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    2 posts, 2 voices, 514 views, started Oct 8, 2008

    Posted on Wednesday, October 8, 2008


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      As the pundits busily sort out who won on style points at last night’s presidential debate or whether Senator McCain managed to stem or change the current electoral momentum clearly favoring Senator Obama, a far bigger message is being lost. The current front runner, Barack Obama, is placing politics over problem solving as November 4 nears. He is acting the consummate people pleaser when tougher medicine is badly needed. He insists on being the candy man distributing confections to those in the Democratic base and independents as well, even as common citizens at a town hall style debate asked multiple questions searching for national sacrifice, clearly defined priorities and bold changes in course. Mr. Obama may sound and look like a leader on stage, but he does not act like a leader in his policy prescriptions.

      When Mr. Obama set forth his economic strategy during the primary season, the world was an awfully different place. We have since watched the meltdown of Wall Street’s investment banks, some disappearing altogether and others being sustained by the federal government, by merger partners and by fundamental business restructuring. We have seen Congress and the President act to infuse nearly $1 trillion taxpayer dollars into an over-leveraged financial market. We have witnessed a decline in the Dow Jones index of nearly 1000 points in just the last two trading days. And the global markets are rapidly following suit. American unemployment has risen to 6.5% and is forecasted to break 7% in short order. Corporate earnings reports indicate a slowdown in economic growth. This is not a pretty picture.

      Yet, Mr. Obama still promises the same mix of middle class tax cuts, capital gains tax increases, payroll tax increases and upper class income tax increases that he proposed early in the year. Are Americans really to accept that Mr. Obama’s economic plans require no adjustments, no additions and no deletions given the massive change in the economic landscape? Financial experts are actually making reference to the Great Depression and the largest financial crisis to grip America since 1929, and Mr. Obama is resting on the same economic plan he rolled out months and months back? He is pleasing. He is not leading.

      Middle class America is not confronting an unmanageable income tax burden today, and lower class America does not pay income taxes in large part. Our middle class instead is facing job loss, equity loss, business contraction and a decrease in real wages. These are structural problems that modest middle class tax relief does not begin to address. The American economy must be rebuilt in this era of globalization to match the conditions we now face. Though a message of tax relief is always pleasing, it is not a serious and substantial answer to a serious and substantial problem.

      And, Mr. Obama’s middle class tax plan is being pitched by the candidate today even after the federal government has acted to increase the national debt by $1 trillion and anticipates record deficits in the current and coming fiscal year. The federal budget is increasingly squeezed by mandatory interest payments to service the national debt, and Mr. Obama actually talks tax cuts? The federal government is cash starved. We borrow from China and Saudi Arabia and other nations at record levels. And treasury bill rates are hitting the floor.

      To make matters worse, the aging of America that is fueling an increase in Medicaid and Medicare costs and the swiftly approaching mass retirements of the baby boomer generation place a giant-sized demand on federal entitlements that are basically funded on a pay-as-you-go basis. Do you still want tax cuts, Mr. Obama, given the extreme deterioration of the American economy and the coming insatiable appetite of our entitlement programs? Do you really believe that your economic strategy meets the challenges of today’s grim circumstances? Mr. Obama has not changed his plans one iota to meet the crisis we now face.

      On the revenue side, is Mr. Obama serious that in the face of a national credit crisis and a major outflow of investment dollars from the stock market that a significant increase in the capital gains rate is prudent policy? Just how will that act to reinvigorate the financial markets and stock market? How does that encourage investment and entrepreneurship? As a Democrat, I surely believe in redistributive tax policy, but policy must be tailored to meet actual circumstances. Mr. Obama actually proposed a 28% capital gains rate earlier this year - this is a recipe for choking an already suffocating market. Adjustments must be made.

      Finally, Mr. Obama’s mix of income tax increases on the wealthy and his proposed increase of the payroll tax on those earning over $250,000 dollars, though sounding fair and equitable to middle class voters who are increasingly angry with Wall Street and corporate CEO’s, requires careful thought given recent events. We must carefully consider just how deeply federal economic policy should squeeze out private investment dollars, the very dollars that we need to reenergize our markets. These dollars in the hands of the federal government may be put to good and beneficial uses; however, they will not be available to create sustainable growth in the private sector where long term jobs are created. The tax base must be grown carefully right now.  

      I am not saying that Mr. Obama’s economic policy was foolish or irresponsible when first crafted. Indeed, I am disgusted with the growing divide between rich and poor in America, a divide that opened wider and wider during Mr. Bush’s presidency. I am saying, however, that tough times call for tough decisions. Leadership demands the strength and prudence to adjust course when trouble lies ahead. Mr. Obama is showing no such leadership on the campaign trail. He is placing politics over problem solving. He is riding his anti-Bush message right across the goal line. He is remaining tied to the Left when a move to the Center is needed. And then what? Only after election day will a President Obama announce that he must rethink his plans given new economic realities?

      I am exceedingly disappointed in Mr. Obama’s failure to adjust voter expectations to current circumstances last night. He is either going to stay the course on his economic plan and drive us over the cliff or change his mind once in office thereby breaking faith with his supporters who are not being prepared for that eventuality. Not good.  


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