President Obama’s Mixed Up Priorities

by T Akery December 11th, 2012 | Presidential News
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Lately, President Obama has been making more campaign speeches, this time about raising taxes on the rich. But in doing this, he is once again showing an inability to recognize the real problems. Instead, he is stuck on one issue in this immovable object type of way. While this political tactic would work very well with the hardliners of the Middle East, it doesn’t work so well with Congress.

Raising taxes on those making $250,000 or more is really an extremely short term delay tactic for the national debt. That is, if all of that extra tax money is used to pay down the national debt. That really is a big if because it won’t happen. No legislation proposed by either party guarantees that all of this extra revenue will go toward the national debt. It is a pipe dream to think that Congress would utilize this money this way.

But the real problem here is the amount. No one asks how much the government would raise from this proposal. All people hear is that the rich are going to pay more. But when it comes to actually collecting all this extra revenue, the government may have dramatically overestimated how much it will collect with this tax raise alone. You see, there is a weird law regarding tax revenue. The British best signify the disappointment of the amount that their big earners are paying. If France moves forward with its tax proposal, they will experience the same type of ultimate disappointment. It is called the law of “diminishing returns.”

Simply put, it means the government would pull in less revenue than expected for a variety of reasons. Obviously for the government, any revenue increase is a good thing —  or at least President Obama would think it a victory;  it would do very little to offset the national debt. In fact, it would only probably be enough to fund the government for a couple of days. It really isn’t that impressive when you seriously think about it and the implications.

Of course, the argument is always that it worked during President Clinton’s administration. But that statement is completely ignoring the fundamental differences in the overall economic conditions under President Obama. President Clinton had the luxury of the Internet bubble. The elderly population receiving aid was much smaller than the number of people paying in and the number of people on food stamps was significantly smaller. In other words, Clinton benefited from a very productive economy.

President Obama really doesn’t have that luxury. There is only one bubble left. That is the money bubble that the Fed is printing. All the other bubbles have burst. Instead of growing, the entire world has pretty much been contracting. Even countries that have managed to stop declining aren’t growing very fast. The world economy is still on very shaky ground.

Raising the tax rate on the top 2% does very little but make President Obama look good politically. But clearly his priorities are screwed up royally. In as little as ten years, the debt payments will be the biggest chunk of the governmental budget. All of those social programs will see huge benefit cuts regardless of how much they are needed. There won’t be enough to go around at the current rate of growth for these programs. That’s just a mathematical fact. Congress really can’t change that fact.

What’s really sad about this whole scenario is that President Obama is ignoring the biggest problem, spending. A tiny raise in revenue will not curb the continuous spending spree that the country is on. Until he faces, talks about and proposes actual spending cuts, all he is doing is playing games with the economy and the American people.

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