Barack Obama’s Fiscal Policy

Today will be a short lesson in fiscal policy, followed by what Barack Obama will do as President in the realm of taxes and spending.  I won’t use a whole lot of big words, if any.  In fact, I hope you are struck by the simplicity of the themes and the ideas that are discussed.  This stuff is really not all that hard.  Politicians (on both sides of the political aisle) want you to think that you can’t understand what is going on, so you have to elect them in order to represent you and be your voice since you are too dumb to understand it.  This isn’t all politicians, just some, and notable for sure.

What is fiscal policy? Fiscal means money, policy means law… money law, or laws about money.  Wow… we’re really blowing some minds here, aren’t we?  What it boils down to is this.  The Federal government collects money and spends money.  Where do they collect this money?  Ultimately from you and me.  Every single tax that was ever devised is levied against the citizen.  Even taxes not levied against the citizen (corporate income tax) is levied against the citizen. More on this later…

The federal government collects the majority of its taxes via the 16th Amendment to the US Constitution, the amendment that created the Federal Income Tax. There is minor discussion that the 16th Amendment was never truly ratified because a state or two was not constitutionally legitimate, but that is another issue altogether, and probably not worth the trouble.  According to one source, 44% of the federal dollars received at the US Treasury are from individual income taxes, 37% are from Social Security/Retirement taxes, 12% are from corporate income taxes, 3% are from sales/excise or use taxes, and 4% are from “other sources” ( My thanks to the National Priorities Project). In a real sense, 81% of tax revenue collected is from income, since the Social Security/Retirement portion of the numbers above are also a tax on income, but at a different rate and by a different name.  The 12% corporate income tax is also a tax on you, Joe Q. Public, because that tax is added the price of goods or services that you purchase from Lowe’s, Coca Cola, Kroger, We Defend U Law firm, etc… they aren’t going to just pay that out of their profits because they are nice.  They add that into the price of the ladder or the bottle of Coke or the grapefruit or the $200/hour fee that the sleazy lawyer on late-night cable tv charges you when you get a DUI.

How your government spent that money that they forcefully took out of your paycheck is a different issue altogether. Depending on the year and the person you talk to, you’ll get widely varying answers.  Almost always, health spending (about 33%) and defense spending (25%) are right at the top. Next would be Social (IN)Security (21%).  Next is non-defense discretionary spending, running about 18%. Next is interest on our national debt, which totals about 8-9 trillion dollars (8%).  If you do the math, you’ll find that’s more than 100%, which obviously is impossible… thus the problem in Washington.  Income is not equaling or exceeding spending.

Here’s where you come in… what happens when you get ot the end of the month and your bank account is down near zero, but you need to fill the gas tank?  You either run out of gas because you didn’t buy it, you take it from savings, or you borrow it from Chase or Bank of America or Citi.  Well, interestingly enough, that’s what the United States has to do as well.  I cannot remember the last time we brought in more money than we actually spent.  That is sad and insane.

So our buddy Barack Obama is now the presumptive Democratic Presidential nominee, and presumably, he has a plan to take in and to spend.  What is it? I’m glad you asked.  (All of this you can find on his website, by the way.  I encourage you to visit and learn about it yourself.)  His first plan is to reinstitute PAYGO, or Pay-as-you-go.  This is actually a great idea. Second, he will reverse the Bush tax cuts for the wealthy.  Well, another way to say it which is equally as valid is to increase the tax rate for the wealthy.  What does he define as wealthy?  Generally, those making over $150,000, although he might say $250,000 sometimes… you never know with him.  Now keep in mind the 80/20 rule.  Generally speaking in any society, 80% of something comes from 20% percent of the group and the other 20% of something comes from the remaining 80% of the group.  That means that the “wealthy already pay out upwards of 80-90% of the tax revenue now.  If we raise taxes on the wealthy, they will be paying closer to 90-95% of the tax burden because Obama’s other goal is to lower taxes for the “poor” and “middle class.”  Just in case you were wondering, one of Karl Marx’s chief ideas in communism was a progressive income tax. The other thing that it interesting to note is that, generally, speaking, those who pay the most in taxes “use” the least amount of government resources and programs.  Those who pay the least amount in taxes (or… gasp… get paid to not pay taxes) “use” the most amount of government resources and programs.  Any economist with a brain that works properly will tell you that the way to increase revenues is to lower taxes.  Lower taxes is the key, and despite Obama’s willingness (and flat out action) to lower taxes for the poor and the middle class, that will not have nearly the effect that he says it will (remember the 80/20 rule).  He would have to cut taxes so deeply in these demographics that the tax on the “wealthy” would be ridiculous.  What happens then?  The “wealthy” then invest less in stocks and bonds, mutual funds and ETF’s.  Those investments are parts of the companies that are invested in.   Those companies provide jobs, goods, and services for the “wealthy” and the “non-wealhty,” but because of the decreased cash they receive from investors, they face the same problem… too much outgo and too little income.  Thus they cannot afford to keep the workforce the same as it was.  Layoffs happen, and then Obama calls for even lower taxes or tax “credits” (read this as payments) to the “poor” and the “middle class.”

So where am I going with all of this?  This post is unbelievably long, I know, but hang in there… here is the clincher.  The sub-title of this whole blog is “the nexus of Christ and Culture.”  I am going to attempt to make that connection today.  The Bible is full of commands to take care of the widow and the orphan (James 1:27; Exodus 22:22; Deut. 10:18; Deut 14:29; Ps 68:5; Isaiah 1:17; Zech 7:10).  We are to care for those who are poor, sick, without clothing, etc.  We are to seek justice to ensure that those who are poor, sick, homeless, etc. are not mistreated.  But that is a religious/Christian/moral compulsion.  That is not a legal compulsion.  Now, am I advocating the total dismantling of all social welfare programs that the federal, state, and local governments have set up?  Absolutely not.  I am willing to part with a small sum of my money by force to ensure there is a safety net for those who are truly destitute.  Without a program like Medicaid/Medicare, some people who are born with birth defects or who have massive health problems like traumatic brain injuries, strokes, etc., would be paralyzed by medical debt for life, since they need tons of care initially and continual care after that.  The problem is that the safety net has become a pillow-top mattress.  There is no incentive for people to pull themselves up by their bootstraps and make a better life for themselves because they know that every month, they’ll collect a check of money that they may or may not have worked for.

To be sure, I am advocating PERSONAL RESPONSIBILITY.  You are responsible for you.  I am responsible for me.  Only insofar as we arrange ourselves in groups are we responsible for each other.  I am responsible for my wife and me.  She is responsible for me and her.  That’s the way MARRIAGE works, but only because we have entered into covenant to take care of each other “in sickness and in health, in poverty or in wealth, until God by death shall separate us or until Christ’s return” “But Michael,” one says, “what about Cain saying to God am I my brother’s keeper? Isn’t that a Biblical madate for all of the stuff that you decry?” Yes, it is a BIBLICAL MANDATE, designed for BIBLICAL FOLLOWERS… the CHURCH!!!!! Not the government.  I don’t want the government sticking their lousy, secular nose in the affairs of individuals trying to help people.  I want the government to protect my homeland and my liberty so that I can “work with my hands” (Genesis 3:17-19), be a productive member of society, and in the words of Charles Wesley, “Make all I can, save all I can, and give all I can.”   The CHURCH has the responsibility to demonstrate the love of God by taking care of the sick and the poor, the widow and the orphan, the homeless and the hungry.

Think about Social (IN)Security.  Do you know that by 2041, Social (IN)Security will be bankrupt?  That means that if you are living in that year, you will either 1) not receive benefits that you paid for because the government will simply not pay them out (yeah right) or  2) you will receive benefits that amount to FAR less than you actually paid for.  If you are thirty or younger, just don’t even figure Social (IN)Security into your retirement picture.  It ain’t gonna be there.  If you get anything, it is a bonus.  That is why I like the idea of letting younger workers opt out of this absolutely horrible “retirement program.”  In fact, I have a deal.  United States, you can have every cent that I have paid into this system ever since I started working.  Take it all… everything.  But from this day forward, let me handle my own retirement.  Don’t take a penny from my paycheck for Social (IN)Security.  I’ll take that same amount of money that you forcefully take from me every two weeks and invest it myself and come out so far ahead of what I would get under “the system” that it wouldn’t even be close.  In fact, I’d bet that if I were to take out less than the percentage that I pay in now, I’d still come out ahead.

There are some inherent issues in this plan that need addressing.  First, what happens to those people who don’t opt out? Well, have fun with Social Security, that’s all I have to say.  Second, the revenues to pay the benefits for those who do not opt out will not be there because so many people will want to opt out. What happens to those benefits?  They probably still need to be paid, so we will have to collect that money elsewhere.  It might even be (and I can’t even believe that I am saying this), we would have to borrow and pay it back over time. But we have to do something to change our “family tree,” as it were.  Younger people have to prove to people who bought into Social(IN)Security that it won’t work as a long-term game plan.  We have to say, “Here’s an idea that we are comfortable with.  We’ll take care of you, but it’s not going to work for us, so let us change the way we do things.  If we keep doing what we’re doing, we’re going to keep having what we’re having.

Well, this subject will probably be revisited soon, because there are so many more things to say about taxes and spending.  I just didn’t get to address all of them today.  Soon (not tomorrow, but soon), I’ll address healthcare… oh yeah, it’ll be juicy.

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~ by michaelldouglas on June 5, 2008.