Obama Is Bad for the Economy - Barron's 78 comments
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When it comes to assessing the implications of John McCain's and Barack Obama's tax plans, the vast majority seem to side with Bank Credit Analyst managing editor Martin Barnes: "There are attempts to make the Obama-McCain difference big; but they are not that big, really."
Barron's Jim McTague begs to differ. "The vast majority... is wrong."
Obama would have the top 1% of income-tax payers handing over an average of $93,700 more - to $652,900. McCain would reduce the group's taxes by $48,860 to $510,320. While appealing, it fails to address the impact such a blow to the super-rich's disposable income could have:
These folks tend to plow a lot of their money into businesses -- from family operations to blue-chip stocks -- to say nothing of shopping trips and travel. In other words, cutting their after-tax income could deal another blow to an already-hobbled economy.
Investment strategist Michael Aronstein notes a similar plan, implemented by Herbert Hoover during the Great Depression, sucked "much-needed investment capital out of the markets and into the hands of bureaucrats, delaying the turnaround." Looking ahead ten years, the difference between the two is far from insignificant. Obama would siphon about $800B out of corporate coffers, while McCain's plan would reduce the government's take by $600B.
Analysis by independent economist Allen Sinai measured the impact of the Bush administration's tax cuts: Without them, GDP would have been 0.7% less each year from 2001-2006, and unemployment would have been 1.2% higher.
Wachovia chief economist John Silvia notes corporate and capital-gains tax hikes would impede foreign investment once the world gets wind that it's more expensive to do business in the U.S.
All this is not to say that an Obama win spells sure disaster:
Obama could get lucky... Oil prices could fall to $50 a barrel, or a Tom Edison might turn crab grass into jet fuel. Better yet, Obama, who's no dummy, might think twice about raising taxes during the worst financial crisis in 78 years.
:::::::::::::::::::::::::::::::
- The Tax Policy Center recently updated its analysis (.pdf) of the fiscal implications of the candidates' tax proposals. In both cases, the impact on the national debt would be greater than under the Center's previous model.
- Anton Wahlman claims fear of an 'Obama-tax' is leading smaller and privately-held companies to sell themselves now, rather than infusing more capital or going public.
- Roger Ehrenberg's open letter to the next U.S. president.
- See Seeking Alpha's elections page for more right hooks and left jabs.
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This article has 78 comments:
The events of 9/11 turned a politically opportunistic fraud into a criminal enterprise, in which the administration bent and/or broke the rules, not to save the country, but to save its own skin. Bush, Cheney, Rumsfeld et al thought they could practice the art of deception sufficiently that they would go down in history as the Churchhill's of their time. Instead, they will go down as the Napoleon's, who everestimated their own capacity and righteousness, deceived the people they were sworn to serve, overreached on the international stage and underreached at home where it really counts.
Unfortunately, unlike Napoleon, they will not wind up confined to rocky islands. They will live lives of wealth, pomp and circumstance while the American people try to find their way back to an ethic that is more productive than greed.
And why increase the tax burden on the very ones among us who have brought us this economic cornucopia? Take John McCain, for example. He’s wealthy, but why increase taxes on him? After all, he must have arrived at this wealth by way of growing a business and hiring people as he went along, and we wouldn’t want to stultify his entrepreneurial acumen that has brought economic benefits to all. The McCains could have sat on their wealth and clipped bond coupons or something – but, instead, they had the courage to venture into real estate and now own 7 (or is it 10?) homes. Think of how this has stimulated the real estate economy! So we as a country don’t want to hobble such “family operations” or cause our super-rich to curtail their “shopping trips and travel” – it would just be counter-productive.
We shouldn’t tax the wealthy at all – think of the added jobs we’d create if the super-rich had all that additional money to plow into their businesses, buy blue-chip stocks, go on shopping trips and travel – and prime our economic pump as they went along!
In fact, a properly-incentivized tax code would SUBSIDIZE the super-rich: not only should they pay no taxes, but we should grant tax REBATES in direct proportion to their wealth.
Think of all the jobs we’d create … wake up, America!
America became the great counrty it was by allowing wealth to trickle down to Main Street to invigorate the enconomy . America will not thrive by the rich buying a bigger yacht or other extravagance but rather by directing tax revenues to when they do most good - Main St and the other 99 %. This IMHO is what ailes the American Economy at present and is what a Democratic administation would fix .
As numerous Barrons articles over the years will testify the US stock market does better under the Democrats ,
why is that Mr McTague ???
Neither McCain nor Obama are on the right track. They are making the same old promises and tax arguements to appease the un-informed electorate. They are not addressing the imminent financial catastrophy born out of the fraudulent business practices of the banking system whose crimes are being covered up by the government.
They should be rooting out corruption amongst their collegues. Of course, McCain wouldn't hear of that since he got caught with his hand in the cookie jar:
en.wikipedia.org/wiki/...
As Alpha Seeker aptly says:
"McCain has been bought and sold for way too long in Washington."
McCain is not a bad guy...he is probably a good old guy and the folks who will come with him (if he is the next President) are going to be the same "good ol' boys" who have been trained by the current Bush Administration.
In my neck of the woods (North Georgia), you can't go a half mile without seeing some truck, car, or boat for sale in someone's front yard. They are not being sold so that the people can buy a new one...they are being sold so that the people can eat. I don't think folks making $500,000 year and have several homes know (or care) what is going on in the real America. America is HURTIN'.
When the next international crisis comes up, do you want someone in charge who is waiting for the cue card or do you want someone who can THINK? Does America realize how badly the military is being treated with multiple deployments, extended enlistments, and destroyed families? Our military is like a powerful tank without any ammunition....
Obama is not perfect, but if the choice is McCain or Obama......it seems clear to me that Obama is the pick.
Sorry for the long diatribe. I'm just fed up.
And that statement above is coming from a Republican (me) who thinks Bush's fiscal policy over the last 8 years has been a complete disaster. He put the country on a credit card for his two terms and eventually those bills come due. It's as if the Republicans never heard of the word balanced budget. No, they just spend, spend, spend.
Democrats: Oh man, he is so rich, that's so unfair! How disappointing! I want a piece of his fortune. I don't want to rob him, so let's just tax him.
Republicans: Oh man, he is so rich. How did he do it? How inspiring! I want be like him also!
Face it. Neither one of these guys have an answer to our financial woes.
McCain admittedly knows nothing about the economy and Obama wants
to give hand outs to everyone.
I hope one of these guys just has the guts to balance the budget and attempted to move us closer to being LESS energy independent.
Give me a deficit hawk regardless of party affiliation.
The GOP was so concerned with Clinton but he turned out to be the best president in a half a century. Reagan was a joke.
If FDR's economic policy was "disastrous", how did he average 8% GDP growth per year? We need more such disasters and less of the GOP's idea of "success".
Republicans understandably never tire of feathering their own nest. But the data are irrefutable: their policies damage the economy, grievously. Another eight years of such policies and we will be a full fledged colony of China.
Re. taxes, on the whole they have the effect of punishing the successful, the productive, and the savers, and rewarding everyone else - this is a road to increasing prosperity? Of course, those on the left always hold up some group that they think doesn't deserve what they're earning - is that what we've come to as a country, using the tax system to vent our envy? If we're going to start voting to take money from people because they don't deserve it, please tell me where I can vote to reduce the incomes of ballplayers, Hollywood stars, and trial lawyers, all big constituencies of the Democrats.
Yep, taxing the "rich" is going to hobble our economy. Because taxing the poor and the middle-class over the last eight years (both directly and indirectly - through skyrocketing education, medical and energy expenses) has done so much for the American economy!!
The Republicans need to go. Before it's too late.
There's nothing wrong with being rich. But there's a LOT wrong with being greedy and hypocritical. And that pretty much sums up the Republican party. Remember what Bush memorably said? "This is an impressive crowd - the haves and the have-mores."
A more swaggering cast of feckless, sanctimonious chicken-hawks has never walked across the nation's stage before.
The Barron's article is utterly pathetic. The last gasp of a pathetic, villainous oligarchy before being stampeded in the storming of the Bastille.
Words are cheap, Doug. Where's your data?
As the bust deepens, you might change your tune. During the Great Depression the unemployment rate was 25%. This included very many who were not lazy but could not find work anyway. Fractional-reserve banking besides being dishonest leads to economic INSTABILITY. Read von Mises, F.A. Hayek, or Murray N. Rothbard for more info.
How about: "Save and produce" for a change?
People would just relax and retire if they didn't have debts to repay.
It will be important for our grandchildren to be very, very productive.
Then at his next meeting he could explain ti was for the common good. I am sure his shareholders would be happy.
Answer: Mid 60's and to pay for the Vietman War. I believe the great Johnson and his "Great Society " which has wasted trillions of dollars of taxpayer money.
Wrong. If the money is created from nothing it leads to MAL-INVESTMENTS. Furthermore, the money stolen from the poor and middle class via "forced savings" will have to be repaid by increased social spending to prevent a revolution.
There just is no substitute for HONEST savings. How surprising!
s&p 500 on 1/19/1993 - day before clinton took office: 435.13
s&p 500 on 1/19/2001 - day before Bush II took office: 1,342.54
s&p 500 on 3/04/2008 - yesterday afternoon 1,2292.20
Bush's tax cuts have given us an increase in the deficit and national debt that eclipse any and all predecessors. Before an increase in the capital gains tax can matter, one has to generate gains; under Bush the pressures of the federal deficit have sucked the lifeblood out of the economy.
McCain is basically what was once known as a Democrat.
Obama is a Marxist/Fascist.
So today's choices when voting Repub/Dem are left and lefter.
Unfortunately, I'll be voting for the lesser of 2 evils - McCain. Although I do admit that I'll have to take a swig of Pepto Bismal before doing so because he gives me the drizzly sh*ts.
But he is definitely better than a lightweight community organizer, marxist, who hangs out with a racist pastor and a man that was involved in terror bombings, funnels money to a slumlord to land a sweetheart deal for his multi-million dollar mansion, married to a woman that isn't proud of her country and thinks it's mean, is endorsed by Hamas and Hezbollah, lets his half brother live in a hut on $1 a month because he doesn't want anyone to know about his muslim family members, has no significant business or legislative achievments, looks down on people that believe in God and own firearms, waffles worse than John Kerry, and will lose the war on terror.
That a man like Obama could have gotten so far shows what dire straits our country is in and the ignorance of many or our citizens.
s.wsj.net/public/resou...
How can we loose the war on terror? Don't we have the right to control immigration? Who the h*** says we have to be stomping around the world with our troops making enemies?
If the US had minded it's own business and not stationed troops on Muslim lands, we would have no problem with terrorists. Do the Swiss have terrorists? If the USAF bombed your family would you become a terrorist?
The Bush administration recognized this: the most economically stimulative measure it could think of was a flat-rate tax rebate to everyone.
Keep up the good work.
When Obama first announced he was running for president, one of the first things he did was run to the Ellen Degenerate Show. Now is he gay or just so desperate for some votes that he would do such a thing. Obama claimed he prayed to Jesus every night and was part of a church for 30 years, yet one of his main goals was to get the approval of lesbians and gays. I'm not here to judge but my Bible states that a man is not to lye with a man and a woman is not to lye with a woman. We are supposed to be one nation under God, yet I don't think Obama will obey God's Law and commandments. We need someone like McCain who has real moral integrity and the best interest for this country.
You're rehashing the same arguments for the 2001 and 2003 tax cuts.
We gave the top 1% a lot of money in 2001 and even more in 2003. Either they didn't spend it, OR they're not enough of them to run this economy in the way the political economists (that's a scary two words) assured us they would. They didn't even come close.
It's very clear that for the past 5 years our economy was driven by MIDDLE-CLASS consumer spending based on increased debt-whether it be credit card, HELOC or whatever.
It's clear that this has been the weakest recovery. Weakest job growth. Weakest period of consumer sentiment while in the midst of a "boom." Negative household savings. And the list goes on.
But it's been very strong in divisive political bombast, which is good for those that sell hot air.
Were the top 1% theory true, then we should have given the stimulus to the them instead of the middle class, right? We gave the money to the middle class because we knew they'd spend it, and quickly at that. Were household debt not so high I'd imagine they'd have spent more of the stimulus.
We do need to keep taxes low, and fair.
But the past 8 years have allowed us to see how supply-side economics really works. It has been proven that it's a tactic for temporary revival of the economy and a very effective political tool. It is not a rational grand strategy for managing the republic.
On Bush. During the primaries of 1999 my instinct told me he will not be a good President for he is an intellectual lightweight and is too reliant on his newly acquired religious beliefs. I was right. He was not intelligent enough to counter his advisors arguments and he hired people who had the same religious leanings as his - instead of the most competed people.
We have seen the results: launched war on the Iraq without a Plan on what to do after the invasion. Appointed incompetents such as Brown of FEMA, Gonzales, etc., (thank goodness we avoided Harriet Miers), fired US Attys who were doing well but were not in the same religious vein, allowed US car companies to resist stricter mileage standards, allowed mortgage companies to give loans to people who cannot afford it because he believed that every family should own a house without regard to their financial capabilities.
Lesson we should learn from the Bush years here is - do not elect an intellectual light weight who has a very narrow experience in world history and economics and who relies on his religion to carry him through.
On Obama: my instinct tells me he is another intellectual light weight who has little knowledge of world history, no experience in economics, a racial (well hidden) agenda and radical (again well hidden) beliefs, but because he is a smart and convincing talker, is very dangerous.
We do not know a whole lot about him but we do know enough to be very leary. From his writings and past behavior, we know he truely believes in what his Pastor J Wright says (he denies this cause he knows people will not elect him if he does not), he has no problem associating with seedy characters if it is to his benefit (Rizzo) and he enjoyed associating with radicals. In short, his moral values and principles in life are less than honorable. In grey situations, he will not have a strong moral compass to guide him in making correct decisions. This is very dangerous for the US and the world. Obama will be another Jimmy Carter and we do not want to go that route again.
On McCain: my instinct tells me he is a very principled man (plenty of historical evidence to support this), who will fight the establishment when necessary (again plenty of past actions in the Senate to support this) in order to force honesty and fairness on his fellow senators and congressmen. From the way he answers questions, I can see he is an honest person whose high moral values will (if he becomes President)make him go after companies and individuals who are crooks such as Ken Lay, Mozillo, Merrill Lynch, etc. I see him as one who will try to make put a limit in interest rates on credit cards like it was 25 years ago.
If he becomes President, I see him lowering our dependence on foreign oil and addressing Global Warming in a very serious and significant way. If he becomes a two term President, he will see the resolution before he leaves office.
Intellectually, he has the capability to argue with anyone he encounters. Just as important, a willingness to consult others if the subject of the arguement is beyond his know how. He could be the President who could bring back fiscal discipline to Congress. If he chooses Romney who has a very good business acument, that would be a big plus.
I see McCain as someone who is strong enough to be respected by world leaders like Putin that future wars will be avoided.
On Reagan and Bush 1: Reagan's greatest achievement that the world should be greatfull for is he started the collapse of te Soviet Union. It was Bush 1 who finished it (but got little recognision for it). Without him, Reagan would not have looked as good.
On Clinton: people forget Bush 1 through his good decisions, already had the economic recovery started when Clinton took over. But Clinton took the credit. The economy and the internet bubble was already heading down before Clinton left office and Bush 2 got the blame. Clinton was the one who missed gettting Bin Laden.
Bernanke won't increase interest rates this year or anytime soon in the new year. He's prepared to permit Obama to spend lavishly on a scale we haven't seen since the 1970s. It may be the only way to keep his job too.
Crude oil prices showing the effect of the glut, followed in this century by the current supply/demand imbalances helped in no small measure by putting domestic resources off-limits and not doing squat about the boom in gas-guzzlers:
tinyurl.com/5d97eu
The false prosperity of the stock-market boom as P/Es went stratrospheric (and I'm being kind by showing the S&P and not the Nasdaq):
tinyurl.com/5qg2fe
The "peace dividend" that followed our winning the cold war, another benefit Clinton got from prior administrations going back to Truman, and one that literally went "bang" in 2001:
tinyurl.com/6qdvoa
There is clearly no perfect policy, however, I find it hard to believe that we can't do any better than the past eight years.
As someone who would be paying far more in tax, I personally have no problem in doing so...as long as I get my value for the investment. If anyone doesn't believe that tax rates will be going up as the Enron-like accounting lapses of the federal government come to light. We have not been accounting for any of the liabilities for social security or medicare -- if you think the subprime issue is big, you ain't seen nothing yet. Our government's been cutting checks that future generations will have to pay.
Granted I am not happy about higher taxes... I think that a combination of fairly draconian cuts and tax raises are needed to get back to any sort of fiscal responsibility. And if you don't believe so, please take a remedial accounting course, and go back to the fiction that we are using as government fiscal responsibility.
spending is cut to match
otherwise, it's just like the irresponsible consumer, oh, that's us, spending what we don't have til we have to forfeit and bankrupt the big lenders that wanted to stay "just enough" in eternal debt to support their, uh, support of our economy, you now, jetting about and such....
"Tax roll is about 793 trillion annually"
Do you mean 3.97 trillion on a $13T economy?
Who cares about Obama's tax policy or Mc Cain's tax policy. They could eliminate taxes 100% and guess what...?
We would still be cranking out/borrowing upward of $12 billion per month funding Jihad vs. Mcworld.
Who cares about Obama's tax policy or Mc Cain's tax policy. They could eliminate taxes 100% and guess what...?
We would still be cranking out/borrowing upward of $12 billion per month funding Jihad vs. Mcworld.
en.wikipedia.org/wiki/...
(my comments remain the same)
The 90s were good because conservative Republicans battled Clinton on spending. By the late 90s, many of the conservatives left and the rest of the party had a spending party with Bush. Democrats opposed Bush and the Republicans because....they didn't spend enough. Just look at Democrat budgets and proposals, they always said Republicans spent too little.
How can we be sure? One-percenters may be less inclined to take on investment/market risk given the greater financial security of more cash savings. Someone with the need to have their savings grow or provide income might be a more motivated investor.
Perhaps, we should institute some sort of flat tax to solve this debate once and fo all. Spending less would also be helpful. But I don't see a viable candidate promising to spend less.
Igorsky, your argument doesn't hold water. It is McCain who is an intellectual lightweight, not Obama. I myself have more education tha I care to admit to and I find that Obama is very intelligent. This is why I am going to vote for him. We need to have a smart president. Clinton is very smart, whatever his other faults. Reagan was also very smart even though not in strictly academic way.
We need a WISE President who understands the limits of knowledge and power.