Tuesday, March 25, 2008

Obama, Clinton Flunk Economics 101

Lorin and Randy, two members of the Black Conservatives Group on Yahoo have responded to the “economic plans” (if they deserve that term) of Hillary Clinton and Barack Obama. Here are their reactions, followed by mine. They explain their sophisticated points simply and compellingly.

Lorin says: Raising taxes is bad for economic growth. It reduces the capacity of individuals or companies to spend, save or invest. These activities are critical for job creation, business formation,innovation, and risk taking.As a result, Obama has recently begun to hedge about his plan to roll back Bush's individual income tax cuts for those making over $200K, in light of the economic malaise / recession. He is now saying that he may not insist that they be rolled back.He has blinked.There is nothing like an economic downturn to test the validity of ones professed public policy prescriptions.If raising taxes on the "rich" indeed was a low risk strategy with negligible negative economic repercussions, Obama would be sticking to his guns.If Obama thinks 1+1 = 3 then he should stick to that nonsensical view irrespective of the economic climate.In fact, we know, 1 + 1 = 2. All day, every day.The same math is true of his proposals to remove the cap on income subject to social security taxes, make companies pay income taxes at the US rate (2nd or 3rd highest among developed countries) rather than the foreign rate, roll back Bush's reduction in taxes dividends, and sympathy for fellow math wizard Charlie Rangel's proposal to raise taxes on carried interests and capital gains.I remain supportive of Obama's quest for the nomination, but not for the Presidency.His economic and tax policies don't add up.

LJC (Lorin J. Crenshaw)

Randy says: Obama has no workable method for fixing the Social Security mess, since raising SS tax will not cure the long-term shortfall. This failure is ESPECIALLY harmful if the U.S. allows all the 30 million illegal aliens to collect Social Security benefits, including their older relatives (who come here under "family reunification" plans) who have never paid a penny into the system. Even the illegals who have worked in the U.S. often have contributed no taxes (wish I could have done that!) because their wages have been paid in cash.Generally, private retirement accounts can be created at a 3-4% real growth rate, compared to 0-1% for Social Security.For blacks especially, the Social Security system is a form of theft, since any given black worker is statistically likely to die several years sooner after retirement, so he/she does not collect as much in benefits as Asians/Caucasians who typically live several years longer.What is needed is some form of personally owned retirement account, so that if a black wage-earner dies earlier than his asian/white counterpart, the accumulated retirement fund can be passed on to his/her children, thus keeping the money in the family for education, home-buying, bill-paying or just enjoyment.The way things now work, the benefits end with death, and the money is returned to the SS pool to benefit other workers, or even worse, someone who may not deserve it at all.I am not saying that we should scrap the SS system entirely, since some people are attached to it and feel that only government provides stability. If those people want to continue with the current system, they must have the option to do so.


My response: Randy and Lorin show why this is one of the best groups (Black Conservatives) on the Internet. In one sense, national economics really is about making one plus one equal more than two in that it's about creating new wealth. It's not just about taking money from one guy's pocket and putting it another person's, which is the "economic plan" of Barack Obama and Hillary Clinton. That’s called the "zero sum" game. In the 1960s, President John F. Kenney made a sharp cut in taxes (as Reagan did later), with all sorts of people saying it would reduce tax revenues, etc. In fact, it did just the opposite, leading to very strong growth and HIGHER tax revenues. Well, there aren't any Democrats around like Kennedy (including the one named Ted) anymore. Hillary Clinton gives her big "economic" speech, and it means she would like to take your money to bail out people who bought houses they can't afford. Punish the people who made good decisions -- and reward the people who made bad ones. In her view and Barack's it's not one plus one but one minus one. The Moveon.org types who can't stand America just love it. If Clinton and Obama hired Randy and Lorin as their economic advisors they might be worth voting for. But don't quit your days jobs, Randy and Lorin, because those calls won’t come. .

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