Tax. Spend. Dictate.

Tax. Spend. Dictate. These three words completely summarize the economic policies of Barrack Obama.

On taxation, Obama believes that the 'rich' pay too little in taxes so his plan is to raise taxes on those earning more than $250,000. Why $250,000? I assume because he feels that the number of people earning more than that are in sufficiently small numbers that they won't affect his polling numbers. Obama also wants to increase taxes on dividends and capital gains, again playing to a myth that only the 'rich' will be hit by these taxes. Obama doesn't even care if these higher taxes will actually raise revenue, he wants to do it simply to fit his notion of 'fairness'. Of course he doesn't stop there. Obama also wants to change the way Social Security gets funded so that people earning over $250,000 will have to pay additional taxes over and above the wage cap. This completely eliminates the charade that Social Security is anything but a welfare program. Finally, as part of Obama's energy policy, he wants to tax the 'windfall' profits of oil companies. Of course, what defines 'windfall'? In Obama's world it must simply be a large dollar number earned by an unpopular industry, because on a profit as a percentage of sales, the oil industry is positively middle of the road. Again, in a zeal to appeal to populist instincts, Obama would prefer to do something harmful rather than being courageous and doing something sensible.

Other than increasing 'fairness', what does Obama plan to do with all this extra cash he hopes to raise? Why spend it, of course. Every day there is an article in the newspaper about how Obama is going to give $x billion dollars to support this, that or the other thing. If there is a problem, Obama's solution is to throw money at it. It doesn't matter if this is a good solution, it doesn't matter if the origin of the problem is government meddling, if you throw money at it, the problem will go away, right? It's worked so well in the past. Obama wants to be the national Santa Claus, handing out goodies paid for by people who work for a living while he takes the credit. None of this, of course, is the President's job, but that doesn't stop him from convincing an ignorant electorate that he should be elected because of his generosity.

Tax and spend are two big impediments to true liberty. Taxation takes money by force. Your labor isn't all yours, part of it is owned by the government. Government spending is taking decisions away from the people and replacing them with decisions made by the political class (which includes corporations and other influencial people) However, Obama isn't content with attacking your liberty through tax and spend, he also want to dictate how you live your lives. For example, as part of his energy policy, he wants to ban conventional light bulbs, forcing everyone to buy CFL's. I have no problem with CFL's, they have there place, but I certainly don't want to replace every light in my house with a high mercury device which is expensive, ugly and has a host of other problems. This doesn't matter to Obama, he and his technocrat advisors know what is best for you and me and therefore he will use his power (not really granted by the Constitution) to force us to live the way he wants us to live. Health care will be a similar thing. Obama wants to implement a medical insurance scheme which will continually force us to obey new government restrictions. I predict a host of new laws to promote a 'healthier' person so that we don't cost the government so much money in health care. Again, dictate it and it will be so!

Obama is campaigning on 'Change'. I don't see this as change, but more of an acceleration. We've had continual growth of government and continual reduction in liberties. Under Obama I would expect this trend to continue. Make no mistake, John McCain isn't much better, but at least he would be a Republican President presiding over a Democrat controlled Congress. Some gridlock is bound to happen. With Obama as President and a Democrat controlled Congress there is virtually no limit to the damage they could do to this country. Just look at what happened when Bush presided over a Republican Congress.

The Fallacy of 'Buy American'

There has been an ongoing debate in our local newspaper on the topic of buying foreign cars vs. buying American cars. In addition, we've had letters stating that we shouldn't buy anything from a foreign country. The idea is that buying American will save American jobs. The reality is that this action would actually cost American jobs.

When people buy foreign products, it's entirely possible that there will be Americans who lose their job because their company can't compete with the foreign company. When American car companies are suffering because people aren't buying their products, we can see the result, some works lose their jobs. However, this isn't the entire picture.

By buying products with the most value, we conserve our wealth. If we simply purchased products because they were supposedly made in American, we might be spending more money that we would have to. By spending more money on one product, we have less money to spend on others. This may save the jobs of some American auto workers, for example, but it may cost jobs of workers who make other products or provide other services that we would have been able to spend our money on if we weren't over paying. In addition, if we only buy American products, American workers who work in the shipping industry would lose jobs because there would be no products to import. If we aren't importing, we can't export. Nobody would have any dollars with which to purchase our products. Again workers involved in import/export would lose their jobs. Why are auto workers jobs more important?

We can even take this scenario further. Surely if it is wrong to import products from foreign countries, it also wrong to import products from other states. If it's wrong to import from other states it must also be wrong to import from other counties. Taken to it's logical conclusion, no one should by anything from anybody. We should all just make our own stuff. Guess what? We've been there, done that. I personally wouldn't want to go back to a world where everyone makes their own clothes, grows their own food, builds their own houses, etc. Trade is what allowed our standard of living to dramatically improve. Trade is a personal thing which isn't and shoudn't be constrained by artificial political boundaries.

No Surprise

I was reading this weekend that Hillary Clinton has chosen not to listen to economists regarding her gas tax holiday. Big surprise there since it's obvious from her other economic positions that she chooses to ignore sound economics on a regular basis. She has an amazing ego which convinces her that whatever she wants she will get, regardless of reality. More likely, she feels that if she appears to be attacking a problem she will get credit, and when it doesn't work she'll have some other scapegoat for why it didn't happen.

On the gas tax proposal, she is completely out of touch with reality. She claims that her proposal will help those people who are struggling with high gas prices, when in fact the opposite will occur. Gas prices, like all prices, are driven by supply and demand. When demand is high and supply is low, prices will rise. Cutting the gas tax will, for a short period of time, reduce prices. However, lower prices will release additional demand and prices will soon move up again. In addition, her idea to implement a windfall profits tax on oil companies will actually reduce supply. Why would an oil company spend valuable reasearch and development dollars trying to find and produce more oil, only to have profits from those risky ventures taken by government. The net effect will be to reduce supply, thereby raising prices even more. It's not like this is rocket science. The same thing happened the last time we had a windfall profits tax on oil.

Hillary has some other proposals which are equally bad from an economic point of view. She wants to raise taxes on capital gains and dividends. Of course this will just cause people to hold on to profitable investments longer than they would like, rather than being able to take their gains and move into other investments. This has the effect of hindering mobility of capital. Capital is what is needed to start and keep new businesses running. It is this business creation which creates the jobs which help everyone. Ms. Clinton's short sited fixation on 'fairness' ignores the greater reality that she is really hurting the very people she claims to want to help. We only need to look at the infamous 'yacht tax' to see what happens when you try to punish the rich through excessive taxation.

The policies that Hillary Clinton proposes are almost universally bad from an economic standpoint. However, there are places in the world where such policies may be welcome. I understand that Cuba will likely be looking for a new president in the near future. Perhaps Ms. Clinton should take up residence in Cuba and run for president of that country. Certainly her policies are more consistent with Cuba's socialist paradise than the capitalist United States.