Sorry rich people, you can't keep your money...
“We cannot afford to extend the tax cuts for those making more than $250,000 a year”
– White House Press Secretary Robert Gibbs
A few weeks ago, I got into a debate with a waining liberal about Obama’s double-dip recession. He claimed (correctly) that the recession would linger until consumer demand increased. Then he erroneously claimed that extending unemployment benefits to 99 weeks was pumping cash into the market and boasting consumer demand. Clearly the man has weak command of mathematics.
The Obamanomic Fatal Flaw
Obama’s big campaign tax mantra was “We cut taxes for 95 percent of working families.” Yes, this was true, but when you get into “the math,” you find that the amount of taxes cut amounted to $7.69/week per worker. What would you do with an extra $7.69/week? Top off your gas tank? Serve your family steak on Saturday night instead of chicken? Buy a Latte or two? Whatever it is, it’s not going to create new jobs.
What about Obama’s other economic programs, like dumping hundreds of billions into saving government and union jobs or extending unemployment benefits? I suppose one might argue that demand would be lower if these massive hand-outs didn’t happen, but there is no way on earth that they increased demand enough to create a good job.
Good Jobs Versus Government Jobs
Another fatal flaw in Obamanomics is the way they equate government jobs to private sector jobs. Private sector jobs are the economic engine of the United States. They cost the taxpayer nothing to create. The business that creates them pays income taxes to fund the general welfare. Eventually, someone probably pays sales tax, employees also pay income taxes, and if that private sector business offers stock that results in a capital gains or is acquired, even more taxes are paid.
On the other hand, most government jobs are an economic luxury to the nation. Sure, we’d love more school teachers, cops, firefighters, soldiers, social workers, etc, but all of these jobs are a burden on the national economy. Government workers now earn double what their private sector counterparts earn, but because such a large portion of their compensation comes in the form of benefits and deferred income (pensions), they pay taxes at a much lower rate than their private sector counterparts. And, their employer (the government) pays no income or capital gains taxes.
But, the biggest difference between a government job and a good private sector job is that politicians create government jobs using other people’s money and the rich create good private sector jobs using their own money!
Blame the Rich for High Unemployment
The economic truth is that only the rich can create jobs that contribute to the economy. And the rich will only do so when they believe they will earn a profit down the road for doing so. Today the rich have stopped investing money in creating jobs. We know that they are sitting on over $2 trillion in private capital and refuse to invest it, but why?
The reason the rich are not investing in creating new jobs is because Obama has made impossible for them to know if they’ll ever make an after-tax profit by doing so. They know that they face a massive tax increase to pay for Obamacare, they know that their employee insurance premiums are going up, they know that thanks to Obama’s massive financial regulation bill, their cost of compliance will increase, and now it looks like they’ll be facing the biggest tax increase in the history of the United States on January 1, 2010.
If we want jobs, we can’t afford to raise taxes on the rich!
Gibbs’ claim that “We cannot afford to extend the tax cuts for those making more than $250,000 a year” is either economic suicide or just plain stupid. My liberal friend was right, the economy will get better when consumer demand increases, but the government cannot print or borrow enough money to “move the needle” on consumer demand. What little good they do is immediately offset by the reality that they just put billions more “on the tab” that will ultimately have to be paid by the private sector.
Consumer (and business) demand will only increase when the rich feel optimistic enough about their future profit potential to put their own money on the line to create new businesses and new jobs. Once consumers see this happening (private sector hiring), they’ll feel better about their economic future and end result will be a undeniable increase in consumer demand. Nothing else will do it.
Let’s Hear it for The Party of No!
Over the last 20 months our government has become a massive malignant tumor on the economy of the United States. Everything Obama does squeezes capital and downstream profit potential out of the private sector economy. All of the stimulus spending has done nothing to heal the economy. At best, it’s created a very short lived “sugar high,” but more likely, it’s simply been a morphine drip for the victim of a terminal disease — the US Economy.
Obama and his minions continue to criticize conservatives as “the party of no.” But if the only idea coming out of the “party of yes” is more spending and taxes, which is an economic cancer for the country, “just saying no” sounds like a pretty good idea.
Dave
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