Note that the article never once mentions that McCain's plan basically is a huge tax break for the top 1%, a smaller tax break on the middle and lower classes but your employer health benefit is now taxable income. This means although the average American would continue to see essentially aero real wage growth their taxable wage growth would be immediate and huge. Simply put any debate between McCain and Obama over taxes would be a lopsided Obama victory.Justforfun000 wrote:Obama may break bent economy
By Dick Morris and Eileen McGann
Tuesday, September 23, 2008 - Added 23h ago
Whatever is left of the economy after the current round of crisis interventions by the Fed could go down the drain if Barack Obama is elected and carries out his plans for sharp increases in taxation. Even if Obama does not understand the linkage, most Americans do and will turn sharply against Obama’s tax plans if John McCain hammers away at the risk they pose for us all.
I don't know if these guys just don't understand how timelines work but since the US was already IN a depression in 1932 its rather clear that the top rate wasn't the catalyst . The collapse of Wall Street three years earlier, the subsequent destruction of credit followed by a couple major agricultural failures that lead to rampant infaltion on staples being the culprit. Simply put raising the top rate has about as much to do with affecting the GDP in 1932 as spitting in the Colorado River has to do with generating electricity at the Hoover Dam,During the Great Depression, Congress raised taxes sharply in the Revenue Act of 1932. The top rate went from 25 percent to 63 percent. As a result, the real Gross Domestic Product dropped by 13.3 percent and unemployment rose from 15.9 percent to 23.6 percent.
Again the economy in 1991 was the result of the MASSIVE government spending through the last years of the Regan administration (a nice chunk of which went to bailing out S&Ls). Combine that with the cost of GW-I (and it was considerable) and the reduction in available credit caused by the near total demise of the S&L industry and you have a situation similair to today in that massive government debt creates a hazardous budget situation where the US will undermine the dollar by not getting back ahead of the ball and this in turn affects purchasing power and the ability of the US consumer to jump start the US economy through situation. Bush lost re-election not just because of the economy but also because for those who still liked him as a fiscal conservative you suddenly had the option of Perot and when you take a huge chunkout of your bae voters (Rockefeller Republicans) then obviously your opponent will probably win. The economy alone didn't kill Bush but even if it did his decision to raise taxes was still the RIGHT decision (as the following 9 years of prosperity showed).n 1990, the first President Bush famously broke his “read my lips, no new taxes” pledge of 1988 and raised the federal gasoline tax and federal excise taxes, and imposed a 10-percent surtax on the top income bracket, raising its taxes to 31 percent. The recession that followed in 1991-1992 cost him re-election.
Also notice how in the first paragraph raising taxes was bad because it hurts GDP but in the second its bad because it losses elections. Its because the writers do know that the tax increases were followed by the surge of the economy shortly thereafter so it would disprove their already ridiculous idea that raising the top rate hurts the GDP.
Yup they may just have to keep their money invested in those companies...which would keep them liquid, reduce short selling in the current down market, and hold up the institutions which are endagered because there isn't as much profit in selling them down the river...horror of horrors. This paragraph also neatly ignores (thank goodness) the classic lie about Capital Gains cuts increasing revenue since they don't. Every Capital Gains cut of the last few years has produced a brief surge of folks cashing in followed by an overall net reduction in government revenue. It also neatly ignroes the fact that capital gains only matter if people are making money on the market so right now I'd rather think that's not our largest worry (and again if they are short selling their way to a rosy future well then at least the government gets some money back out of the deal). Mroeover the 1/3rd increase is disingenuous since nobody bothers to point out that it would raise the rate from 15% to 20%...which is still less than the lowest bracket rate for regular income.It is obvious that increasing capital gains taxes by a minimum of one-third and possibly doubling them, both of which Obama has proposed, would send a signal to investors to keep their money under the mattress. Who would buy stock knowing that the tax on any profits he or she will make is going to go up sharply if Obama becomes president?
I don't know enough of the situaiton to comment specifically but I'd rather expect that at the same time Michigan may have needed the money to do more important things...like pay for kids to go to school and repair some bridges. That being said this would also be the perfect time to point out the continuing idea that GDP is all that matters being a central theme to this whole piece. Sure GDP matters...if you are talking about overall national econmic health its the quickest (not the best, just quickest) indicator of whether the basics are working or not. However GDP leaves out a whole host of other issues which need to be addressed such as median real wages, debt as a % of GDP, trade imbalance and job loss/growth. On the state level especially those latter issues are FAR more important than GDP.Look at what happened just last year in Michigan. Democratic Gov. Jennifer Granholm raised taxes on almost everything. Income taxes shot up 11.5 percent, and the state’s 6 percent sales tax was expanded to dozens of new services, like investment advice, janitorial services, landscaping, ski lifts and carpet cleaning.
The $1.75 billion tax package shook the economy to its foundations. Michigan became the only one of the 50 states with a shrinking gross domestic product. The value of all goods and services produced in the state fell by 0.5 percent, while the national GDP rose by 3.4 percent. The state fell from 23rd in GDP to 35th. Taxes caused a disaster.
1) Lie about Obama's tax increases since his plan is, at best, revenue neutral since it includes a huge swath of cuts in the bottom rates and increased accessibility for EITC and similair programs.In a strong economy, Obama’s proposed tax increases would raise questions. In a weak economy, they portend a catastrophe. It would be like bleeding a sick patient, the medicine of 200 years ago, depriving him of blood even as he needs more, not less, circulating through his arteries.
2) Continues the GDP is everything meme since the authors would be happy with a growing economy even if the debt as % of GDP was growing...which is the idiotic situation we've placed ourselves in over the last 8 years.
3) Sooner or later we are going to have to pay this money and the longer we put it off the worse we undermine the overall economy. If we honestly needed to raise taxes and there was a concurrent plan to actually start addressing the roots of the economic problems the US faces then I would be all for it.
Firing the head of the SEC won't do anything since the SEC has, like the CFTC, been gutted of most oversight abilities by the likes of Phil Gramm. Sure Sarbannes-Oxley, as amended, has put more disclosure in publicly traded firms but it holds no ability for them to look into trading markets that legislation hides from scrutiny (such as the Credit Default Swap mess). Hell the SEC even under Bush went out of its way back in 2006 to state that CDS were risky investments that nobody knew how to acurately rpice or asses. Since they can't regulate it then firing the guy who did nothing because he couldn't is stupid. It'd be fa smarter for McCain to finally throw Phil under the bus well and truly (not that it will happen) but even that won't actually do anything. Focusing on taxes would be a retarded move for McCain since its yet another chance for Obama to link him to the ultra-wealthy the McCain plan is designed to help.McCain’s populist rhetoric, including his pledge to fire Securities and Exchange Commission Chairman Christopher Cox is important for a Republican candidate. But his focus should shift to the tax issue. With firms suffering, withering and dying for a lack of capital, tax increases on those who invest would be a horrible mistake.
Americans will realize this obvious fact, and McCain should use it to gain the advantage in discussing the economy.
There is no reason for the economy to work to Obama’s advantage when he is committed to a doctrinaire program of tax increases and spending hikes. McCain can use the issue to run rings around him.
