The Obama Watch

Obama’s Calculated Deception

He thinks you're really stupid. But Paul Ryan has his number.

By 2.1.12

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Calculated deception as a central public manipulation strategy practiced by President Obama involves the President taking advantage of what he thinks the average person doesn't know and won't be told by a compliant media. Such calculated deception was central to last week's State of the Union Address. That address is useful only as an outline of the President's reelection strategy.

A powerful practical answer will come at the end of March in the form of House Budget Committee Chairman Paul Ryan's 2013 budget proposal, which will be passed by the Republican-controlled House. That budget, which all the Republicans will run on, and the President's State of the Union Address will frame the 2012 election debate.

He Thinks You're Stupid

The Obama SOTU exhibited again Obama's core "progressive" conviction that the average American is hopelessly stupid. Obama bemoans America as "a country where a shrinking number of people do really well, while a growing number of Americans barely get by." You may identify with that statement, as it correctly applies to Obama's America today. But not to Reagan's America, or my America.

As Henry R. Nau explained in the January 26 Wall Street Journal, "the U.S. grew by more than 3% per year [in real terms] from 1980 to 2007, and created more than 50 million new jobs, massively expanding a middle class of working women, African-Americans and legal as well as illegal immigrants. Per capita income increased by 65%, and household income went up substantially in all income categories."

But Obama continued last week, "Long before the recession, jobs and manufacturing began leaving our shores." Mr. Obama, let me introduce you to Mr. Nau, who, unlike you, is a real professor. The 25-year Reagan boom from 1982 to 2007 added 50 million jobs. The recession began in December, 2007, and it is your policies that have prevented America from recovering from it.

Obama recalled, "[T]he basic American promise that if you worked hard, you could do well enough to raise a family, own a home, send your kids to college, and put a little away for retirement." He said, "The defining issue of our time is how to keep that promise alive. No challenge is more urgent. No debate is more important." 

Actually, that debate is over, Barack. Reagan already showed us how to do it. As Professor Nau also explained:

Yes, "the middle class has shrunk," as Mr. Obama said while campaigning last month. But not because it's getting poorer, but because it's getting richer. According to Stephen Rose of the Georgetown University Center on Education and the Workforce, fewer people live today in middle-class households with incomes between $35,000 and $105,000, while the percentage of households making less than $35,000 has remained the same. Where did the missing households go? They became richer. In the past three decades [1980 to 2007], the percentage of households making more than $105,000 in inflation adjusted dollars doubled to 24% from 11%.

Where were you from 1980 to 2007, Mr. Obama? Sleeping? In Indonesia? In an ideologically induced stupor?

But Obama continued to drone on with his fairy tale bedtime stories in the SOTU. He proclaimed, "But I intend to fight obstruction with action, and I will oppose any effort to return to the very same policies that brought on the economic crisis in the first place." One of Obama's top fairy tales is the calculated deception that he has been trying so hard to get the economy to recover, but he has been "obstructed" by the "Republican Congress."

But there is no "Republican Congress." Obama is certain that you are too stupid to know that while the House of Representatives is firmly in Republican control, the Democrats still hold a majority in the Senate. Moreover, that Republican House has been busily passing good legislation that would help to restore the economy, from the repeal of Obamacare on day one, to the Ryan 2012 budget, that would cut $6.2 trillion in federal spending in the first 10 years alone, balancing the budget, and ultimately actually paying off the national debt, if continued long enough.

Moreover, the Ryan 2012 budget would do that while slashing income tax rates to 10% for those making less than $100,000 per year, and 25% for those making above, with the federal corporate tax rate slashed to 25% as well, which along with Reagan monetary and regulatory policies would restore the Reagan economic boom.

But the Democrat Senate has refused to even take up any of this legislation passed by the Republican House. Indeed, the Democrat Senate has refused to even pass any budget for 2 years, in violation of federal law. Which raises the question, if Harry Reid and his Senate Democrats don't have to obey the law, why should the rest of us have to?

Moreover, Obama is also certain that you, or at least your friends and neighbors, are too stupid to know that during the first two of his three years in office, the Congress was completely controlled by Democrat supermajorities that were able to give Obama anything he wanted. Congressional Republicans during those years were reduced to hapless bystanders, which is how Obamacare was passed.

Fairy Tale Bedtime Stories

But let us not pass over Obama's staunch opposition "to the very same policies that brought on the economic crisis in the first place." Obama's second biggest tall tale is that the financial crisis of 2008 was caused by the Reaganomics policies of deregulation and tax rate cuts begun 30 years ago.

But as readers of this column know, the real causes of the financial crisis were government policies of overregulation and cheap dollar monetary policy, as thoroughly documented in such books as Paul Sperry's The Great American Bank Robbery: The Unauthorized Report About What Really Caused the Financial Crisis (Thomas Nelson, 2011), Gretchen Morgenson and Joshua Rosner's Reckless Endangerment (Times Books, 2011), John B. Taylor's  Getting Off Track (Hoover Institution Press, 2009), and my own book, America's Ticking Bankruptcy Bomb (HarperCollins, 2011). The minimal interest rate, cheap dollar monetary policy of the Fed pumped up the housing bubble. Overregulation mandated the looting of the banks, forcing them to trash traditional lending standards because they were "discriminatory" to the poor who couldn't afford their own home, which further pumped up the housing bubble and ensured that the banks were maximally vulnerable to the bubble. Government backing for the securitization of these toxic mortgages by Fannie Mae and Freddie Mac ensured this vulnerability was spread throughout the financial community of the U.S., and the entire world.

These policies of overregulation and cheap dollar monetary expansion were the opposite of Reaganomics. For years, the ultra-leftist Obama himself had been promoting precisely these very policies at the root of the crisis. The opposite policies of Reaganomics, opposed in detail by Obama, were the causes of the Reagan boom discussed above. As Professor Nau explains,

What were the policy trends that produced this Great Expansion? Precisely the free-market policies of deregulation and lower marginal income-tax rates that Mr. Obama decries. President Reagan's decision to reverse the high tax, loose-money, and interventionist government policies of the 1970s brought an end to the painful "stagflation of that decade….Sadly, [Obama's] policies resemble those that brought on the stagflation of the 1970s, not those that ignited the Great Expansion. 

But the all time whopper of calculated deception that Obama tells is the fable of the Great Hustler Warren Buffett. As Obama regaled us in the SOTU, "Right now, Warren Buffett pays a lower tax rate than his secretary….Tax reform should follow the Buffett rule: If you make more than $1 million a year, you should not pay less than 30 percent in taxes."

The picture of America's tax policy that Obama paints is the opposite of reality, and the American people will suffer the loss of the American Dream if they fall for it. In 2007, before President Obama was even elected, the top 1% of income earners paid 40.4% of all federal income taxes, about twice their share of income. In fact, the top 1% of income earners paid more in federal income taxes than the bottom 95% combined! This is all as reported in official IRS data. This was after nearly 40 years of the policies of Reaganomics!

Moreover, this does not count the burdens of the corporate income tax, which is how not only Obama but dishonest liberal Democrats across the board create the phony statistic about Buffett and his secretary. They just ignore the existence of the federal corporate income tax entirely, with its 35% rate. The Wall Street Journal reported the actual facts on January 26, saying, "In fact, the Congressional Budget Office notes that the effective income tax rate of the richest 1% is about 29.5% when including all federal taxes such as the distribution of corporate taxes, or about twice the 15.1% paid by middle class families."

The capital gains tax is paid on top of the corporate income tax, not instead of it. Investment income is taxed once by the corporate income tax, and then by the capital gains or dividends tax when it is passed through to the individual. That makes for a total effective rate on investment income of 45%. Bringing it down to the 30% of Obama's Buffett Rule would require further tax rate cuts.

But what Obama is proposing would actually double the capital gains tax rate to 30%, leaving America with the third highest capital gains rate in the developed world. That would be on top of the second highest corporate tax rate in the developed world. And it would be on top of all the tax rate increases already scheduled to go into effect next year under current law, with the Obamacare taxes becoming effective, and the Bush tax cuts scheduled to expire. Obama calculates that the average American doesn't know anything about that.

Obama and the Democrats play-acting as if they don't understand the corporate income tax leaves America uncompetitive and falling behind in the world. It means fewer jobs and declining income for you and your friends and neighbors. But they don't care as long as their calculated deception can trick enough voters to get them past the next election.

As for Mr. Buffett, a higher capital gains rate will not affect the tax shelter fund that has made him a billionaire. It would only make it more attractive as a tax shelter alternative. So he prospers by calling for higher taxes and a reduced standard of living for the rest of us. In fact, he is lionized in the leftist media and by President Obama as a result. The wily, 82-year old coot will be hustling America until his dying day.

Is This Fair?

Obama proclaimed in his SOTU that his goal is "to restore an economy where everyone gets a fair shot, everyone does their fair share, and everyone plays by the same set of rules." Everyone would play under the same set of rules under a flat tax, where Warren Buffett would precisely pay the same tax rate as his secretary.

But that is not what Obama is for. He is for the nation's small businesses, job creators, and investors paying almost all of the federal income taxes, and his supporters in his political machine paying nothing. That would be the result of adding still further tax increases on disfavored taxpayers.

But are the results of Obama's policies really fair? The recession started in December 2007. Since the Great Depression recessions in America have previously lasted an average of 10 months, with the longest previously lasting 16 months. When President Obama entered office in January 2009, the recession was already in its 13th month. His responsibility was to manage a timely robust recovery to get America back on track again.

Supposedly a forward-looking progressive, Obama proved to be America's first backward-looking regressive. His first act was to increase federal spending, borrowing, deficits, and the national debt by nearly a trillion dollars to finance a supposed "stimulus" package, based on the proven failed Keynesian theory left for dead 30 years ago holding that increased government spending, deficits, and debt are what promotes economic growth and recovery.

As should have been long expected, Obama's trillion dollar Keynesian stimulus did nothing to promote recovery and growth, and almost surely delayed it. That is because borrowing a trillion dollars out of the economy to spend a trillion back into it does nothing to promote the economy on net. Indeed, it is a net drag on the economy, because the private sector spends the money more productively and efficiently than the public sector.

After the stimulus, Obama veered steadily left. Through Obamacare, he increased future federal taxes and spending by trillions more, adopting or wildly expanding three entitlement programs, on top of the entitlement crisis America already suffers. Through the EPA, Dodd-Frank, and other regulatory expansions, he wildly rocketed up regulatory costs, burdens, and barriers. He has already enacted in current law increases in the top tax rates of virtually every major federal tax for next year. And as in the SOTU, every time he speaks he calls for and threatens still more tax increases, especially on the nation's job creators and investors.

The National Bureau of Economic Research scored the recession as ending in June 2009, the longest on record. Yet, today, in the 49th month since the recession started, there has still been no real recovery, not like recoveries from previous recessions in America.

Unemployment actually rose after June 2009 and did not fall back down below that level until 18 months later in December 2010. Instead of a recovery, America suffered the longest period of unemployment near 9% or above since the Great Depression. Even today, 49 months after the recession started, the U6 unemployment rate counting the unemployed, underemployed, and discouraged workers is still 15.2%. And that doesn't include all the workers who have fled the workforce under Obama's economic oppression. The unemployment rate with the full measure of discouraged workers is reported at www.shadowstats.com as a depression level 23%. Is this fair, Mr. Obama?

Today, more than four years since the recession started, there are still almost 25 million Americans unemployed or underemployed. That includes 5.6 million who are long-term unemployed for 27 weeks, or more than six months. Under President Obama, America has suffered the longest period with so many in such long-term unemployment since the Great Depression. Is this fair?

Indeed, African Americans have already long been suffering another depression under Obama, with unemployment today, 49 months after the recession started, still at 15.8%. Black unemployment has been over 15% for two and a half years under Obama. Black teenage unemployment today is over 40%, where it has persisted for over two years as well.

Hispanics have also been suffering a depression under Obama, with unemployment today still in double digits at 11%. Hispanic unemployment has been in double digits for three years under President Obama. Over one-fourth of Hispanic youths remain unemployed today, which also has persisted for years. Is this fair?

The Census Bureau reported in September that more Americans are in poverty today than at any time in the entire history of Census tracking poverty. Americans dependent on food stamps are at an all-time high as well. Real wages and incomes have been falling so steadily under Obama and his confused, throwback, Keynesian/neo-Marxist Obamanomics, that the Census Bureau also reported that real median family income in America has fallen all the way back to 1996 levels. Is this fair, Mr. Obama?

Obama apologists cannot argue that this is because the recession was so bad, because the historical record in America is that the worse the recession the stronger the recovery. Based on historical precedent, we should at worst be finishing the second year of a booming recovery by now.

Ryan's Salvation

In March, Paul Ryan will again propose to restore traditional, American, world-leading prosperity and growth, with a budget that will cut federal spending by trillions over the next 10 years, leading to a balanced budget, and sharply reduced national debt. Like last year, that budget will again include tax reform, reducing rates to restore prosperity, and long-term entitlement reform. With restored Reagan regulatory and monetary policies, this would reignite the Reagan boom.

And that is what the election this year will be all about. Do we want the traditional, real America, with world leading economic growth and prosperity? Or do we want to trash all that for Obama's neo-Marxist vision of robbing from job creators and investors to buy votes through still more government dependency, resulting in the fairness of the equal sharing of misery, and the decline of America to become just another country?

 

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About the Author
Peter Ferrara is Director of Entitlement and Budget Policy at the Heartland Institute, General Counsel of the American Civil Rights Union, Senior Fellow at the National Center for Policy Analysis, and Senior Policy Advisor on Entitlements and Budget Policy at the National Tax Limitation Foundation. He served in the White House Office of Policy Development under President Reagan, and as Associate Deputy Attorney General of the United States under President George H.W. Bush.