They’ve rescued Obama once. After 2012 he’ll try to get rid of them again.
During President Obama’s 2008 campaign, he termed the Bush tax cuts “the failed policies of the past.” But last December, with the economy in shambles under the Keynesian, throwback, 1970s-style economic policies of Obamanomics, it was the Bush tax cuts he turned to, agreeing to extend the tax cuts for everyone for two more years. That was directly contrary to his 2008 campaign pledge to allow the tax cuts to expire for singles making over $200,000 per year, and for couples making over $250,000.
At the time I wrote in this space that the tax cut extension would allow breathing room for the long overdue economic recovery to finally sprout this year. And sure enough, that is exactly what has happened, with unemployment falling to 8.9% since then. But President Obama is now working on the Coming Crash of 2013, which will be the result on our current course if he is reelected.
Pinning the Economy to the Mat
The Bush tax cuts were scheduled to expire at the end of 2010. Allowing their expiration for singles making over $200,000 per year and couples making over $250,000 would have meant the following for these individuals, who comprise the bulk of the nation’s employers and investors.
The two top income tax rates would have increased by nearly 20%, counting Obama’s proposed phaseouts of deductions and exemptions. The capital gains tax would have increased by nearly 60%, counting the new Obamacare tax on investment income. The tax rate on dividends would have nearly tripled, counting the new Obamacare tax as well. The Medicare payroll tax would have increased by over 60% for the targeted income earners. The death tax would have risen from the grave with a 55% top rate, if the Bush tax cuts simply expired.
Yet, in 2007, even before Obama became President, official IRS data shows that the top 1% of income earners paid more in federal income taxes than the bottom 95% of income earners combined. The top 3%, to which Obama’s across the board tax rate increases would apply, paid more than the bottom 97% combined. Yet, President Obama was still committed to his left wing extremist tax piracy policy of increasing the tax rates of virtually every major federal tax on this one small sliver of taxpayers. That is why I am thinking that the Somali pirates the Navy just captured may surprisingly turn up working at the United States Treasury Department, at the Office of Tax Policy.
But President Obama’s commitment to this tax piracy did not serve him or the nation very well. Before this latest recession, going all the way back to World War II, two-thirds of a century by now, recessions in America had lasted only 10 months on average. The longest previously had been 16 months. But by December, 2010, it had been 3 years since the last recession started.
Yet, even by that December, the latest unemployment report had showed the unemployment rate increasing again, to 9.8%. That capped 16 straight months of unemployment at 9.5% or above, the longest such period since the Great Depression.
Unemployment among African-Americans had persisted during that period at 15% or above. Among Hispanics it had also persisted well into the double digits. Teenagers had suffered persistent unemployment around 25%, 45% for black teenagers. These groups were suffering a depression.
Even though technically by December the recession was declared over, historically the deeper the recession the stronger the recovery. But President Obama’s recovery was moping along at less than half the rate of prior recoveries from similarly deep recessions. By December, the economy should have been in its second year of booming economic growth. Instead, an all-time record 44 million were struggling in poverty, one in seven Americans, with over 40 million on food stamps, another all-time record.
Rebuked by the November political shellacking, President Obama finally relented in December and agreed to extend the Bush tax cuts for two years, for everyone. And that has allowed the breathing room for the long overdue recovery to now begin to sprout, with unemployment declining to 8.9% in the latest report.
But the economy still has a long way to go before traditional economic growth is restored. The labor force participation rate remains stuck at its lowest level in 25 years. With the same labor force participation as before the recession, the unemployment rate would be 11.5% today. Those who have given up and dropped out of the labor force are still not working.
This is the second time the Bush tax cuts, “the failed policies of the past,” have saved America from a recession. After the more capital intensive Bush tax rate cuts of 2003 kicked in, the economy created 7.8 million new jobs, and the unemployment rate fell from over 6% to 4.4%. Real economic growth over the next three years doubled from the average for the prior three years, to 3.5%.
Business investment spending, which had declined for 9 straight quarters, reversed and increased 6.7% per quarter. That is where the jobs came from. Manufacturing output soared to its highest level in 20 years. The stock market revived, creating almost $7 trillion in new shareholder wealth. From 2003 to 2007, the S&P 500 almost doubled. Capital gains tax revenues had doubled by 2005, despite the 25% rate cut in 2003.
The Coming Crash of 2013
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