Saturday, April 19, 2008

Kudlow on Obama's Economics

Why Not Blame Obama?

It's rather amusing watching the liberal media launch a full-scale attack on George Stephanopoulos and Charles Gibson, with General Tom Shales of the Washington Post leading the charge. ABC's Stephanopoulos and Gibson had the audacity to ask Obama some tough questions during the Democratic debate Tuesday night. Challenge Obama with well-informed questions on tax policy and politics? Wound the media favorite? How dare they?

The fallout is fascinating. With members of the mainstream liberal media lunging at each others throats, it's kind of like watching Hillary and Obama go at it.

But here's the deal: During the debate, Obama bungled his answers on tax policy, big time. Period. End of sentence. End of story. To my liberal friends in the media, all I can say is: Get over it. Your guy has a very poor grasp of basic economic principles.

First off, you don't raise taxes during a recession. That's a no-brainer. Second, doubling the capital-gains tax rate will affect Americans up and down the income ladder, not just rich hedge-fund managers. In addition, capital-gains tax cuts are self-financing, and they stimulate jobs and the economy. You want to raise budget revenues and spark economic growth? Cut the cap-gains tax rate. That's what history shows.

The Wall Street Journal's Steve Moore points out that in 2005, almost half of all tax returns reporting capital gains came from households with incomes under $50,000, while more than three-quarters came from households earning less than $100,000.

Obama also proposed uncapping the payroll tax, another blunder that will hit people up and down the income ladder. While Obama pledges tax hikes only for folks earning more that $200,000 a year, his tax hike on payrolls would actually slam middle-income earners. The cap on wages subject to the payroll tax is presently $102,000. By eliminating that cap Obama will be soaking veteran firemen, cops, teachers, and health-service workers, along with a variety of other occupations.

In fact, in America's largest cities, a firefighter married to a school teacher can earn close to $200,000 filing jointly. So not only will each spouse separately pay more for Social Security and health care under Obama's plan, together they'll also be slammed by Obama's cap-gains tax increase.

This is more than just a failure to understand the Laffer curve. It's another cultural misstep by Obama. I can't help but wonder if the senator knows any cops or firemen. His appeal is to well-educated latte liberals. That remark about middle-income folks having turned to God, faith, and guns because of economic setbacks? Not only was it ill-advised, it illustrates the wide cultural chasm that exists between the candidate and the rest of America.

In effect, Obama's economics are bad and his social circle is very limited. This is one of the many reasons why a quarter of the Hillary Democrats are telling pollsters they'll likely move to John McCain in the general election.

Obama's real agenda is far-liberal left. It's an ideology that places income redistribution above economic growth. That's his real message. And it's the same one that sunk Carter, Mondale, Dukakis, Gore, and Kerry. Bill Clinton? He was a growth Democrat. So he won twice. But Obama is aligning himself with the Democratic losers. And that will make him a loser as well.

The Gallup poll taken after the Democratic debate reveals that Hillary's pit-bull routine may have worked. We'll learn more on that front come Tuesday when Pennsylvanians head to the voting booths. But that's a different issue. What I'm saying is that liberals need to quit blaming Charlie Gibson and George Stephanopoulos for Obama's shortcomings. Instead, they need to blame Obama for failing to grasp how tax penalties on upward mobility will hurt the very people he thinks he's going to help.

Jack Kemp has effectively made the point that African American communities desperately need capital in order to create new businesses and jobs. Yet as Obama takes the capital out of capitalism, all those who are not rich will be hurt when the rich folks with capital have less of it -- after tax -- to invest in those new businesses and new jobs.

That's exactly why wealth-redistribution plans always backfire. Robbing Peter to pay Paul is a surefire economic loser. So is putting government in charge of the economy, which is what Mr. Obama is proselytizing.

This marks the third mistake for the Illinois senator. Not only does he not understand economics; not only is he set apart from middle-class values and beliefs; he apparently hasn't read much history either.

Did someone say inexperience?


Anonymous said...

Raising taxes and reducing spending has actually been the long held and historically proven method of addressing a recession.

To address the recession that followed him into office, Ronald Reagan approved one of the largest tax increases in our history in 1982. Over the course of his two terms in office Reagan approved a total of thirteen tax increases along with significant cuts in government spending.

To address the recession during his administration, George H. W. Bush raised taxes and approved the “PAYGO” system that required budget cuts to offset new spending. Please see the Omnibus Budget Reconciliation Act of 1990 and the Budget Enforcement Act of 1990.

Our current recession is the direct result of a BIG GOVERNMENT, BORROW AND SPEND REPUBLICAN, namely George W. Bush.

History, if nothing else, teaches us that you don’t cut taxes TWICE after initiating a major increase in spending on a huge, new government bureaucracy like Homeland Security (aka – the world’s biggest slush fund) and two undeclared wars in Iraq and Afghanistan. You don’t sink the nation even deeper into long-term debt with China and Saudi Arabia to finance your massive spending increases that should have and could have been paid with those same taxes that you cut. You don’t avoid regulating mortgage markets just because the good ‘ol boys that underwrite your political career ask you to look the other way (of course, W. was just trying again to exceed his dad - see Savings and Loan debacle.)

Any fool with a half-open history book and mind can tell you that doing what Bush and his merry band of spend, spend, spend allies in Congress have done over the last seven years will most assuredly bring about a recession, will put you at an extreme disadvantage negotiating any trade deficit with China, and will virtually eliminate your leverage on oil production with Saudi Arabia.

Hmmm, does any of this sound familiar?

Did you happen to notice how many of the nation’s Fortune 1000 CEOs converted their compensation package from salaries to stocks after Bush lowered the capital gains tax from 21% to 15%?

Warren Buffet still has no takers on his offer to give $1 million dollars to any of these CEOs who can show that they pay a greater percentage of their income in taxes than their secretaries.

You voted for George W. Bush twice, didn’t you? Sigh… Say no more, say no more.

Just because you’re a member of the spoiled, little rich boys club doesn’t mean that you’re one of them. Stop carrying water for the spoiled, little rich boys.

Free your mind. Declare your independence.

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