FRED WOLFERMAN: Obamanomics: Barack's Fiscal Ideas Are All Off the Wall
I'm trying to keep an open mind, I really am.
After all, Hillary Clinton is out of the race. Apparently. Barack Obama is a fresh face, and heaven knows, his rhetoric about the need for change rings true, if hopelessly simplistic. My kids are liberals and proselytizing continually. I want to cast my vote for someone I believe will at least try to lead competently and impede the stupidities of Congress.
But, as regular readers will know, my hobby horse is the national balance sheet, and -- I'm sorry, all you believers out there -- but Barack Obama is an economic illiterate. In fact, his bad ideas are coming so fast this is the third time I've rewritten this thing, and I can only hope he remains quiet until Friday.
First, consider Obama's solution to the high cost of gasoline: Slap a windfall profits tax on the oil companies and hand out the money to the poor, so they can -- you guessed it -- buy more gas.
This is a terrible idea on so many levels I hardly know where to start. First, and I admit to a strong capitalistic bent here, there is no such thing as a windfall profit. If anybody can figure out how to make a high profit margin in today's cutthroat global economy, more power to him; the oil companies haven't. Their margins run consistently under 10 percent.
The guys making the most money are the foreign dictators and potentates who sell the stuff to us, because Mr. Obama's party won't let us drill in our own backyard. The best way to get more of something is to encourage its production. Overtaxing its suppliers does not qualify.
A profit is just a product of accounting conventions. It does not necessarily flow into the pockets of business owners -- though, if it did in the case of oil companies, that would in many cases be you and me, since virtually every pension portfolio owns some oil stocks.
Unless a business wants to borrow money, however, profits are what it reinvests to expand. In the case of oil companies, this includes drilling new wells where they are permitted, at up to $100 million a pop, expanding refineries, since new ones are not allowed, upgrading pipelines and all the other stuff required to fill up your tank.
Suppose Obama's proposed 25 percent windfall profits tax actually came to pass. What are you going to do, Mr. Oil Company Executive? The shareholders want their dividends, employees want raises, wells need drilling, so where will you get the money? How about a price increase? If the government is going to raise your taxes, what else to do but squeeze more out of the consumer?
How about the environment? Do we really want to help people buy gas? Oil consumption is actually declining for the first time in -- oh -- ever. Maybe we should let well enough alone.
Mr. Obama's next ill-gotten idea is Ridiculous Stimulus Package II. The first one, promoted by the evil, inept, incompetent George Bush, wasn't enough, it didn't do the job. So, naturally, we need another one. Here's a thought: Instead of taking our money, running it through a bureaucracy and sending it back to us, just let us keep it in the first place. The name for that would be low taxes.
Speaking of taxes, Mr. Obama's archetypical populist soak-the-rich tax policy can, and doubtless will, come to pass by doing nothing -- by letting the Bush tax program (I refuse to call it a tax cut) expire. He also supports an increase in the capital gains tax, which will, as has been demonstrated consistently in the past, reduce actual tax receipts from capital gains and flatten the stock market.
This week, Obama actually came up with a half-good idea. He wants to require employees without a formal pension plan to open a forced-contribution IRA, with contributions partially matched by the government. This has the benefit of leaving ownership and control with the employee.
Then, just to prove that it is all about being elected, he proposed a change in Social Security that would levy FICA taxes on incomes above $250,000, while continuing to exempt those above the current cutoff of $102,000, leaving a "doughnut hole" of untaxed income between those two numbers. Why? Because there are a lot of voters in that income gap. Pandering of the first order.
Mr. Obama also endorses further regulation of credit card companies in a variety of ways, the net result of which would be to reduce borrowing costs. Well, OK; a lot of people borrow a lot of money. Many of them borrow too much money. But lenders are already highly regulated, and there is plenty of competition for your debt. Isn't there something to be said for personal responsibility, balancing your budget, managing your life? Apparently not for Mr. Obama. Not in an election year.
If Obama actually believes some of the things he is saying, and, if he were elected with the new, presumably very Democratic Congress, we would see something akin to FDR's first 100 days, when legislation flew out of Washington even faster than lobbyists' money now flies in.
You can expect fiscal irresponsibility that will make George Bush look like Ebeneezer Scrooge. If you think the dollar is weak now, if you think the federal deficit is large now, if you're unhappy with the stock market now, just wait.
Fred Wolferman lives in Southern Pines. Contact him by e-mail at firstname.lastname@example.org.
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