American Elephants

It’s the Economy, Mr. Obama. Armageddon Approaches. by The Elephant's Child

The 2012 election is about the economy.  Even Obama admitted it in his speech at Cuyahoga Community College in Cleveland last week. Obama said:

Yes, foreign policy matters.  Social issues matter. But more than anything else, this election presents a choice between two fundamentally different visions of how to create strong, sustained growth.

President Obama believes firmly in Big Government. He believes that growth, strong, sustained growth comes about because of government ‘investment’ in the economy. Government investment in new industries, government investment in new ideas, government investment in training people, government investment in education, and government investment in clean energy. That’s a lot of government investment of “government money,” which of course comes from the taxpayers. We know this because he has demonstrated over and over that this is his belief and his program.

Obama’s fiscal 2013 budget shows federal spending increasing from $2,983 trillion in 2008 to an all-time record of $3,796 trillion in 2012 — an increase of 27.3%. The federal budget deficit for the last budget by a Republican-controlled Congress was $161 billion for fiscal year 2007. Obama’s budget deficit for 2012 is $1,327 trillionthe highest in world history.

The federal debt held by the public will double during Obama’s four years. In just one term, Obama will have increased the national debt as much as all prior presidents from George Washington to George  W. Bush combined.

Unemployment stands at 8.2 percent, and the CBO expects the rate to remain there for the remainder of the year. The Federal Reserve expects the growth rate to remain stuck below 2%. Obama remarked in Cleveland that “Governor Romney and his allies in Congress believe deeply in the theory that…the best way to grow the economy is from the top down.” Huh? What? His plan, “our North Star — an economy that’s built not from the top down, but from a growing middle class.” A middle class is the result of growth, not the other way around.

The foundational economic theory of Obamanomics is that even though the economy expanded “during the last few decades,” the middle class stagnated. The rich  took all the money, and they ought to give it back. He has said repeatedly that the U.S. has gone off the track in the last few decades — just when the tax rates started to fall dramatically.

Obama said in The Audacity of Hope that he didn’t buy the theory that the high marginal tax rates that existed when Reagan took office hurt incentives to save and invest.  In other words, he does not accept that the Reagan revolution set off a 20-year economic boom. Evidence doesn’t matter. The Left didn’t like Reagan.

Obama rejected the recommendations of his own debt commission.  The Bowles-Simpson Commission would have reduced or eliminated tax breaks while lowering the top tax rate to no higher than 29 percent. This would have resulted in a huge tax increase, but the amount of new revenue would not be enough to balance the budget without restructuring of entitlements.

To fund a federal government where ObamaCare is operating and Social Security is funded and domestic “investments” are financed, the Democrats would need more revenue. They always think that higher tax rates on the rich and maybe a value added tax on everybody else will be the way to get their hands on the cash.

So we have looming on the financial horizon “Taxmageddon” — the one-year $494 billion tax increase that looms on January 1, 3013. This is not what the economy needs when it is already deep in the doldrums from over-regulation and  uncertainty. The recent spate of bad economic news — everything from weak consumer sales to bad consumer sentiment is a sign that the economy continues to slow even more. Businesses, investors and, entrepreneurs can’t plan for the near future. They don’t know what their taxes will be in a few months and they can’t tell if investments they might make would be profitable. Translation: no hiring.

Congress needs to stop the disaster of Taxmageddon and end the uncertainty as soon as possible. If it doesn’t act, they risk a return to a second recession, even deeper. You might want to contact your Congressional representatives and urge prompt action.

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