chance of defeating the President in the 2012 election.
In these polls, Former Massachusetts Governor Mitt Romney would lose to President Obama by 43.7% to 45.9%. Texas Representative Ron Paul, so often overlooked in this contest, is the next strongest contender, losing to Obama 41.6% to 47.6%. In third place is businessman Herman Cain, 39.8% to 48.2%.
Perhaps the most interesting statistic in the RealClearPolitics polls is the poll result for a generic “Republican” against President Obama: in this case, the numbers favor the Republican candidate: 44.8% to 41.8%. That seems to indicate that voters are not particularly enamored of the current field of potential Republican nominees.
The US Senate is set to pass a so-called “bailout bill” that amounts to $838 billion. To give that some sort of perspective, you’d have to spend a million dollars a day for two thousand, two hundred and ninety-five years to spend an equivalent amount. Of course, that doesn’t include the interest which will accrue on that staggering debt.
How will this gigantic tab be paid? It’ll by paid by the US taxpayer: $6,2,36 per taxpayer, to be precise. That, of course, is on top of the $13,500 each taxpayer is already on the hook for via the original TARP money, the bailout of AIG, Lehman, et al. New total: $19,736 for each and every taxpayer, on average, plus interest.
There’s an additional downside: money invested in the government bonds to subsidize this massive spending is, of course, money which will not be otherwise invested in the economy for such things as actually spurring economic growth: for every dollar invested in a government bond, there’s one less dollar available for private companies looking to grow and expand.
The total amount borrowed for “bailout” spending to date? $2,651,797,108,408.
What would you do if you had the ability to legally avoid an 87% tax hike? Would you avoid the tax hike? Not surprisingly, many investors are answering in the affirmative.
As we previously reported, President Obama campaigned on a promise to increase the capital gains tax from its current 15% to, ultimately, 28% (an increase of 87%). He later called a 33% increase in this tax, from 15% to 20%, “modest”. Investors took heed, and the “Obama effect” on the markets has been evident ever since election day (see chart).
The Dow Jones Industrial Average closed at 9,625 on Tuesday, November 4, 2008, the day Americans headed to the polls to select their next President, capping a six day rally that had traders thinking the slow path to recovery (or at least relative stability) had begun.
By late Tuesday, it was obvious Senator Barack Obama had won the US Presidential election. Additionally, Democrats took several House and Senate seats, making for a strong (but not quite fillibuster-proof) majority.
The Dow Jones Industrial Average has reacted swiftly and strongly: as of this writing, the DJIA is down to 8,766. That’s a decline of nearly 9% since Mr Obama won the election, and reverses all the gains made during the previous six day rally. That represents over a trillion dollars in capital which has left the market since Mr Obama’s election.
President-elect Obama’s victory is certainly troubling for an economy already on the ropes: he came out in favor of increased protectionism, easier labor union organizing, tax increases on the most productive tax payers, big spending plans on health care, a special tax for successful oil producers and more and bigger government at a time when there isn’t much money to go around and the government has already put taxpayers in the hole for an additional $7,546 each by way of the “bailout” of the financial sector. Additionally, capital is more likely to sit on the sidelines in light of Mr Obama’s proposed 33% increase in the Capital Gains tax (he’s proposed ultimately raising the rate by 87%).
What’s more, Obama and his fellow Democrats will meet very little resistance in imposing their agenda: with the House, the Senate and the Presidency all in Democratic hands (and by wide margins), there’s very little opponents can do to stop wrong-headed policies.
For all the talk of an historic election, recovery for the US economy just got set back considerably: we expect less than 1% growth through 2011, and a contracting economy through all of 2009.
Senator Barack Obama, Nancy Pelosi and other Democrats often talk of making the US tax system more “fair” by imposing additional taxes on higher earners. They argue this segment of the population should be carrying a disproportionally heavier load than the rest of the populace. It’s a very calculated and clever argument: it appeals to envy and social divisions while at the same time jeopardizing only a small segment of voters. But does it have any basis in reality?
When it comes to the US tax system, the wealthy already pay an astonishingly disproportionate share of all tax revenues. Take, for example, the top two percent of all earners: this group pays an incredible 43.6% ¹ of all personal federal income taxes. Yes, you read that right: two percent carry nearly half the load.
Well, you might argue, if they make 43.6% of all income, then that seems reasonable. Not even close: the top two percent of all earners take in 24.1% of all income.
The bottom 50% of all earners contributes a mere 3.3% of all federal income taxes (while earning 13.4% of all income).
Let’s drill down a little further and look at the top five percent: Senator Obama has called on increasing the taxes on this group, and he has defined them as earning $250,000 or more per annum (since then, he’s adjusted that to $200,000 in a television ad; his running mate, Senator Joe Biden, uses $150,000). What do the numbers say about this group?
Well, Senator Biden is closer to the truth than Senator Obama: the top five percent of all earners make $137,056 a year. They currently contribute, wait for it, 57.1% of all federal income taxes. Can it truthfully be said they are not carrying their fair share?
Britain experimented with similar wealth-redistribution schemes in the ’70s: the top earners were subjected to a 90% (yes, ninety-percent!) tax rate. What happened as a result? They left.
You spoke today about your plan to increase capital gains taxes from 15% to 20%. You referred to it as a “modest increase”.
Sir: most people, even most Democrats, do not consider a 33% increase in taxes “modest”.
You’ve also spoken about your intent not to raise taxes on the so-called “middle-class”.
These two statements are incompatible: over 100,000,000 Americans will be affected by your 33% tax increase (which you’ve previously said you’d ultimately raise to 28%, which would be a total tax increase of 87%). People who are relying on their retirement investments will be affected. People invested in mutual funds will be impacted. Hard working people who rely on their union-negotiated pension will be affected, since those same pensions invest in the markets.
Further, at a time when capital has retreated on a wholesale basis from the markets, threatening the entire economy and making investments by companies in job-creating growth virtually impossible, do you truly believe new barriers to capital are prudent economics?
Senator Obama, please, please reconsider this course of action. Neither the American people nor the economy can reasonably be expected to sustain a 33% tax hike, and while ideology is a fine thing in extremely small doses, now isn’t the time to impose it, regardless of how tempting control of all arms of the Legislative and Executive branches of government may make it.
While trillions of dollars in capital has disappeared from the markets, adding a dis-incentive for investors to return to the markets is a sure-fire strategy for lengthening the current downturn. And when companies cannot readily access capital, they can’t build new plants, take on R&D expenditures or do all those other things that lead to the people on “Main Street” gaining access to new jobs.
What’s worse is that Mr Obama does not seem to understand the fundamental difference between a tax rate and tax revenue: changes in tax rates lead to changes in the way people behave. For example, Presidents Ronald Reagan, Bill Clinton and George W. Bush all cut the Capital Gains Tax. Under Clinton, it was 28%. Under George W. Bush it sits at 15%. After each of these tax cuts, tax REVENUE actually increased.
The kind of increase Mr Obama proposes therefore has a dual negative effective with no discernible upside: investment capital stays out of the market and government revenues from the Capital Gains Tax shrink.
So why would Senator Obama consider such an ill-fated move? He thinks it’s “fair”.
You can see Mr Obama’s explanation in the video below – note Jim Lehrer, the moderator, attempt three times to explain to Senator Obama that tax revenue decreases as the Capital Gains Tax increases.