Obama Doesn't Get The Economy

In last night’s State of the Union address, President Obama asked the question “But asking a billionaire to pay at least as much as his secretary in taxes?” Wouldn’t a better idea be to lower the secretary’s taxes to pay the same as the billionaire? (Full transcript here)

This is especially true when a few sentences later he also mentions how “We don’t begrudge financial success in this country. We admire it.” This raises the question, how is raising taxes on the successful not begrudging them of their financial success? When the President refers to raising the taxes on the top 2% of earners he is talking of raising the capital gains tax. While good in theory, he has not thought of the consequences of this action.

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Capital gains are made from investments in companies. These investments allow companies to expand, modernize or develop new technologies, which allow the company to compete in world markets. Raising the tax on these would cause the investors to no longer invest their money in these companies, which in the long run would hurt these businesses and also their employees. If there is no money invested, the company won’t expand, it won’t be able to invest in new technology and it won’t have funds available to put into research and development. The President only needs to look back to the 1930’s and the Great Depression, to see the results when Franklin Roosevelt did exactly the same thing. Another example would be for him to study the rise and fall of communism in the former Soviet Union.

On the other side of the coin, if the President were to lower the taxes on the secretary, she would then be able to purchase more consumer goods, perhaps buy a new home or take a vacation. All these actions would stimulate the economy, increasing employment, increasing wages and causing an upward spiral for everyone. With increased employment, many of those who are now living off the backs of others, could go back to work, decreasing the tax burden.

It is clear President Obama is in full campaign mode and that his message will be one of “Us against them”. The “Evil Rich” versus the “Poor Working Class”, quite similar to a document which was published over a century ago. That document was “The Communist Manifesto.”