Sunday, September 7, 2008

Barack Obama decides that tax increases for the "wealthy" can be postponed

As reported in the Kansas City Star:

Democrat Barack Obama says he would delay rescinding President Bush's tax cuts on wealthy Americans if he becomes the next president and the economy is in a recession, suggesting such an increase would further hurt the economy.

Nevertheless, Obama has no plans to extend the Bush tax cuts beyond their expiration date, as Republican John McCain advocates. Instead, Obama wants to push for his promised tax cuts for the middle class, he said in a broadcast interview aired Sunday.

"Even if we're still in a recession, I'm going to go through with my tax cuts," Obama said. "That's my priority."

What about increasing taxes on the wealthy?

"I think we've got to take a look and see where the economy is. I mean, the economy is weak right now," Obama said on "This Week" on ABC. "The news with Freddie Mac and Fannie Mae, I think, along with the unemployment numbers, indicates that we're fragile."

So let's get this straight: Senator Obama planned to pay for his middle-class tax cuts by raising taxes on anyone making over $250,000/year. This, the Tax Policy Center tells us, would result in a $3.3 Trillion increase to the Federal deficit over the next decade--even without Obama's many new spending programs and healthcare promises.

Now, however, Obama still plans to cut taxes for the middle class, but without raising them on the wealthy, while pushing for an additional stimulus package and supporting the multi-billion-dollar bail-out of Freddie Mac and Fannie Mae, which means that (according to Treasury Secretary Henry Paulson):

Effectively, the federal government has now become the nation's mortgage lender....

This, is, of course, Change We Can Believe In.


Brian Shields said...

On Fannie and Freddie:

I just read the Huffington Post article you linked to about the situation, and I will confess that like most Americans, I have little idea what is going on.

Having read the article, it sounds like the whole ball of wax is riding on this gamble that people will be more comfortable with the government controlling these two companies instead of intensely paranoid like I am about the government's involvement.

It's not like the current administration has a great track record handling the economy.

Anyway, from what I see, it's the gamble that the investors will start buying debt off of Fannie and Freddie and a quicker pace, freeing them up to start offering more mortgages, getting in debt deeper.

Sorry to sound simplistic, but isn't that how we got into this mess?

Allowing homeowners to tap the inflated equity in their homes to pay off their debt, then run their debt back up to unaffordable levels is what turned this booming puppet economy into a bust. Now we're asking the government to in essence, buy the debt, so investors will allow the government to run their debt up again?

Honestly... this is not a problem that can be quick fixed. This busted housing boom took years to build... it'll take an entire generation of future homeowners to correct. The only people with undamaged credit, who can be relied on to buy a house, are your kids... and suckers like me who bombed early, learned their lesson, and have been renting for a few years waiting for the right time to buy.

Trust me, there aren't that many of us out there right now. Ten years or so from now, when people have dug out of their financial messes, and that next generation of first time homeowners comes into the market... then you'll start to see recovery.

If they fix the problems now instead of duct taping the holes.

Anonymous said...

But people don't want the party to end. They want home equity loans to buy new Mercedeses and expensive vacations and Rolexes.

They want the government to guarantee that their stucco-and-particle-board box on a fault line remains "worth" $1.2 million.

They want free money to be pouring in by doing nothing other than borrowing from the government to buy a house that rapidly appreciates.

Hard work and applying oneself to make money went out of style a while back. The present generation in power will do ANYTHING to ensure the gravy train goes a couple of extra miles before the wheels fall off, costs be damned.

After all, the gubmint can just pass the bill to the grandkids! Problem solved!

Brian Shields said...

Around here it's not the $1.2 million crowd with the Mercedes and Rolex's, it is the $600,000 homes with the Lexus SUV's when in reality they maybe can only afford a $300,000 home and a nice Ford.

The problem, around here that I see, is that it is the middle class family that is on the edge of lower middle class being stretched to higher middle class. So desperate for acceptance and feeling like they have made it, that they have gambled themselves on "Keeping up with the Jones'" until the back on their credit burdened budget blew out.

Delaware Watch said...
This comment has been removed by the author.
Delaware Watch said...

That's truly a pity that Obama would consider delaying increasing the taxes of the rich since that means they won't be contributing as much to paying off the debt they incurred for all of us when we borrowed billions to pay for their tax cuts.

Steven H. Newton said...

That's sort of my point. If I supported Obama's tax plan I would be pissing mad. Because without the tax raises, it is just another unfunded tax cut that adds to the deficit. His whole premise was that tax increases to the rich would offset the tax cut to those below.

Now he is making the argument that you can't do tax increases for the rich when the economy is in trouble--presumably because tax increases for the rich will hurt a struggling economy.

If that's the case, then (a) what separates him on this issue from Bush; and (b) doesn't this invalidate part of his former premise.

At any rate it is a major waffle if not a flip-flop.