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Invasion of the Wallet Snatchers
So, as we examine Obama's economic policy proposals, we ought to look
at them with a skeptical eye. Many of the proposals won't become law.
Others will be modified beyond recognition. Still others will be cast
aside, as unforeseen developments force the rejection of old ideas and
the adoption of new ones. The economy could worsen. The wars in Iraq
and Afghanistan could worsen. The United States could become involved
in new conflicts in Darfur, Iran, Pakistan, the Korean peninsula,
Taiwan, or someplace no one has ever heard of. Al Qaeda could strike
again. And don't forget Putin.
There are, however, a few basics we can take for granted. If Obama is
elected president in a few weeks, not only is enrollment in this class
going to spike, but federal taxes, spending, and the deficit--at least
in the short term--are all going to rise. As taxes on the rich go up,
the income threshold at which one becomes "rich" is likely to go down.
Obama wants billions in new spending, and, if the Bush presidency is
any indication, he won't stop Democrats in Congress from spending even
more. And the new spending, combined with the loss in revenue from an
economy in recession, will increase the deficit.
There are all sorts of taxes that can be raised, and a
President Obama is going to raise almost all of them. He's going to
raise federal income taxes on families making more than $250,000 a
year. He's going to raise capital gains and dividend taxes. He's going
to raise the corporate and estate taxes. He's proposing a windfall
profits tax on oil companies. He'd like to tax "carried interest" as
private income. He's suggested lifting the cap on income subject to the
payroll tax.
Obama says that, under his plan, tax rates on incomes below $250,000
will not change, and that "95 percent" of Americans will actually get
an income tax cut. But this is misleading. Plenty of Americans
pay very little, or absolutely no, federal income tax. So it's hard to
give them a tax "cut." What Obama is actually proposing is a refundable
tax credit--it's unclear whether it's a one-shot deal or permanent--of
$500 per person.
He wants to take the federal tax code and carve out all these credits
and exemptions so that the overall tax burden becomes slightly more
progressive, and more government benefits flow to the middle class and
poor. That means an already complicated tax code is about to become
even more complicated. And that income tax hikes on the wealthy are
going to finance benefits for some people who don't pay any income tax
at all. This isn't "cutting" taxes, by which one usually means
across-the-board, permanent rate cuts. It's another form of spending.
The first is his opposition to free trade. Obama has opposed every
trade deal under consideration since he's been in Congress, which,
admittedly, isn't all that long. During the Democratic primaries he
called for renegotiating NAFTA. He may praise free trade in interviews
with the financial press, but he clams up when faced with a large
crowd. And unlike Bill Clinton, Obama has nary a positive word for free
trade in general, even though it has produced undeniable benefits for
Americans and people worldwide. Obama attacks "companies that ship jobs
overseas," but he doesn't have much else to say about the global
economy. Democratic economists will tell you Obama knows better and is
just saying what's politically expedient. Talk about a profile in
courage.
For the sake of the U.S. and global economy, Obama can't allow the AFL-CIO and other unions to dictate trade policy.
But they just might, because Obama has shown no sign of breaking
with the unions on any issue. This is the second-most disturbing aspect
of his economic agenda. Obama has said he would sign the so-called
"card-check" legislation that Congress will undoubtedly consider, and
probably pass, next year. The legislation would eliminate the secret
ballot in union elections and allow the bosses to unionize a shop once
a certain number of names had been written down on a card. Card-check
is an ugly piece of work. One can see how the opportunities for graft,
fraud, and intimidation under this sort of scheme would be enormous.
And the democratic ideal of the secret ballot would be undermined.
Card-check would also lead to a rapid jump in unionization. This is
not, despite what your Teamster friends might tell you, a good thing.
Union participation in the private sector has been on the decline for
decades and, not coincidentally, during this same amount of time, on
average, productivity has skyrocketed while unemployment has plummeted.
Unions produce frozen labor markets, which increase unemployment and
class stratification while lowering productivity and economic growth.
And the unions' politically negotiated wage gains also encourage
inflation.
Obamanomics equals higher taxes, more government spending, a larger
deficit, a more complicated tax code, increased regulation, a slowdown
in global economic integration, and the resurrection of the labor
unions, all brought to you by a cool-headed gradualist with a team of
brilliant advisers. Not a pretty picture. But, as the saying goes,
conservatives should always prepare for the worst, because they ought
to expect nothing less.
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