Tuesday, October 14, 2008

What Exactly IS Obama's Economic Plan

Obama claims to be interested in reducing the tax burden of 101 million middle and lower income families in America. He says that no one making less than $250K will see an increase in their tax burden. He wants to grow the economy from the bottom up. But what exactly are his economic plans?

First, he wants to raise individual tax rates on those making more than $250K to 39.6% (the same as the Clinton rate).

Second, he wants to reduce the tax burden on the middle class and send money in the form of a "rebate" to people who don't even owe any taxes.

Third, he wants to eliminate or sharply raise the cap on FICA (Social Security) taxes. The current cap is around $100K. This is my first point of contention with his plan. He wants to raise the income tax rate by 3.9% on those making over $250K. And he wants to raise the FICA tax (currently the employee and the employer each pay 6.7% of the income) on anyone making over $100K. So, if that is true, he actually DOES want to raise taxes on the middle class.

Anyone making currently $120K would see an increase in taxes (FICA) of $1340 per year. A person making $150K would see an increase in taxes of $3340. A person making $300K would see an increase in taxes of over $15K. And if that same person is also either self employed or happens to run a small business, they will also have the pay the increased EMPLOYER'S side of FICA.

So, Obama, do NOT tell us we will not pay anything more in taxes if we're making less than $250K. That is a big fat lie.

Next, he wants to take that money we pay in increased taxes and GIVE it to the poor. All he's doing here is re-defining government handouts, welfare, through nothing less than wealth re-distribution. He calls it "fairness" or "evening things out" or "sharing the wealth". But who is he to tell me or my boss that they HAVE to share their wealth? Afterall, isn't the business owner the one who puts his ass(ets) on the line by starting a business and working himself/herself to the bones trying to make it work? And Obama wants to FORCE that business owner to SHARE their success with the "less fortunate"....meaning the "less capable or willing to work themselves to the bones or put their entire life savings on the line to make it work"? Frankly, all this amounts to is giving a hungry man a fish instead of teaching him how to fish.

Next he wants me to pay for the 40 million people who do not have health insurance. Frankly, I already do. My rates are as high as they are because the government refuses to do what it should to help lower the COSTS of health care. Forget about trying to get everyone insured. How about lowering the costs of drugs and lower the caps on malpractice suits and eliminating the overabusing powers of the FDA regarding the sales and distributions of pharmaceuticals.

Do that first and then let's see what we can do about getting the rest of the people onto health care.

Then he wants us to actually spend even more money on a failed public school system. The fundamental problem with education is not that there is not enough money being spent on it, but that the money being spent on it is ill-spent. If education really IS important than emulate countries like Japan which has year-round school and encourages rapid advancement through high schools that are almost all magnet schools.

The hole in the Obama and Democratic economic plan is that they want to raise taxes and increase government involvement in economic stimulus. In a recessionary environment this is a literal blueprint for economic disaster.

Friday, October 3, 2008

Palin Victorious

Debates are not about presenting your ticket's proposals for health care or education or foreign affairs. They are good for only two things. First the candidates are looking for one-liners, talking points that can be replayed over and over and over again. They'd prefer they be GOOD one-liners FROM them. But they will accept a BAD one-liner from the opponent.

Second, debates are designed to make the candidate LOOK good to a LARGE audience. That's why Kennedy won in '60. He looked VERY good on TV and many Americans fell in love with him. Reagan didn't get elected because he knew more than anyone else about economics and foreign affairs. He got elected because he had great advisors and knew how to memorize and deliver a line. Clinton got elected for the same reason.

During the past eight years we forgot that because we had no memorable democratic candidate. Gore and Kerry were only good for one thing, being the target of jokes. Now, the Dems have a very appealing candidate. Someone who looks good on TV and knows how to deliver a line well. McCain looks stiff and stoic and has no idea how to deliver a line. That's why Obama benefitted from the last presidential debate. And that's why Palin won this debate hands down. She is MUCH more appealing on TV than ANY of the candidates...and she certainly knows how to deliver a line. She came away from tonight with the one-liners and clearly showed herself as an appealing figure to her followers. Whether that will translate into more votes for McCain is yet to be determined.

Typically, Vice Presidential candidates don't win or lose too many votes nationally. But the reason McCain chose Palin was to help him win Florida, Ohio, Wisconsin, Missouri, the conservative part of Pennsylvania, Virginia, Nevada and possibly Minnesota. I will be watching to see if there are any movements in those states over the next few days.

In the meantime, McCain needs to gear up for his next debate. By then the house should have passed the bailout bill and this economic crisis should be on track to recovery. If that shows up in an easing of credit and market gains between now and Tuesday, he needs to pounce on his DIRECT involvement in helping to solve the problem. He needs to also make sure that Americans know that a simple bill does not finish the matter but that it requires a president who is willing to roll up his sleeves longterm to make sure the bill does what it is supposed to do.

He also needs to hit Obama hard on how he plans on finding money for the spending he STILL insists on adding to the budgetary woes.

One thing I have proposed in a prior post that I wish McCain would adapt and adopt is my idea for fixing the problem with Social Security. Here it is again in bullet point form.

1. Raise the cap on FICA for employees ONLY. Do not burden business owners with a raise of the cap for the employer's portion of the tax. For self employed, raise ONLY the cap for one half of their FICA payments (the part that would ordinarily be the employee's portion of the tax). Frankly, I don't care whether the cap is $250K or no cap at all. Most high income earners have a vested interest (through stock or direct ownership) in a business. And since I am not proposing raising the cap for the employer portion, who are they to complain?

2. Eliminate FICA on the first $25k of wages for people making less than $50k annually (indexed for CPI). This would assist the low income people to keep more of their money. But let's not cause this to reduce their ultimate benefits. They still get credits as though they were making their normal payments.

3. Require that 1/2 of the savings for low income people be invested by them into their company's 401K or into a private retirement account. This money would be invested at their discretion. This would give them better retirement income when added to normal Social Security benefits. It would add investment capital into the markets. And would provide long term tax revenues when they ultimately withdraw and spend that money...years later.

4. The other half of their savings is theirs to use as they please. This immediately aids them in living a better life now and infuses money into the economy now.

This plan provides things for both Democrats and Republicans to love and hate. The raise in the cap puts a smile on the faces of Democrats but will anger the Republicans. But so long as there is still a cap and so long as the cap is not imposed upon the business owners also, the Republicans will accept it. The tax relief for the poor will make the Democrats happy, even if it is not enough relief. But the Republicans will get, in a watered down version, their desire for a self-directing retirement program. Even though the Republicans would rather have that for all contributors, that's not what this is for.

I am not proposing altering how Social Security benefits are invested. I am proposing a supplement to Social Security for low income people. And although Democrats will not like the requirement to have half the tax savings for the poor invested in retirement accounts, they will be happy that it will NOT reduce or replace Social Security for these people one iota.

And frankly, Democrats will have a difficult time explaining away the increased savings rates for low income Americans, the increased income for them and the rise in tax revenues from the money spent by low income people. Republicans will have a difficult time accepting the rise in the cap, but the only other alternatives are to keep things the way they are or eliminate the cap altogether (something that may ultimately be more fair). And honestly, how can they complain about it when the increased cap will not burden down business owners and corporations. In addition, to some degree, the Republicans get their hope, to a limited degree, for a self directed retirement alternative to Social Security. Even if it doesn't replace or reduce Social Security one iota.

Thursday, October 2, 2008

Conservative Domestic Policy

I don't know who reads Senator McCain's email. And I truly doubt anyone is going to take my suggestions seriously. And frankly, even if no one does, I'm still voting for the ticket. But I have thought through several ideas regarding this "Rescue" plan of Congress. And I think the whole deal stinks. I know Senator McCain voted for it only because he thought it best. And I trust his judgment.
However, this is what I would have suggested as the Plan, along with Domestic Policies:

1) Make the lenders restructure the bad loans for the customers. Have the back payments added to the principle and even delay first payment by three months. The lenders will do this in return for the feds buying up the truly bad loans...the ones where there is little chance of the borrowers ever repaying (foreclosure imminent). The delayed payments would be an economic stimulus. Those who are having financial troubles at home will have a fresh chance to catch up. Those not in trouble (and need no restructuring) will use the 3 months of payments as any consumer would...increasing tax revenues and helping the government pay for those truly bad loans they had to buy from the lenders. This keeps the government, for the most part, out of the lending business (something Sen. McCain spoke about earlier).

2) Force all congressmen/women to cut their personal budgets by 25%. No increase, just straight cuts, until such time as the budget is balanced. Make them take commercial flights sometimes. I bet airline safety legislation will pass very quickly. And having them use commercial flights will only help the failing airlines.

3) Make congress and most government agencies begin a 10 year process of replacing most, if not all, government owned vehicles with hybrid vehicles. This shows the government is serious about alternatives fuels and the expenditures will only aid the young industry.

4) Make ALL new government buildings GREEN. Be the leaders you are supposed to be and lead us into a GREEN era. And retrofit existing buildings, as much as possible, to be GREEN (recycle water, add geothermal, wind and solar power to them).

5) Demand Congress pass legislation requiring the entire federal government use a zero base budget. The money saved from this alone could fund alternative fuel research, retooling the auto industry, and revive hopes of a balanced budget again.

6) Change the structure of FICA. Have the cap set higher (i.e. - $250K or more), but eliminate the employee contribution on the first $25K of those earning less than $50K. I am definitely not privy the economic ramifications of this. But if the numbers work out, it would essentially give a tax decrease to low income families and raise revenue from higher earners (which is a legitimate raise). You could tack on the requirement that the reduction in FICA tax must go 1/2 into their company 401K (or personal IRA) and half can be received in the form of a higher paycheck. This increases the potential that low income earners won't be so reliant on SS at retirement and adds money to the economy which will only raise more revenue for the federal government. Having that money put into 401Ks and IRAs will also raise investment capital which will do Wall St. some good. It will also have the longterm effect of increasing tax revenues at the retirement of these people because the addition of a more fully funded retirement plan will give more discretionary funds to spend in the economy at retirement.

The Dems may think this is sneaky way of privatizing SS but the earners would still earn the same credits for SS benefits as they would if that money went into the system. They are just being given the money as a tax break and being required to put at least half into a retirement account. The Dems will also get their wish of higher taxes for the "rich" in the form of higher FICA taxes.

For the self-employed, who pay the entire 15.2% FICA tax, the same plan applies only to half the FICA payments.

7) Education - Increase funding of Charter Schools. Dems won't go for vouchers. But Charter Schools work great...especially when they are well-funded. Some provide oversite for independent study programs, some provide block classes a few days a week and still others are five-day a week classes. Fund them all. They all have their benefits. Not the least of which is heavy parent involvement. Those who wish to use more religious-based curriculum are free to do so, as long as the school does not pay for the books. It costs the state less to finance these schools, for the most part, and test scores show these students invariably do better than they would have in regular schools.

As far as secondary education, I think getting major corporations involved in education at the college level is vital. These are the companies wanting the best and brightest graduates. Give them incentive to work more closely with the universities. Heck, you could do this down the high school level as well.

In addition, I like Senator Obama's idea of making students who need government help for college join the military or Peace Corp or some other noble cause that the government would be wanting to fund anyway.

I also think Newt Gingrich had a great idea as well. Motivate our best and brightest high school students. Give them a chance to graduate from high school early. If they graduate in 3 years then the government pays for their senior year of college. If they graduate high school in 2 years then the government pays for their junior and senior years. I actually believe that many of the most troublesome high school students would jump on this idea and show themselves much smarter than they previously let on. I think juvenile delinquincey would decline, and our youth would be better served.