I have heard Senator Obama say that the current economic situation is the worst it has been since the great depression. What I know is the landscape doesn't look like anything from the movie The Grapes Of Wrath nor does it seem to be as my grandfather described in the stories he has told me about those times. I will allow for a certain amount of hyperbole as all campaigns bend and stretch stats and records to make their point or attempt to fit their claim into a set of circumstances. However, this over the top claim is curious when compared to his statements that the opposition is using scare tactics. I would think the proper revision to his statement would be to say we may be in the worst economic situation since the Carter Administration.
I am not an economist, but I have run my household for almost 30 years, managed in business for others and owned a business of my own. I know what it means to balance a budget, save for a rainy day and save for the future. Part of the problem is the government attitude that spending is what is important, then tax the people to get what the government needs to cover the bill. I wish I had such a luxury with my budget. I went through some government sites and just pulled out some numbers that I put in a table so I could do some comparison. I didn't seek out categories that I thought would work one way or the other, just familiar numbers we hear in the news. Inflation, unemployment and the consumer price index are regular staples on the nightly news. I am sure there are other numbers to look at if we were trying to go in depth into economics, but I was looking for a base to compare against the depression statement.
Let's take a look at some numbers from the past 34 years.
% OF LABOR FORCE
|1974|| FORD - R|| S-D H-D||11.03||5.6||49.3|
|1975|| FORD - R|| S-D H-D||9.20||8.5||53.8|
|1976|| FORD - R|| S-D H-D||5.75||7.7||56.9|
|1977|| CARTER - D||S-D H-D||6.50||7.1||60.6|
|1978|| CARTER - D||S-D H-D||7.62||6.1||65.2|
|1979|| CARTER - D||S-D H-D||11.22||5.8||72.6|
|1980|| CARTER - D||S-D H-D||13.58||7.1||82.4|
|1981|| REAGAN - R|| S-R H-D||10.35||7.6||90.9|
|1982|| REAGAN - R||S-R H-D||6.16||9.7||96.5|
|1983|| REAGAN - R||S-R H-D||3.22||9.6||99.6|
|1984|| REAGAN - R||S-R H-D||4.30||7.5||103.9|
|1985||REAGAN - R||S-R H-D||3.55||7.2||107.6|
|1986|| REAGAN - R||S-R H-D||1.91||7.0||109.6|
|1987|| REAGAN - R||S-D H-D||3.66||6.2||113.6|
|1988|| REAGAN - R||S-D H-D||4.08||5.5||118.3|
|1989|| BUSH - R||S-D H-D||4.83||5.3||124.0|
|1990|| BUSH - R||S-D H-D||5.39||5.6||130.7|
|1991|| BUSH - R||S-D H-D||4.25||6.8||136.2|
|1992|| BUSH - R||S-D H-D||3.03||7.5||140.3|
CLINTON - D
|1994|| CLINTON - D||S-D H-D||2.61||6.1||148.2|
|1995|| CLINTON - D|| S-R H-R||2.81||5.6||152.4|
|1996||CLINTON - D||S-R H-R||2.93||5.4||156.9|
|1997|| CLINTON - D||S-R H-R||2.44||4.9|
|1998|| CLINTON - D||S-R H-R||1.55||4.5||163.0|
|1999||CLINTON - D||S-R H-R||2.19||4.2||166.6|
|2000|| CLINTON - D||S-R H-R||3.38||4.0||172.2|
|2001|| BUSH - R|| S-D H-R||2.83||4.7||177.1|
|2002|| BUSH - R||S-D H-R||1.59||5.8||179.9|
|2003|| BUSH - R||S-R H-R||2.27||6.0||184.0|
|2004|| BUSH - R||S-R H-R||2.68||5.5||188.9|
|2005|| BUSH - R||S-R H-R||3.39||5.1||195.3|
|2006|| BUSH - R||S-R H-R||3.24||4.6||201.6|
| 2007 || BUSH - R||S-D H-D||2.85||4.6|
Inflation by Year
Unemployment as a percent of labor force
Persons 16 years of age and over
Consumer Price Index
A Visual Guide: The Balance Of Power Between Congress and The Presidency
Now what I see above is that the statement is a bit over the top playing on the frustrations of the housing market and the gas prices. The inflation has been below 4% back to 1991. The unemployment number seems to be reasonable compared through the 90's. The consumer price index doesn't appear to be growing any more than other periods in recent history.
What isn't in those numbers is the housing starts which is cyclical to some extent. The current mortgage market meltdown is the result of policies that were enacted back into the Carter era and reinforced through the present time. Also missing in those numbers is the oil price volatility that has affected each of us at the pumps. Again, this is the cumulative effect of the policies over the past 20 or more years. I concede that the President has some effect on the markets based on his policies, his appointees and his leadership. The purse strings, the laws and the pace at which things do or do not happen are under the control of the legislative branch. Look at the table above one more time and examine who was in control of the legislative branch at what times. It appears that Presidents Reagan and Bush Sr were the only two who never had a chance to work with a legislative branch under the same party banner. So to put everything on the President, from whichever party, is a narrow view of things.
I know times are tough for everyone including myself, my family and my neighbors. It is simply magnified by the election cycle and the big ticket meltdowns that are affecting the markets. It does trouble me to see the housing and banking markets being nationalized with the potential of healthcare following suit. Other than the military, not the wars, just the military, what has the government ever run well? There is reason for concern in the future. We already have a mix of socialism and capitalism and, in my opinion, the closer it gets to the socialist end of the spectrum, the more burdensome and poorly run this country's markets will get.
Those are some thoughts in general. Now I will look at a few items specifically concerning Senator Obama and his proposals.
Under the Obama Plan:
- Middle class families will see their taxes cut – and no family making less than $250,000 will see their taxes increase. The typical middle class family will receive well over $1,000 in tax relief under the Obama plan, and will pay tax rates that are 20% lower than they faced under President Reagan. According to the Tax Policy Center, the Obama plan provides three times as much tax relief for middle class families as the McCain plan.
- Families making more than $250,000 will pay either the same or lower tax rates than they paid in the 1990s. Obama will ask the wealthiest 2% of families to give back a portion of the tax cuts they have received over the past eight years to ensure we are restoring fairness and returning to fiscal responsibility. But no family will pay higher tax rates than they would have paid in the 1990s. In fact, dividend rates would be 39 percent lower than what President Bush proposed in his 2001 tax cut.
- Obama’s plan will cut taxes overall, reducing revenues to below the levels that prevailed under Ronald Reagan (less than 18.2 percent of GDP). The Obama tax plan is a net tax cut – his tax relief for middle class families is larger than the revenue raised by his tax changes for families over $250,000. Coupled with his commitment to cut unnecessary spending, Obama will pay for this tax relief while bringing down the budget deficit.
The vague "middle class" designation is never truly defined by anyone, at least that I know of. But that aside, the promises of providing tax cuts is nothing new. I am not in an upper income bracket. My household income has never been within half of the $250,000 line. This does not change my objection to raising taxes on the wealthy. This is a fundamental difference between a conservative and a liberal. Where a conservative sees the confiscation of one's wealth as exactly that, confiscation, a liberal sees it as an act of fairness to the "less fortunate" as if the wealthy were simply lucky to have it and are obligated to share their wealth with the unlucky.
Look at the line in the final bullet point above, "The Obama tax plan is a net tax cut – his tax relief for middle class families is larger than the revenue raised by his tax changes for families over $250,000." Am I to assume that it is okay to confiscate another person's wealth because the numbers work out in a net cut? Am I to say it is okay because I will theoretically receive a cut, but it's okay because there is a wealthy person to make it up? Am I supposed to be inspired to grow my trucking company knowing that I'll be subsidizing others who have no desire to make the same effort?
"Obama will ask the wealthiest 2% of families to give back a portion of the tax cuts they have received over the past eight years to ensure we are restoring fairness and returning to fiscal responsibility." He will ask? Can these families say no? Give back? Is this voluntary? A portion of the tax cuts being removed means the taxes are going up whether he says they are being raised or not. The same is true when the Bush tax cuts are allowed to expire rather than being made permanent, even if he doesn't do it right away. Who is the fairness being restored to? Not the person working hard to generate the wealth. Not to the person receiving the breaks, though it would easy to buy that pitch.
The wealthy are the ones who make the jobs possible. The government doesn't create jobs, contrary to popular belief, other than the jobs to run the bureaucracy created to administer yet another program. Every dollar taken from those who run the businesses is one less dollar with which the business can be run. When the working capital is restricted, a business has a more difficult time growing, or in some cases even surviving. This Robin Hood approach is not a sound plan for the business environment. If a company needs to reduce costs to compete, but the taxes increase, what is the business to do? Some of the possibilities are reduce costs in overhead, materials or labor. Move to a state with lower taxes. Move to a country with a more friendly business environment. This speaks to corporate tax rates as well. Corporations don't pay taxes as if they are an external item having no effect on the operation of the business. Taxes are part of the cost of doing business. Payroll taxes, social security taxes, real estate taxes and employee benefits all play into the cost of doing business and are reflected in the cost of goods and services to the consumers.
Unless there are corresponding spending cuts, the tax cuts are the equivalent of a spending program that is being billed to the wealthy. Or in Senator Obama's terms, spreading the wealth around. Here again is the fundamental difference between conservative and liberal viewpoints. The wealth is not the property of the government to spread around. The government does not have the constitutional right to CONFISCATE the wealth of some people to REDISTRIBUTE to other people.
That ties in to the proposed programs by Senator Obama. If there is currently a deficit, any additional program will increase the need for taxes to be raised to pay for it. Again, no matter where the taxes are raised, personal or corporate, wealthy or middle class, the result is the same. Everyone will be affected by the cost of the program. It doesn't even matter if the programs are near one trillion dollars or one hundred billion dollars. The dollars still need to come from somewhere, or more precisely, someone. List whatever programs he proposes and add up the costs. For purposes of this discussion it doesn't matter what the total is really, just understand that the money will come from our pockets in some form or fashion.