Economics Professor says Obama’s plan will further hurt the US, thoughts?
Obamanomics Is a Recipe for Recession By MICHAEL J. BOSKIN WSJ October 16, 2008 What if I told you that a prominent global political figure i...
Obamanomics Is a Recipe for Recession
By MICHAEL J. BOSKIN WSJ
October 16, 2008
What if I told you that a prominent global political figure in recent months has proposed: abrogating key features of his government’s contracts with energy companies; unilaterally renegotiating his country’s international economic treaties; dramatically raising marginal tax rates on the "rich" to levels not seen in his country in three decades (which would make them among the highest in the world); and changing his country’s social insurance system into explicit welfare by severing the link between taxes and benefits?
AP
The first name that came to mind would probably not be Barack Obama, possibly our nation’s next president. Yet despite his obvious general intelligence, and uplifting and motivational eloquence, Sen. Obama reveals this startling economic illiteracy in his policy proposals and economic pronouncements. From the property rights and rule of (contract) law foundations of a successful market economy to the specifics of tax, spending, energy, regulatory and trade policy, if the proposals espoused by candidate Obama ever became law, the American economy would suffer a serious setback.
To be sure, Mr. Obama has been clouding these positions as he heads into the general election and, once elected, presidents sometimes see the world differently than when they are running. Some cite Bill Clinton’s move to the economic policy center following his Hillary health-care and 1994 Congressional election debacles as a possible Obama model. But candidate Obama starts much further left on spending, taxes, trade and regulation than candidate Clinton. A move as large as Mr. Clinton’s toward the center would still leave Mr. Obama on the economic left.
Also, by 1995 the country had a Republican Congress to limit President Clinton’s big government agenda, whereas most political pundits predict strengthened Democratic majorities in both Houses in 2009. Because newly elected presidents usually try to implement the policies they campaigned on, Mr. Obama’s proposals are worth exploring in some depth. I’ll discuss taxes and trade, although the story on his other proposals is similar.
First, taxes. The table nearby demonstrates what could happen to marginal tax rates in an Obama administration. Mr. Obama would raise the top marginal rates on earnings, dividends and capital gains passed in 2001 and 2003, and phase out itemized deductions for high income taxpayers. He would uncap Social Security taxes, which currently are levied on the first 2,000 of earnings. The result is a remarkable reduction in work incentives for our most economically productive citizens.
The top 35% marginal income tax rate rises to 39.6%; adding the state income tax, the Medicare tax, the effect of the deduction phase-out and Mr. Obama’s new Social Security tax (of up to 12.4%) increases the total combined marginal tax rate on additional labor earnings (or small business income) from 44.6% to a whopping 62.8%. People respond to what they get to keep after tax, which the Obama plan reduces from 55.4 cents on the dollar to 37.2 cents — a reduction of one-third in the after-tax wage!
Despite the rhetoric, that’s not just on "rich" individuals. It’s also on a lot of small businesses and two-earner middle-aged middle-class couples in their peak earnings years in high cost-of-living areas. (His large increase in energy taxes, not documented here, would disproportionately harm low-income Americans. And, while he says he will not raise taxes on the middle class, he’ll need many more tax hikes to pay for his big increase in spending.)
On dividends the story is about as bad, with rates rising from 50.4% to 65.6%, and after-tax returns falling over 30%. Even a small response of work and investment to these lower returns means such tax rates, sooner or later, would seriously damage the economy.
On economic policy, the president proposes and Congress disposes, so presidents often wind up getting the favorite policy of powerful senators or congressmen. Thus, while Mr. Obama also proposes an alternative minimum tax (AMT) patch, he could instead wind up with the permanent abolition plan for the AMT proposed by the Ways and Means Committee Chairman Charlie Rangel (D., N.Y.) — a 4.6% additional hike in the marginal rate with no deductibility of state income taxes. Marginal tax rates would then approach 70%, levels not seen since the 1970s and among the highest in the world. The after-tax return to work — the take-home wage for more time or effort — would be cut by more than 40%.
Now trade. In the primaries, Sen. Obama was famously protectionist, claiming he would rip up and renegotiate the North American Free Trade Agreement (Nafta). Since its passage (for which former President Bill Clinton ran a brave anchor leg, given opposition to trade liberalization in his party), Nafta has risen to almost mythological proportions as a metaphor for
We really do not need a professional to tell us that. It’s pretty obvious that Obama’s plan would hurt the economy more than help it. People that don’t see it that way aren’t seeing clearly.
this is no place for educated opinions.
Things are bad, but not as bad as they seem.
Remember the Clinton years?
Clinton didn’t have to raise taxes to balance the budget, because of job growth.
The economy grew so well, it got rid of deficit spending and started paying down the debt!
We just need to do that again, but this time with jobs that won’t have a ‘bubble burst’[like the dotcoms did].
For starters, we need to maintain our infrastructure, and THAT will have to be an ongoing process from now on.
[This has been ignored on a national basis far too long]
We need to develop green technology, and green products and energy,a wide open field with incredible opportunity.
Also, paying teachers a decent wage will help stimulate the economy too, when they spend more and pay more taxes [just from the higher income]
This is just a couple of measures that will help, not the whole picture obviously, I have to save SOMETHING for when I run for president.
Obama is a true leader.
He has already said hundreds of times in his stump speech that "we need to turn off the TVs" when discussing education & child raising.
when elected, he will tell us we have to tighten our belts, not "go shopping’ like his underqualified predicessor Bush did.
I am a white 51 year old veteran on disibility & an Obama Delegate, but I am not asking you to take my word for it.
Go to his website, see how he wants to make the world a better place.
I have been waiting 40 years for a candidate this exciting & origional.
I have been waiting 30 years for someone as concerned about the big picture as I’ve been [maintaining infrastructure, decent teacher pay & universal healthcare]
I have been waiting 20 years to believe that the younger people will get off their collective butts & try to make things better.
I have been waiting 10 years [ok 8] to put COMPETENCE back in the White House!
This truly is the most important election of your life.
VOTE FOR OBAMA/BIDEN ON NOVEMBER 4TH!
OBAMA
OBIDEN
OEIGHT
The man is a professor and knows what he’s talking about.
If anything it proves being a professor doesn’t mean very much.
If all the economists were laid end to end, they would not reach a conclusion.
Both of their plans will screw up the economy.
Nobel prize winner (2008) says that Obama plan is best for country. McCains plan will create more poor, and middle class will cease to exist.
That’s funny. Economists seem to overwhelmingly support Obama this election.
He is one out of many. Most of them agree that Obama’s plan makes more sense. Including the guy that just won the Nobel Prize for Economics and Warren Buffett.
Boskin is a conservative writing in a conservative paper.
65 Nobel Laureates have endorsed Obama.
Actually, a poll by the Economist magazine found that the majority of economists support an Obama presidency.
Mind quoting a less obviously biased source than the WSJ?
WSJ is conservative rag that has been wrong for the last 8 years. Marginal tax rates will not be at 70% under the obama plan, and even if they were, such a plan will never get through congress. WSJ is playing to it’s audience.
One of the truths in this world is that if you put 5 economists in a room and ask them to evaluate the status and future of the economy, you will get 5 different opinions. Boskin’s is entitled to his. Others disagree.
It is an easy conclusin, Obama will destroy this economy and the American people are willing to let them. They really do not get it, they think this is a game and things will not get that bad. I will tell you what I am doing. I am selling as much of my comics and items of value. I am going to stockpile gold and cash. I did all I could to help McCain but it looks like Obama is going to win. Protect your family stockpile cash we are going to need it.
That was way more space than needed.
Obama says Obama’s plan will hurt the economy.
What else do you need to know?
I KNOW THAT OBAMA’S PLAN WILL HURT AMERICA!!!! THE QUESTION IS WHY CAN’T AMERICA SEE THROUGH ALL OF HIS LIES???? THERE IS NO WAY POSSIBLE FOR HIM TO CUT TAXES FOR 95% OF AMERICA PERIOD!!! HOW ON EARTH DO YOU THINK HE WILL GET THE $$$ TO PAY FOR ALL OF THE NEW PROGRAMS HE PLANS TO IMPLEMENT??? COME ON AMERICA, I THOUGHT WE WERE SMARTER THAN THAT!!
Hey Moron,
Nobody wants to read that crap…
Here’s a whole website by economists for OBAMA…
http://econ4obama.blogspot.com/
For every lunatic so-called economist for McCain you can find I can list 1000 for Obama.
Do some reasearch on Paul Krugman – A NOBEL PRIZE WINNING ECONOMIST. See what he thinks about McCain.
Obama’s plan is the biggest welfare give-away in history!
here is a sneak preview into a government controlled nation..
http://www.youtube.com/watch?v=HCpUxoseopY
It would be silly to consider that Obama himself came up with the economic proposals. He has his team of experts. Now this guy probably wants on the ticket so he shows ideas. Good for him! I am no expert so I cannot really comment his article but the more ideas, the better. Everybody should try to contribute to find a way out of this mess!
well Alan Greenspan said the same thing about McCains!
but i’m sure those back water base republicans who beleive everything they are told probably don’t even know or care who Greenspan is!
JEEPERS..long reading..but..jeepers
do we need more taxes?
cut their paycheck..pension funding, health cares, free money for travel..food, shelter, ect..and do waht we do..itemized !
and trim the fat in the war spending as well. just glad war over therre..not here. that is a wise chess game move by having a frontline right at IRAN border.
beyond that..obama..you’re a nice fellow
why don’t you become "BORN AGAIN" switch party or FIX YOUR PARTY..to become
one antion under GOD..philosophy
and we’ll vote you in OFTEN.
i like the democratic ideal
but..we’re spending to much already.
all talk and NO GO.
he got no proof..of his committement.
voting like he does.
Public economic policy is more or less empty words for the US. We cannot meet our Medicare and Social Security obligations without bankrupting the country and sending the entire global economy into a tailspin.
That being said, Obama’s economic policies are bad for the country, and bad for the world. I’m still voting for him because I can’t see Palin as prez if mccain bows out early. Hopefully Congress gets their collective heads out of their a#%es and rights this sinking ship before we all go down.
What if I told you the 2008 winner of the Nobel Prize in Economics predicted the bursting of the housing market bubble. He predicted the recession. He predicted the number of jobs that Bush’s tax cuts would create would be drastically lower than the number the administration wanted us to believe. So far, this man has been dead-on.
He also supports Barack Obama.
I guess it just depends on which economist you ask.
We can sure see where all these brilliant economics professors
has gotten us. For the good they are they should be cleaning
out the bull pin. That should keep them busy for a while.
Okay, that’s one economist supporting McCain’s economic policies.
Here’s a fun game. Google "economists supporting McCaine." Then, Google "economists supporting Obama." What did you learn?