Obama's Increased Capital Gains Tax on the Rich Will Hurt the Middle Class

In the State of the Union address, President Obama argued that the rich should pay higher taxes on their wealth so the middle class can be strengthened by increased tax breaks.  Of course, this is the classic populist, class-warfare, and wealth redistribution argument that Democrats have used forever.

It is based on the false promise that raising taxes on the rich will somehow reduce income inequality in America.  Quite frankly, this is an admission by the President that the middle class is hurting under his watch. Yet, despite all of the tax increases on the rich over the years, we have the greatest gap in income distribution in this country's history.

In the President's latest tax-the-rich scheme, he proposes raising the capital gains tax to 28% for those couples making $500,000 or more; arguing that this is the same tax rate we had under Ronald Reagan.  In doing so, he knows that the Republican-controlled Congress won't buy into it because they believe, like I do, that raising taxes on capital gains stifles innovation and the growth of businesses.  Also, the Reagan argument is a canard because 28% was the top tax rate for everything in Reagan's days of tax reform. Today, the top rate is 39.6%.  Also, that 28% is in addition to a 3.8% surcharge for ObamaCare that didn't exist when capital gains under Reagan were at 28%.  But, forget all those "lies" about taxes under Reagan.  In the mind of any Democrat like Obama, all they can see are a bunch of rich people making even more money by investing in stocks.  That, of course, is a very naive view of what happens when wealthy people invest in the market.

When you or I buy 100 shares of a stock, we will do very little to effect its price.  But, when a rich investor buys 5,000 or 10,000 or even more shares of a stock that you own, it's a big thing and, the  price will jump on a trade like that.  Further, it sends a signal throughout the investment community that your stock has some big investor(s) interested in it.  This, in turn, attracts more buyers and the price will climb on increasing buy-order volumes.  Simply, big investors help raise small investors up as well. So, every day, the 50% of the middle class that own stocks are being helped by wealthy investors.

So, why is a new 28% tax on capital gains so bad?  It means that big investors will have 28% less money available to reinvest and, thus, pull more small investors -- mostly in the middle class -- along with them.  Since taking office, Obama has already raised the top capital gains rate from 15% to 23.8% plus a 3.8% ObamaCare tax on investment.  Now, he wants 28% plus the 3.8%.   

Every time the Democrats attempt to tax the rich, they end up hurting the little guy in some fashion.  In 1990, the Democrats thought they had the perfect tax-the-rich scheme by creating a luxury tax on expensive cars, boats, jewelry, and furs. It backfired when consumers stopped buying as many items in these categories.  As a result, thousand of workers in those related industries lost their jobs.  Some businesses went belly up.  Ultimately, in just two years, the same Democrats who passed the luxury tax had to repeal it in order stop the bleeding of jobs and businesses.

Now, in another attempt to tax the rich and help the middle class, Obama may wind up hurting the very people he intends to help.

References:

Obama’s proposal to raise the capital gains tax drives sharp wedge between parties: http://www.washingtonpost.com/business/economy/obamas-proposal-to-raise-the-capital-gains-tax-drives-sharp-wedge-between-parties/2015/01/20/85eafb64-a0c1-11e4-903f-9f2faf7cd9fe_story.html

Only half of all middle class Americans invested in stocks: Down from 66%: http://money.cnn.com/2013/05/09/investing/american-stock-ownership/

IRS Announces 2014 Tax Brackets, Standard Deduction: http://www.forbes.com/sites/kellyphillipserb/2013/10/31/irs-announces-2014-tax-brackets-standard-deduction-amounts-and-more/

Paying Obamacare's 3.8% Investment Tax?:  http://www.forbes.com/sites/robertwood/2014/04/10/paying-obamacares-3-8-investment-tax-if-you-like-your-investments-keep-your-investments/

Special Report: 25 Years After [Reagan] Tax Reform: http://www.forbes.com/sites/janetnovack/2011/10/21/special-report-25-years-after-tax-reform-what-comes-next/

The Democrats Still Haven't Learned From Their 1990 Tax-The-Rich Fiasco: http://cuttingthroughthefog.blogspot.com/2012/07/the-democrats-still-havent-learned-from.html

The Obama tax proposals: Tailored cuts and hikes: http://www.usatoday.com/story/money/2015/01/20/obama-tax-proposals/22064109/

Why Democrats Don't Deserve the Black Vote

Recently, The Drudge Report posted the following video made by three activists who were railing against Democrat policies and how they always want the Black vote but do nothing to benefit African American communities:



I, for one, have always been perplexed as to why Democrats think they deserve the Black vote.

It was a Republican President, Abraham Lincoln, who lead a Civil War to free Blacks from slavery.  Following the Civil War, so-called Radical Republicans fought for things like voting rights for Blacks in the Reconstruction era.  Then, in 1964, it was white Southern Democrats such as Robert Byrd and Al Gore Sr. who filibustered trying to block civil rights legislation.  Republicans voted for civil rights by 80% in both Houses of Congress. Democrats only voted to approve 61% in the House and 66% in the Senate.

Now, in the above video, these three Black activists appear to be complaining about just one thing: Jobs.

So, to that I need only present one chart that appeared on the CNN Money site in 2011:

 

Thanks to the policies of Democrat President, Jimmy Carter, Black unemployment rose to over 20% in the early 1980's; and the disparity between Black and White unemployment was high.  Then, thanks to the policies of a Republican President by the name of Ronald Reagan, Blacks, as well as all Americans, enjoyed one of the longest stretches of lower unemployment since World War II.  To be fair, the policies of Bill Clinton also benefited Blacks in the 1990's, though much of that success was done by building on the policies of Reagan.

Today, under Obama, Blacks are again hurting; just as the video above points out.  They, as of this writing, have an unemployment rate of 11.4% as compared to 5.3% for Whites, and the disparity between Black and White unemployment has returned to the days of Jimmy Carter where Black unemployment was more than twice as high as it is for Whites.

So, then, why should any Black think that only Democrats will benefit them in terms of jobs and a better life?

References:

Black unemployment: Highest in 27 years: http://money.cnn.com/2011/09/02/news/economy/black_unemployment_rate/

Civil Rights Act of 1964: http://en.wikipedia.org/wiki/Civil_Rights_Act_of_1964

Radical Republican: http://en.wikipedia.org/wiki/Radical_Republican

Reconstruction Era: http://en.wikipedia.org/wiki/Reconstruction_Era

Dispelling the Myth That George W. Bush Only Benefited The Rich

We've heard it all before.  According to Obama and the Democrats, the George W. Bush tax cuts only benefited  the rich.  Thus, apparently, the rich got richer and the poor got poorer during the Bush years.

However, thanks to a post by Jim Lindgren, in a Washington Post blog, we get this very enlightening chart:

As the chart shows, of the last four out-of-office Presidents, the incomes of the lowest 20% of our population under George W. Bush increased the highest at 18.4%.  At the same time, the top 20%, saw declines of  6% in their incomes.  Under Clinton, the poor only saw income increases of 13.3%; but, the richest 1% saw their income rise by a whopping 84.1%.  Reagan was the biggest benefactor of the rich with a 90.9% increase in their incomes in his 8 years.

That, then, brings us to Obama.  Under his stewardship we have a record number of people in poverty: 46.5 million and a 49-year high; as a percent of population. Further, Obama has had to admit that, since being in office, 95% of all the income gains have gone to the top 1%.

If this was a fairy tale, and Obama had a magic mirror, his "fairest of all" question would definitely result in George W's face reflecting back at him.   


References:

Jim Lindgren:  If we want more income equality, should we return to the economy of George W. Bush?: http://www.washingtonpost.com/news/volokh-conspiracy/wp/2014/01/28/if-we-want-more-income-equality-should-we-return-to-the-economy-of-george-w-bush/

That’s rich: Poverty level under Obama breaks 50-year record: http://www.washingtontimes.com/news/2014/jan/7/obamas-rhetoric-on-fighting-poverty-doesnt-match-h/?page=all


Obama admits 95% of income gains gone to top 1%: http://money.cnn.com/2013/09/15/news/economy/income-inequality-obama/

Team Obama: We Are Definitely Better Off Than 4 Years Ago

Over the last weekend, representatives of the Obama campaign were asked the classic Ronald Reagan rhetorical question: "Ask yourself if are you better off than you were four years ago?"  All, except for one, danced around the answer by declaring how bad things were when Obama took office; offering this as the only proof that Americans are truly better off today.  Now, the one who didn't do the dance, Democratic Gov. Martin O’Malley of Maryland, answered the Reagan-esque question by saying: "No, but that's not the question of this election."

I think most Americans would probably agree with the first part of O'Malley's answer because I believe they  feel that things have only gotten worse over the last four years.  Lets not forget the recession actually ended 5 months after Obama took office; with a noticeable rebound in economic activity.  Ever since then, economic growth in this country has only gotten weaker with debt going through the roof.   The average family income has shrunk by more than $4000; and, at the same time, prices for food, energy, gasoline, and clothing are significantly higher with gasoline prices more than doubling.  Home prices have hit rock bottom. People are still being foreclosed on. Many couldn't sell there homes if they wanted to because they are so upside down on their mortgages.  Home sales, despite record low interest rates, are at half the rate of a normal economy. There are a million more unemployed today than when Obama took office. Nearly half of all college graduates can't find work. Then, too, more than 8 million people are being forced to work part-time for lack of any real jobs.  On top of that, more than 12 million workers have just given up looking or are in jobs that are below their experience levels.  Put that all together and it is very hard to say America is better off under Obama's stewardship.

As far as O'Malley's "but that's not the question of this election", I think this is another attempt to sidestep the reality that Americans aren't better off.  Further, in poll after poll, jobs, the economy, home values, and food prices are things that are the biggest concerns of voters.  O'Malley and others in the Obama camp are just whistling past the graveyard if they keep trying ignore the truth contained in the answer to that famous Reagen question.

Reagan's Words Of 32 Years Ago Are As True Today

            (to save some time you can start the video at 3:24 point)



Note: Right now there is a lot of talk about a "mystery" speaker at this year's DNC Convention.  Personally, I think they would be smart to replay this very video; or, at least parts of it.

There Are Liars. Damn Liars. And, Obama's Stephanie Cutter.

Stephanie Cutter is Obama's Deputy Campaign Manager.  She's the one who has introduced so many lies to the campaign, that its almost hard to keep track.  She's the one who claimed that she knew nothing about the ad where a man said his wife died of cancer because of Romney.  Even though, just two months earlier, the news media was all ears, when she had that same man on conference call while he told the very same story.  Then, too, she tried to imply that Romney was a felon for filing improper SEC forms when stepped down from Bain.

Now, the latest lie from the one who seems to think that Obama's reelection is just one more lie away, is her claim that Obama's recovery is better than the much heralded Reagan recovery because Obama has created 4.5 million jobs in the last 27 months.

The fact is that in the first 27 months of the Reagan recovery, more than 9.8 million jobs were created; 1.1 million in a single month (September 1983).   In Reagan's first term, the total civilian and government workforce grew from 146.6 million in 1981 to 153.4 million in 1985.  That's a growth of nearly 5% in 4 years.  For Obama, the workforce has actually shrunk; moving from 201.5 workers in January 2009 to a projected 200.7 million by year's end.  So, somehow, the claim that Obama created 4.3 million jobs is a little hard to swallow when the workforce, itself, has fallen.  As I have said before, if the President actually did create 4.3 million jobs, more than double that amount of jobs had to be destroyed for the workforce to have remain nearly flat over 4 years.

Lastly, when Reagan took office, the unemployment rate was 13.8%.  By the end of Reagan's first term, unemployment stood at 7%.  Obama, on the other hand, was handed an unemployment rate of 7.6%.  Within months, it zoomed to 10.2% and the new CBO estimates expected it to be closer to 9% by the year's end.  On top of that, Obama holds the modern day record of having 42 straight months of unemployment above 8%.

The Cutter Video: http://www.realclearpolitics.com/video/2012/08/22/cutter_obama_has_created_more_jobs_than_the_reagan_recovery.html

Milton Friedman's Words Ring As True Today

If he had lived, economist Milton Friedman would have been 100 years old today.  To me, personally, Friedman was a mentor.  He, as an adviser, was what helped make Ronald Reagan so economically successful. And, to those who call themselves Keynesians,  Friedman was their worst nightmare; exposing the myth of government spending as a means of stimulating an economy.  At the same time, he destroyed the typical liberal concept that increasing taxes have no consequences.

For the most part, his economic principals emanated from a simple, old saying: "There is no such thing as a free lunch".  Friedman's use of those words to explain economic principals is as true today as when he first started popularizing them; especially, now, with Obama and Bernanke spending like the proverbial drunken sailors and, with Obama and the Democrats planning new taxes for the so-called rich.  For this reason, I present one of Friedman's many speeches.  This one titled: "The Free Lunch Myth":

 

Finally, there is this 1978 speech that Mr. Friedman gave on the impact of the government takeover of healthcare.  Again, as pertinent today, with ObamaCare, as it was in 1978.

Mitt Romney's Gender Gap Problem?

In 1980, Ronald Reagan won handily over Jimmy Carter by 10 percentage points; 51% to 41%.  This was despite the fact that exit polling showed that women, by a spread of 7 percentage points,  overwhelmingly voted for the loser in that contest. So, decidedly, it was a lopsided men's vote that did Carter in.

Right now, pundits and media are making a lot out of the fact that Mitt Romney is lagging behind Barack Obama when it comes to the women's vote; as if this so-called "Gender Gap" never existed before. The reality is that every Republican candidate for president has had to face the same lack of women voters.  That's because, over the years, Democrats have been successful in catering to women's needs and fears by providing one new social or safety net program after another. This election year is no different with Obama targeting the women's vote with "free" contraception. Yet, in modern times, Republicans have managed to win this nation's top job fifty percent of the time. And, in each case where a Republican won, it was the men  who became the deciding factor.

One thing we know from the Carter/Reagan match-up is that men break late for one candidate or the other. In 1980, right up to the election, most polls had Carter in the lead.  Yet, when was all said and done, Carter lost by a landslide.  That may be because men, with their alpha dog mentality, saw Carter as being the weaker of the two candidates.

I personally think that this year's election will be a repeat of the Carter loss; with men breaking decidedly for Romney on the day of the election.  And, like the 1980 election, the women's vote will be less important than how men view the electoral match-up. Obama is "a" weak, not-able-to-get-things-done leader; just like Carter. The classic male mentality rejects such weakness.  Men don't want hear constant excuses and blame for things not getting done; and, that's all Obama does.  Whereas, Romney has a proven track record of accomplishment.  To me, all this talk of the gender gap is an attempt by Obama-loyalists to psych Americans into believing the Romney can't win because he doesn't have the women's vote.  But, we know from history that's just not true. That's why I think that, barring any major misstep by Romney, Obama is likely to follow in Carter's footsteps as a one-term president.

Gingrich and Santorum Are Delusional

As Rick Santorum so aptly indicated in his non-concession concession speech last night, we are at half-time in the Republican nomination process. With 3 decisive wins yesterday, its quite apparent that Mitt Romney -- barring any Howard Dean-like meltdown -- will be the Republican nominee for President. At this juncture, Romney has, on average, captured nearly 60% of the delegates that had been up for grabs. He now only needs to capture 40% of the remaining delegates to win the nomination; and, its obvious that he is gaining momentum. Yet, Santorum and Newt Gingrich refuse to drop out.

To me, Gingrich is the most delusional of the two. He seems to think that, somehow, he and Santorum will garner enough delegates to deprive Romney of the 1144 needed to win. Then, he's got this egotistical idea that he will make one, single speech at the Republican Convention and the delegates will fawn all over him and switch there allegiances to give him the nomination. This from a guy who has been fighting with Ron Paul for last place in the primaries. Think about this. If, consistently, 85% or more of the Republicans won't even vote for him in the primary races then, why, in the world, would a majority of Americans vote for him in the general election?

Then, there's Santorum. He now thinks he's some kind of reincarnation of Ronald Reagan. In last night's speech he compared himself to Reagan by implying that, like Reagan, he will run the table in all the remaining primaries. But, Santorum is no Reagan; neither in notoriety, personality, temperament, cleverness, or experience. Santorum believes he should attack Romney to win the nomination. Reagan believed in the so-called 11th commandment and he didn't attack other Republicans running against him. He won the nomination by attacking Carter's policies. And, when attacked by other Republicans, he simply deflected their attacks by using facts and, often, humor. Santorum is being a destructive attack dog that may well hurt Romney in the general election; thus, reelecting Obama. He can certainly stay in the race but, he should tone-down his harsh rhetoric. Lastly, Santorum has only been able to capture 24% of the delegates as compared to Romney's 60% win rate. Like Gingrich, the math is surely against him.

Nancy Reagan's Incongruous Statement on Stem Cell Research

Today, Obama signed an executive order that would lift the previous Bush restrictions on embryonic stem cell research. Clearly, those on the left supported this move. After all, it is just another extension of their pro-choice attitude towards the destruction of embryos.

Sadly, the left has been able to find a rather famous person who is associated with the right and who has come to the support of their cause. That would be the wife of the right's most famous president in modern times: Ronald Reagan. In a statement, Nancy Reagan said the following:

"I’m very grateful that President Obama has lifted the restrictions on federal funding for embryonic stem cell research. These new rules will now make it possible for scientists to move forward. I urge researchers to make use of the opportunities that are available to them, and to do all they can to fulfill the promise that stem cell research offers.

Countless people, suffering from many different diseases, stand to benefit from the answers stem cell research can provide. We owe it to ourselves and to our children to do everything in our power to find cures for these diseases – and soon. As I’ve said before, time is short, and life is precious."

Now, I recognize that she, along with the whole world, would love to cure all the ills that afflict mankind. That would be tremendous. However, at what cost? Should we destroy life to save life?

In the last sentence of her statement, she says: "...and life is precious." Those words, alone, show how inconsistent her beliefs are on stem cell research. You can't allow the destruction of newly formed human life and, at the same time, believe that life is precious. Unfortunately, the left is using Nancy Reagan's emotion on this topic as a justification of what many consider to be an immoral act. And, that's just my opinion.

A Picture Worth 2000 Points

Today, there's a lot of people looking at Obama's method of handling the economy, and then drawing comparisons to Jimmy Carter. They point to the fact that it was the Reagan tax cuts (The Economic Recovery Tax Act Of 1981), and not taxing and spending, that really got this country going after the disaster of Carter.

Even though the Carter economic problems aren't exactly the same as now, there are some parallels to the government intervention that caused the dramatic rates of inflation and that contracted our economy during those years. Actually, to be fair, some of that government intervention started with the Nixon Administration in terms of trade barriers. Certainly, if you want to read all about the Nixon/Carter years and their economic policies, there's plenty of information on the Internet about them.

My focus of this blog entry, is to show you the reaction of the stock market to the various governmental programs/influences of that time frame; from Nixon, to Ford, to Carter and, to Reagan.

When Nixon left office, the stock market responded with a mini-crash. It did so because of the psychological impact of having a tarnished Presidency. At the same time, the country was beginning to enter another recession. After settling in, Gerald Ford's tenure ultimately saw the markets rebound. Ford's attempts to get reelected were squashed from the onset by Nixon's ethical problem. A problem that took a further toll on almost any Republican who was running for office. Through three consecutive election cycles, the House and the Senate went strongly to the Democrats; even stronger than today. Prior to Nixon's problems, the Republicans had gained traction as a result of the Vietnam war and LBJ's failed handling of that situation.

Carter came into office by riding the white horse of restored ethics and the promise of economic recovery. However, his policies, both domestic and foreign, and the policies of the Democratic Congress were disastrous. The OPEC embargo was responded to with price controls. Inflation was rampant. Carter's handling of the Iran hostage situation was terrible. When Carter left office, after just one term, the inflation rate was over 12% per annum; and, in some parts of the country, it was even higher than 14 percent. Wages were absolutely lagging behind inflation. Mortgage rates were all in double digits.

Reagan came into office with a commitment to a better foreign policy and a promise to attack the economy with tax cuts. Something called supply-side economics and better know today as Reaganomics. Just like now, the stock market continued to fall after Reagan took office as investors waited to see his plan for recovery. However, unlike the response to Obama's plans, the stock market fall was extremely muted. Obama has seen nothing short of a complete collapse of the markets with every piece of information that he has released about his plans. Unlike Obama, Reagan took his time in putting a plan together. He submitted it to both the public and to Congress and, didn't just give some outline to Congress for them to interpret. Unlike Obama's Congress of today, Reagan had an opposing, Democratic majority in Congress to overcome with his proposed recovery. He truly had to get a bipartisan agreement to do what he wanted. In August of that year, the Economic Recovery Tax Act of 1981 was passed and signed by Reagan.

Unlike the rapid fall of the stock market of today, which has followed Obama's Stimulus Bill, the stock market under Reagan tread water for the next year and until it could see the fruits of those tax cuts. Once it did start seeing the inklings of a recovery, the market was off to the races by gaining 2000 points; from a level of 800 to almost 2800. The tax cuts created a growth in the econom, and without any of the runaway inflation that occurred during the Carter years.

It should also be pointed out that Paul Volker was the Fed Chairman of the time. It was his accommodative lowering of interest rates that fought off and lowered inflation in 1981 and 1982. As a result, inflation dropped from a high of 12.5% under Carter to 3.8% in 1982. He is currently on Obama's team but seems to be somewhat forgetful of what was done in that era.

The only problem with Reagan's tax cuts was that it overheated the economy and subsequently, the stock markets. As always, it was the excess of buying into the stock market, like the home buying of this last decade, that set up a scenario for failure. As a result of too much exuberance, the market crashed in 1987. Even so, the economy was in great shape and the market recovered more than 60 percent of the 1987 losses in just one year; and, then went on to even greater heights within another 2 years.

The point of all this is to show how differently the stock market responded to Reagan's plans as opposed to those being presented by Obama. Literally, the stock market stopped it's fall after Reagan's passage of the tax cuts in 1981. Obviously, the market's appraisal of the situation was a correct one. We know this from the rocket rise of the markets from 1982 and all the way into the Clinton/G.W. Bush years. In contrast, the stock markets have continued to fall with the ever passing disclosure of Obama's various recovery plans.

So, given the market actions of today, what do you think the stock market is really saying? It certainly isn't saying that Obama's Keynesian belief in big government spending, high taxation, and vast government regulation and control will get us out of this recession. Also, it certainly isn't buying all the "smooth talking" coming out of this so-called communicator. The markets are responding with disbelief and they aren't buying Obama's explanations. In 1981-1982, the stock markets were right in betting on the words and programs of Ronald Reagan. And, today, I am betting that they are right in responding negatively to Obama. And, that's just my opinion.

Note: You can get a larger, clearer view of the above stock market chart by clicking on it. Use your back button to return.