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Obama’s New Deal

October 6, 2008

If the Messiah wins, we will have a liberal house, a liberal senate and a liberal executive. Not a good sign for any economic conservative out there. James Pethokoukis dissects parts of a possible Obama economy.

1) Direct refinancing for homeowners.

2) Direct government involvement in the management of failing financial institutions that are recapitalized by government money, through something like the Reconstruction Finance Corporations of the Roosevelt era.

3) A transfer tax on stock and bond transactions, both to raise needed revenue and to damp down the kind of speculation that led to the meltdown.

4) Substantial public spending to pull the wider economy out of the hole. Most of that can be raised by surtaxes on the wealthy and by transaction taxes on speculation, but it will also require a temporary increase in public deficits.

5) Raise enough revenue to cover about $700 billion of financial recapitalization in year one, and in years two through eight use the proceeds for public works, infrastructure, good jobs, universal health coverage, expanded pre-kindergarten and child care.

How is he going to pay for all this new spending? He promised not to raise taxes on any couple making under 250,000 and any single person making under 200,000 and the Messiah would not lie about that right? At the Barackropolis, the Messiah said he would pay for any new spending “by closing corporate loopholes and tax havens.” Factcheck noted the fallacy in this. They estimate that his supposed tac cuts (economic redistribution) will cost government 130 billion in revenue, but closing tax loopholes (he doesn’t know what that means) would generate only 80 billion.

In order to pay for this massive increase in the size of government, there are two possible options.  One, Barack lied and middle class taxes go up also. Big Time. Alternatively, McCain’s assertion that an Obama presidency would be Jimmy Carter’s second term becomes a self-fulfilling prophecy.  We could see hikes in the payroll tax and 70 percent marginal tax rates for top income earners.  This could encourage flight from the U.S. to other areas such as Canada or Britain where tax rates would be lower. Higher taxes also empower creation of new tax shelters.

Also note that countries with higher marginal tax rates suffer ridiculously high levels of unemployment

Right now we are hovering around 6% unemployment. At the end of the Carter administration it was over 12%. Higher taxes will lead to lower hours for wage earners and early retirement for employers who don’t see a point in working 9 months out of the year to pay federal taxes. Let’s not forget, state and city taxes as well as sales, payroll, capgains, etc.

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