Obama finally released his plan to reduce the deficit and to pay for his latest spending proposal: The 447 billion dollar American Jobs Act (incidentally, I am glad Obama points out that his latest jobs plan is for the benefit of Americans and not for say Germans – Although the Chinese may be the true benefactor from the latest Obama jobs plan - if they continue to buy up more of our debt). By the end of the year, the Obama White House will have increased the federal deficit by 30% (in just 3 years on the job) mostly by passing ObamaCare and the Recovery Act (the 862 billion dollar stimulus). First, let’s consider the fact that Obama’s original budget proposal this year raised the deficit – it did nothing to reduce our national debt. Now, Obama, and Democrats want to reduce the deficit. What happened to the progressive belief that deficit spending is okay – aka the Paul Krugman economic model. Do not be fooled, this sudden change in progressive ideology is merely to give the impression of fiscal responsibility - it is a political hoax because the 2012 elections are around the corner. At the same time, Democrats posturing as fiscal hawks not only validates the concerns of a vast majority of Americans, but conservatives especially Tea Partiers. Secondly, this plan has no prayer of being passed. Democrats will not support cuts to Medicare, Medicaid, and other entitlements; and Republicans will not support any tax hikes – especially in a recession. In fact, tax hikes on the wealthy will not pass the Senate (Even though Democrats outnumber Republicans 53 to 47). Blue Dog Senators such as Wyden, Lieberman, Conrad, Baucus and others will not go along with an Obama plan which includes tax hikes on any individual or corporation. Here’s a brief synopsis of the latest nightmarish proposal by Obama.
Entitlement Cuts – Let’s start with the good news: Obama has proposed cuts to Medicare and Medicaid as well as discretionary spending. However, this vindicates the Paul Ryan budget plan. Remember, Democrats were demonizing Paul Ryan and conservatives as “wanting to push grandma over a cliff” because Ryan proposed changes to Medicare. And let’s not forget that ObamaCare already cut 500 billion dollars in Medicare spending to pay for the healthcare legislation. Finally, Obama’s deficit reduction plan has one glaring omission by refusing to tackle social security, which is scheduled to run out of money in the next decade.
Corporate Tax Increases – Obama plans to cut tax loopholes for oil and gas energy companies. Since oil companies profit fewer than 5 cents per gallon, they will pass these tax increases onto the consumer. Yes, that is right; this will be a tax on all Americans. The government already receives 50 cents in tax revenue per gallon of gas. They may as well increase that tax to 60 or 70 cents per gallon because that is exactly what is going to happen. Gas prices will spike an additional 10 to 20 cents per gallon to pay for the Obama tax increases on oil and gas companies. Why doesn’t the President cut tax loopholes for ALL corporations including GE and Whirlpool who paid no income taxes this past year? And while the President is at it, why doesn’t he stop providing taxpayer funded loans to “green” companies with bad credit ratings such as Solyndra? Can we at least apply tax laws fairly and consistently for ALL corporations?
The Buffet Rule – The Buffet Rule is a proposed tax hike on wealthy Americans making over 250 thousand dollars per year. First, Warren Buffet is a hypocrite. If Buffet wants to pay higher taxes he does not have itemize all his deductions, and he certainly does not have to take advantage of all the tax loopholes which enabled him to shelter his fortune from the IRS. Secondly, if the government applied a 100% tax rate to every family earning over 250 thousand dollars per year, it would not account for 33% of the federal deficit this year. This means the only true way to reduce the deficit is by reining in out of control government spending. Thirdly, we must consider the Laffer Effect. The Laffer Effect states there is an ideal tax rate and any tax above this ideal rate would yield less government revenue, not more. What is the ideal tax rate – most studies indicate it is about 33%. Today, many Americans already pay more than 33% in taxes – including local, state, and federal taxes. After all, when tax rates are too high, it reduces the incentive for people to earn more money. I ran models to understand the effects of raising the tax rate on wealthy Americans from 35% to 39.6%. The results indicated that the federal government could collect additional revenues, around 100 to 200 billion dollars per year. But the models also indicated consumer spending would decrease by 700 to 800 billion dollars annually – equating to a 5% decline in GDP. These results are catastrophic and could lead to the reduction of 1 to 2 million jobs nationally.
Afghanistan War – It sounds like Obama is waiving the white flag and is going to surrender in Afghanistan. If intelligence suggests the terror threat from Afghanistan is a national threat to the U.S., then Obama should finish what he started. Why support a troop surge and increase drone attacks only to admit defeat? This simply does not make any sense. Besides, this year the U.S. has cut military spending dramatically in Iraq, but our nation still faces massive budget shortfalls.
My Book: Is America Dying? (Amazon.com, Barnes and Noble)