This week, President-elect Barack Obama vowed that he intended to advance what he termed a stimulus bill that would provide a $1,000 tax rebate to 95 percent of working families. His idea is to "to get people spending again." http://news.theage.com.au/world/us-families-to-get-1000-dollar-tax-cut-obama-20090109-7czx.html According to Mr. Obama, “This would be "the first stage of a middle-class tax cut that I promised during the campaign and will include in our next budget."
The inaccuracies, untenable assumptions and mis-placed fundamentals of Mr. Obama’s recent rhetoric are too long and numerous for a blog. Let me list just a few of the foibles of his plan. First, a vast share of those receiving the “tax cut” actually pay no income taxes. So for this group, they are more accurately defined as welfare recipients. Don’t get me wrong, most all of us are receiving subsidies or welfare from some level of government. My primary objection is to Mr. Obama’s terminology. Let’s label it more accurately. My second objection to his plan is that over the past two decades more and more of the tax burden has been shifted away from low income workers to high income workers to the point where the majority (those not paying federal income taxes) can vote themselves a pay raise by inserting political leaders into office who promise to “soak the rich” and enrich the “working families.”
This was the genius of Mr. Obama’s campaign when he promised to raise taxes on families earning more than $250,000 and cut taxes on families making less than this amount. How could the 95 percent majority, those making less than $250,000, resist voting for the man who vowed to take earnings from the supposed rich, the 5 percent minority and give to them. I am just surprised that all politicians aren’t running on such a clever and ultimately destructive platform. Why am I not surprised that Mr. Obama now indicates that he may in fact not increase taxes on the “evil rich”?
Instead he intends to expand by $800 billion an already out-of-control federal budget deficit. According to the Congressional Budget Office, the deficit for 2009 will total more than $1.2 trillion even without Mr. Obama’s stimulus. As a percent of the economy, this is the largest U.S. deficit incurred since World War II. Now I once had the mis-fortune to serve as a Visiting Scholar with the Congressional Budget Office and can thus attest to their model’s inability to get within a mile of the likely final value. This deficit added to an already too large federal debt of over $10 trillion is going to choke the next generation with higher inflation, interest rates and taxes. As a baby-boomer, I can only cry for those individuals younger than me who will ultimately pay the cost of this mammoth blunder.