Thursday, November 6, 2008

Obamanomics = Massive drain on wealth creation

National Post columnist Jacqueline Thorpe has an excellent acticle on Obamanomics. Here it is in its entirety (Hat tip Roy Eappen):
As the fervour fades, the world will have to get used to a new word: Obamanomics.

It means tax hikes for the rich, tax cuts for the poor and middle class, a promise to renegotiate NAFTA, greater union power, windfall taxes on oil and gas profits, higher taxes on capital gains and corporate dividends and more comprehensive health care coverage.


Obamanomics is essentially about taking more money from the rich and giving it to the poor, plain old-fashioned "neighbourliness" as Mr. Obama has described it.

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Or, as others have remarked, taking money from those who earn it and giving it to those who don't.

Under his income tax plan, Mr. Obama says he will provide tax cuts for 95% of Americans. He will do this by repealing Bush tax cuts -- set to expire in 2010 -- and bumping the top rates back to 36% from 33% and to 39.6% from 35%. Individuals earning over US$200,000 and families over US$250,000 will see sizable tax increases. This includes sole proprietors of businesses such as lawyers, accountants or plumbers called Joe.

Since 38% of Americans currently do not pay federal income taxes, Mr. Obama will provide them with refundable tax credits. Under his plan, 48% of Americans will pay no income tax.

"For the people that don't pay taxes, he is simply going to write them a cheque," says Andy Busch, global foreign exchange strategist at BMO Capital Markets. "That is income redistribution at its worst and produces very little value."

Other plans include raising taxes on capital gains and dividends to 20% from 15% for families earning more than US$250,000. He plans to leave the corporate tax rate at 35%, which in a world of rapidly falling rates, looks positively anti-business. He will introduce windfall taxes on oil and gas companies but offer US$4-billion in credits to U. S. auto-makers to retool to greener cars.

Much has been made of Mr. Obama's plan to renegotiate NAFTA to make it more labour-friendly, though no one seems to believe he will actually make it more protectionist.

The bottom line is this: Obama's economic plan is likely to be a drag on growth and it will cost money. The nonpartisan Tax Policy Center estimates Obama's program would add US$3.5-trillion to U. S. debt over the next 10 years, including interest. His plans for health care-- which may be delayed by financial necessity -- would tack on another US$1.6-trillion.
Just a thought, but maybe he can start making good by returning some of the money that got him to the white house in the first place.

8 Comments:

At Nov 7, 2008, 4:15:00 PM , Blogger Rob said...

The tax cut is for those under $250,000 (generally).

Or, as others have remarked, taking money from those who earn it and giving it to those who don't.

I make less than $250,000, and thus would receive a tax cut in the United States. Am I incapable of earning income, unless I make five times the median?

Unless I become extremely successful, I will likely never make six figures. I therefore understand what's good for the middle class is good for me. Protecting the marginal tax rates of those who are six sigma or more removed from the mean is hardly good for the middle class. Cutting taxes for those well within the breadth of the bell curve is.

 
At Nov 7, 2008, 6:35:00 PM , Anonymous nbt said...

He's looks like he's going to leave the corporate tax rate at 35%, which in a world of rapidly falling rates, is fairly regressive towards business and job growth.

 
At Nov 9, 2008, 10:19:00 PM , Blogger Iain G. Foulds said...

... The economic philosophy of the Left is limited to a caveman's understanding of forcing money from one to another.
... Every left-wing "solution" is based upon the forced sacrifice of individual liberty- whether the state forcing money from those who earned it, or limiting the freedom of individuals to purchase foreign goods through socialist protectionist policies.
... Let us begin to build a nation based upon the principles of liberty.

 
At Nov 10, 2008, 9:41:00 AM , Blogger Rob said...

The economic philosophy of the Left is limited to a caveman's understanding of forcing money from one to another.

How is increasing the marginal tax rates paid by the rich to cut taxes for the middle class any more caveman-like than cutting taxes for everyone by vastly increasing foreign debt?

You can't be free if you owe your country to another.

 
At Nov 10, 2008, 10:50:00 AM , Anonymous Anonymous said...

I don't see him upholding his economic plan. How can he when he is promising everything from Universal Medicare, more troops in Afghanistan to tax cuts for 95 per cent of US citizens.

 
At Nov 10, 2008, 10:50:00 AM , Anonymous Anonymous said...

This comment has been removed by a blog administrator.

 
At Nov 10, 2008, 12:26:00 PM , Anonymous bill said...

The rich pay the majority of the taxes now (almost two thirds), why would you want them to pay more?

It's definitely a drag on wealth creation.

 
At Nov 10, 2008, 3:30:00 PM , Blogger Rob said...

bill: I'd rather free up the income of the middle class, allowing consumer spending, savings, and entrepreneurship to increase.

It also depends of your definition of rich. I'd define anyone with more wealth than me rich, as they are relatively "richer" than me.

The vast bulk of Canadians (and Americans) make less than $100,000/yr. We should target this mass of the population for tax cuts and incentives before giving more favour to the rich, whoever they may be. This would be the best way to stimulate the economy.

 

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