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Friday, November 7, 2008

President Elect Obama Begins to Spread the Wealth Around

Any doubt that a President Obama would not follow through on his intention to "spread the wealth around" were laid to rest immediately with his initial announcement of his immediate intentions. The initial plan is loaded with goodies for just about everyone except any that is currently successful. Here are the details. Senator Obama promised to bring another stimulus (refund checks from the government) immediately, more "loans" to the automakers, extension of unemployment benefits, stimulus to struggling states and municipalities, and a moratorium on foreclosures.

Obama's insistence on another government stimulus package has always been curious. The first did absolutely nothing to stem the tide of the faltering economy and that was when the economy was much stronger than it is now. Furthermore, multiple stimulus checks along with his planned tax cuts, should put to rest any and all debate that in fact his tax plan is also, to some, a government welfare policy. The new stimulus plan will mean that folks will receive a total of $1200 in government rebate checks. Combine this with his planned tax cuts and the total back to most that earn below $30,000 will far surpass any and all of their yearly tax burden. A person making $20,000 yearly would already get a $1000 tax cut. (under a President Obama's tax proposal) Add another $1200 for the two stimulus packages and such an earner would see a tax cut of 11%, far surpassing the 6.5% they pay in payroll taxes.

Furthermore, President Obama is determined to carry the struggling auto industry. He didn't give a specific Dollar amount but President Elect Obama is clearly motivated to give the auto industry whatever they need to sustain their uncontrollable losses. The problem for the automakers goes far beyond merely a lack of capital. That is one of the many negative results of the industry. The problem is that they can't stay competitive and they are also being crushed by the faltering economy. The right thing to do is to let them die and allow one of the foreign entities to buy them cheaply. That keeps their success or failure in the private sector. Instead, taxpayer's money is now being used to carry poorly run companies. While I was against the financial bailout, at least there is something to be said for not allowing those with the money to fail. There is absolutely no reason that failing automakers have to be saved. We didn't save internet companies following the internet bust and we don't need to save the automakers.

Extending unemployment benefits will sure help those that are unemployed, but it will also give someone another reason to be unemployed. A similar phenomenon will occur when you put a moratorium on foreclosures. While all of this may provide relief for people that are struggling, none of it will do a thing to stimulate the economy.

Furthermore, anyone not convinced that a President Obama would run up our deficits far beyond anything that even President Bush imagined had better realize that in his first press conference he's already proposed roughly $100 billion in new spending. So far, we've heard nothing about spending cuts to match it. So far, the idea of pay go is non existent.

Worse than this, Barack Obama intends to continue with his entire economic platform. This means that while those making $20,000 yearly will get about an 11% tax cut, those above $250,000 will see their tax burden rise as much as 10%. Furthermore, while the struggling auto makers will get tens of billions of Dollars, the oil companies will get a "windfall profits tax". The era of wealth redistribution is well on its way. Much more problematic is that nothing that President Elect Obama has proposed so far will do anything more than negligible to stimulate the economy. If all it took was stimulus check to get an economy out of a rut, we'd never have any long lasting ruts. Feeding Detroits with more billions will keep those companies from going bankrupt, but it won't stimulate the economy either. Foreclosure moratoriums and extending unemployment benefits only encourage more of both. Finally, providing struggling municipalities with new cash will only help the fiscal profile of the municipality itself.


Anonymous said...

You were doing okay until this "but it will also igve someone another reason to be unemployed". Now, that's just astoundingly stupid. the implication being that people are "looking for" reasons to be unemployed. I'm not sure what world you live in, but very few people WANT to be unemployed. Other than that you're okay, but that old saw (that vast numbers of people are looking for ways to get handouts) is not only not supported by any known studies, it is also patently absurd.

mike volpe said...

Being paid not to work doesn't encourage those out of work not to work. Really, what does it encourage.

Gail said...

Where is the money going to come from?

It is my understanding that the federal income tax is on "income".

With the stock market in th tank and not recovering, it would appear that a large number of investors have sold stock and are not re-investing. That would mean they sold at a considerable loss. Anyone want to bet that the losses incurred by the wealthiest 1% of the population will be larger than their "income"?

Think the thought through, the wealthiest among us won't have any reportable income this year to tax.

Since the wealthiest members of our society pay about 90% of the taxes, very little money will be garnered by the IRS this year.

Futhermore, I'd be willing to bet that most of the funds from selling stock are already offshored in Cayman Islands or Switzerland. This might explain why after the bank bailout, the banks still aren't lending any money.

Has anyone seen any statistics on this?

It is going to be an interesting year.

Best regards,
Gail S

Anonymous said...

I had an ex employee come to me and ask for some part time work. She is getting married in the spring and needed the extra income. It worked out well for me, I was in need of her talents. She picked up about 18 hours a week at $15.

After two weeks she came to me and said she had been laid off at her other job, could she have some more hours. I said it might be possible. She said she needed at least 25 or so. If not, she could make $355 for sitting at home collecting unemployment.

Which she chose to do.

Went from two jobs to none.

Tell me that we aren't enabling.

Anonymous said...

I've worked several jobs now where I haven't made 355 a week working full time, and before the minimum wage was raised, i only made half of that after taxes.

i'm in a better position now, but this is ridiculous.

Anonymous said...

there are some people out there like myself who really need unemployment. i was laid off and am a college student getting ready to do 500 hours of externship, meaning, i won't get paid for this. i need this unemployment to be able to finish my degree. without unemployment i'll be doing my 40 hours a week, unpaid, at a hospital to complete my externship. Again unpaid, and will have to work another job on top of that just to pay my rent. So, not everyone on unemployment is just lazy. Some people do need the help, not just want it.