Obama’s Specifics for Economic Change

by David Kilpatrick

There has been a lot of talk about Obama being the agent of change, but many are asking the question, “What, exactly, does he intend to change?” His speeches are a virtual cornucopia of promises that a better life awaits us all under an Obama administration, but how will he deliver? Let’s examine some of his specific proposals relating to the economy from his web site and ask ourselves how these proposals will make our lives better.

According to the IRS: For 2006, taxpayers filed 138.4 million U.S. individual income tax returns, an increase of 2.9 percent from the 134.5 million returns filed for 2005. Adjusted Gross Income (AGI) increased from the previous year by 8.4 percent to $8.0 trillion for 2006. Taxable income increased 9.0 percent to $5.6 trillion; the alternative minimum tax rose 21.3 percent to $19.3 billion; total income tax increased by 10.6 percent to $1.0 trillion; and total tax liability rose by 10.3 percent to $1.1 trillion. So, even with a fundamentally strong U.S. economy, there are still weaknesses in job growth, the credit markets, manufacturing, and trade.

Obama Solution 1:
A Windfall Profits Tax on American oil companies to bring a $1000 energy rebate to American families.
Barack Obama will enact a windfall profits tax on excessive oil company profits to give American families an immediate $1,000 emergency energy rebate to help families pay rising bills. This relief would be a down payment on Obama's long-term plan to provide middle-class families with at least $1,000 per year in permanent tax relief.

Problem with that: Let’s do math: $1000 for each family, 140 million tax returns… that’s checks totaling about $140 billion! As oil company profits in 2007 were $120 billion, the rebates would be $20 billion more than ALL of the profits made by American oil companies… so clearly, this can’t be funded with a windfall profits tax.
Result: According to John Hofmeister, president of Shell U.S. in a recent interview on CNNMoney.com, "If our profits are taxed, that means we'll have less capital to invest in new production and it could raise gas prices." In other words, LESS SUPPLY and HIGHER PRICES, as well as a shortfall of almost $130 billion in funding the rebates.

Obama Solution 2:
Provide $50 billion to Jumpstart the Economy and Prevent 1 Million Americans from Losing Their Jobs.
This relief would include a $25 billion State Growth Fund to prevent state and local cuts in health, education, housing, and heating assistance or counterproductive increases in property taxes, tolls or fees. Obama’s relief plan will also include $25 billion in a Jobs and Growth Fund to prevent cutbacks in road and bridge maintenance and fund school re­pair - all to save more than 1 million jobs in danger of being cut.

Problem with that: The Gross Domestic Product of the U.S. is $13.13 trillion. $50 billion is a drop in the bucket that directed toward government spending projects designed to “prevent cutbacks” can hardly be called a “Jumpstart”. A “Jumpstart” would normally be seen as a chance to advance, not merely hold the line. Interestingly, nothing proposed by McCain would provide for cutbacks in road and bridge maintenance or school repair, so the 1 million jobs are not in jeopardy in the first place.
Result: Two more pointless government funding projects costing $50 billion per year.

Obama Solution 3:
Provide a Tax Cut for Working Families.
Obama will restore fairness to the tax code and provide 150 million workers the tax relief they need. Obama will create a new "Making Work Pay" tax credit of up to $500 per person, or $1,000 per working family. The "Making Work Pay" tax credit will completely eliminate income taxes for 10 million Americans.

Problem with that: This is not a tax cut at all. It’s wealth redistribution. 50% of American workers pay no taxes, so “offering tax relief to those who need it most” sounds nice, but it is a nonsensical statement. Adding another entitlement to the spending problems facing the U.S. is counterproductive. Since 1965, incomes are up 35%. Since 1965, mandatory government spending is up 789%. Another government spending program is not the answer.
Result: Another government spending program costing $140 billion per year.

Obama Solution 4:
Ensure Freedom to Unionize.
Obama believes that workers should have the freedom to choose whether to join a union without harassment or intimidation from their employers. Obama cosponsored and is strong advocate for the Employee Free Choice Act, a bipartisan effort to assure that workers can exercise their right to organize. He will continue to fight for EFCA's passage and sign it into law.

Problem with that: The Employee Free Choice Act eliminates the right to a private ballot and would, consequentially, allow intimidation by unions that are trying to make workers join. Burdening businesses with more regulations in an obvious attempt to pander to the unions will not help the economy or encourage more hiring. Workers are already free to unionize and employers are already required to adhere to labor laws that protect workers’ health, safety, rights, working conditions, and fair wages. It’s not the health or welfare of the worker that Obama would fight for, but the health and welfare of big labor unions who sustain themselves on the backs of the American workers.
Result: Higher labor costs which HURT employment and the return of historic worker harassment by labor unions whose memberships are dwindling.

Obama Solution 5:
Raise the Minimum Wage.
Barack Obama will raise the minimum wage, index it to inflation and increase the Earned Income Tax Credit to make sure that full-time workers earn a living wage that allows them to raise their families and pay for basic needs.

Problem with that: The minimum wage is an unfunded mandate on small businesses that offer entry level positions for teens and young adults that, most typically, don’t have families to support. Many live with their parents. Increasing the price of labor will make it more difficult for people to find jobs, not easier.
Result: Employers will hire the “bare minimum” number of employees and finding work will become difficult. We are in a global labor market and raising the cost locally will hurt us globally.

The policy of “raise taxes” and “spend more” has never been helpful during a weak economy and it is likely to cause a disaster. Obama continually wants us to remember Clinton’s era as a time of growth and prosperity, forgetting that tax revenues were falling under his higher rates and that the economy was stagnating prior to Bush’s tax cuts. The solutions he offers are either counterproductive to growth or address labor rights problems that don’t exist.

Obama's profound lack of experience leads him to make decisions based on book study rather than hands-on application and his advisors from socialist think-tanks won’t help. We can hope for one of two things: That McCain wins or that Obama changes his stands completely.