I’m including this article (below) by Mr. Ferrara in full because it reflects much of what I have experienced during the entirety of my working life from 1963 to when I was laid-off/retired in 2008 and on to the present. Although quite lengthy I hope you will read it in full and reflect on it as we approach the next election.
My first brush with economics and tax policies was in my freshman year in 1962-63 at the Montana School of Mines where I took an economics course. What I remember about that course was that we were introduced to and studied the tax rate cut policies introduced by JFK and how they subsequently stimulated the economy. Shortly thereafter I began my working career with a couple of really stinky jobs before joining the Navy and returning to college thus delaying my reentry into the work force until 1970.
I didn’t pay much attention to the national economic situation through the LBJ/Nixon/Ford years, I guess because things were fairly stable and I had a good job and was growing in my career. That changed in the Carter years when seemingly all of a sudden we were facing double digit inflation, double digit unemployment, interest rates of some 20+% and the gutting of the US military. I started to pay attention to our governments economic policies.
Then Reagan came along and I was looking forward to a new way of doing business. The ensuing policies called Reaganomics began a 25+ year economic prosperity era which I also paid attention to and benefited from as most of us did in those years. Presidents of both parties benefited from these policies including Bush 41, Clinton and Bush 43. Clinton doubly benefited from the Reagan policies because of the “peace dividend” resulting from the Reagan induced collapse of the Soviet Union. Again, I personally benefited from these policies as they trickled down to me and my family.
George W. Bush responded to the 2001 recession by again revisiting policies of cutting tax rates. This was especially important because of the large economic hit of the September 11, 2001 attacks at the heart of the American economic system. Again, I personally benefited as a result of these policies, and I recall the 8 years of George W. Bush as being fairly prosperous.
The Obama years seem to me to be a concerted effort to undo the gains made since JFK stimulated the economy with his 1962 tax rate cuts. The long term economic trends I have seen over the past 48 years convince me that economic prosperity comes when our leaders subscribe to capitalistic free market principles, and economic decline comes when our leaders subscribe to a command and control economic model. I’ll let you decide which of our political parties subscribe to which philosophy.
Now I encourage you to read Mr. Ferrara’s article.
Dec 17, 2011
His mother was an unabashed hippie from 1960s central casting. His father was an openly avowed Communist from Kenya. While his father wasn’t around much, his devoutly progressive grandparents arranged for him to be mentored during his adolescent years by a dues paying member of the U.S. Communist Party, Frank Marshall Davis.
When he went to college, he was attracted to the Marxist professors and student activists, according to his own published memoirs. When he graduated, he moved to Chicago and became an instructor for the left-wing extremist organization ACORN in the social manipulation methods of radical Marxist agitator Saul Alinsky. He attended for close to two decades the Trinity United Church of Christ, which practiced neo-Marxist Black Liberation Theology. That church was headed during those years by the openly socialist Rev. Jeremiah Wright, who declared that the 9/11 terrorist attack on America was “America’s chickens coming home to roost.” He also famously preached from his pulpit, “Not God bless America, God damn America….”
He launched his political career in the living room of the home of Bill Ayers and Bernardine Dohrn, co-founders and former leaders of the openly Communist domestic terrorist organization, the Weather Underground. That organization conducted several bombings in America and engaged in other violence that resulted in several injuries and even deaths.
All of this is documented in the public record. This is the man the Democrat party took off the streets of Chicago, then pursuing a career as a Marxist street agitator, and launched into the White House, favoring him over Hillary Clinton because she was too moderate for the party. They did that because he best reflects the heart and soul of today’s radical-left, Che Guevara Democratic Party. It is in this context that we should understand and analyze Obama’s Hugo Chavez speech given last week at Osawatomie High School in Kansas.
Obama’s Hugo Chavez Coming Out
In that speech, he drew a picture of America as a struggling third world nation, saying at stake today “is whether this will be a country where working people can earn enough to raise a family, build a modest savings, own a home, and secure a retirement.” In fact, he said, “there are millions of working families in this country who are now forced to take their children to food banks for a decent meal.”
This sounds more like Indonesia, or Venezuela, or Nicaragua. But it is not America “long before the recession hit.”
He explained the roots of the problem as:
Over the last few decades, huge advances in technology have allowed businesses to do more with less, and made it easier for them to set up shop and hire workers anywhere in the world…. Steel mills that needed 1,000 employees are now able to do the same work with 100, so that layoffs were too often permanent, not just a temporary part of the business cycle…. If you were a bank teller or a phone operator or a travel agent, you saw many in your profession replaced by ATMs or the Internet.
This Luddite analysis fundamentally misconceives the role of technology in a modern economy. Such advancing technology increases worker productivity, and, therefore, wages and standard of living. Technological progress over the decades is why the average American worker in 2000 enjoyed 7 times the standard of living of the average American worker in 1900.
He then tries to pin the blame for his failures on others, saying, “Now, in the midst of this debate, there are some who seem to be suffering from a kind of collective amnesia. After all that’s happened, after the worst economic crisis since the Great Depression, they want to return to the same practices that got us into this mess.”
The policies that got us into this mess included primarily the so-called “affordable housing policies” Obama himself and other Democrats long advocated, with the government forcing the banks by overregulation to drop their traditional lending standards to provide loans and mortgages to low and moderate income applicants who could not qualify under those traditional standards. (See the full documentation and discussion in Paul Sperry’s The Great American Bank Robbery: The Unauthorized Report About What Really Caused the Financial Crisis and Gretchen Morgenson and Joshua Rosner’s Reckless Endangerment: How Outsized Ambition, Greed, and Corruption Led to Economic Armageddon.
The other major factor was the Fed’s loose monetary policy starting under Bush in the 2000s, which funded the housing bubble. Both policies were departures from the fundamental planks of Reaganomics. As I discuss in detail in my own book, America’s Ticking Bankruptcy Bomb, the four planks of Reaganomics had been effectively abandoned by 2008, and that was the cause of the financial crisis, which ended the 25-year economic boom from 1982 to 2007 that Reaganomics had created.
Obama tries to continue his historical revisionism, saying, “Remember that in those years, in 2001 and 2003, Congress passed two of the most expensive tax cuts in history, and what did they get us? The slowest job growth in half a century. Massive deficits that have made it much harder to pay for the investments that built this country.”
Here is what really happened. Those Bush tax cuts quickly ended the 2001 recession, despite the contractionary economic impacts of 9/11, and the economy continued to grow for another 73 months. After the rate cuts were all fully implemented in 2003, 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 3 years doubled from the average for the prior 3 years, to 3.5%.
In response to the rate cuts, 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 Bush’s 25% cut in the capital gains rate.
The deficit in the last budget adopted by Republican Congressional majorities was $161 billion for fiscal 2007. Today that deficit is nearly 10 times as much. Total federal revenues under Bush soared by nearly 30%, from $1.991 trillion in 2001 to $2.568 trillion in 2007. The day the Democrat Congressional majorities took office, January 3, 2007, the unemployment rate was 4.6%. George Bush’s economic policies, “the failed policies of the past” in Obama’s rhetoric, had set a record of 52 straight months of job creation.
What has continued to fail us now is that Obama’s own policies, the exact opposite of Reaganomics in every detail, have failed to produce any timely real recovery from the last recession. Before this last recession, since the Great Depression recessions in America have lasted an average of 10 months, with the longest previously at 16 months. But here we are today 48 months after the last recession started and there is still no real recovery. Instead, we have record poverty, and record extended unemployment.
They can’t say that is because the recession was so bad, because the historical record in America is that the deeper the recession the stronger the recovery. Based on the historical record, we should be ending the second year of a booming economy right now. The failure to achieve that is the responsibility of Barack Obama.
Obama himself was counting on precisely this history making him look like a hero. That is why he so confidently told the Today Show on Feb. 2, 2009, “a year from now I think people are gonna see that we’re starting to make some progress…if I don’t have this done in three years, then this is going to be a one-term proposition.”
Before Barack Obama as President, the rest of the world looked to America as the example for the economic model that works to achieve prosperity. But today Obama tells America “It doesn’t work. It’s never worked. It didn’t work when it was tried in the decade before the Great Depression. It’s not what led to the incredible postwar boom of the 50s and 60s. And it didn’t work when we tried it during the last decade.”
But it’s President Obama, who fundamentally doesn’t understand his own country, that doesn’t work.
Obama’s Tax and Spending Fantasies
In his Kansas speech, Obama offered as his solution increased government spending as the foundation for rising prosperity. He says:
Today, manufacturers and other companies are setting up shop in places with the best infrastructure to ship their products, move their workers, and communicate with the rest of the world. That’s why the over one million construction workers who lost their jobs when the housing market collapsed shouldn’t be sitting at home with nothing to do. They should be rebuilding our roads and bridges; laying down faster railroads and broadband; modernizing our schools — all the things other countries are doing to attract good jobs and businesses to their shores.
Instead of the American capitalist model maximized by Reaganomics, Obama tells us to look at the basic infrastructure spending of other countries as the model that works. But American economic growth is not suffering because of a lack of basic infrastructure like a third world country. It is suffering because Obama is so doggedly pursuing the opposite of every policy that would free the economy to produce and boom. Under such Obamanomics, soon enough America will be suffering from the lack of a reliable energy grid like a third world country.
Obama whines that Bush’s massive deficits (if his deficits were massive what are Obama’s?), supposedly caused by his tax cuts (not–revenue again rose during the Bush years), “have made it much harder to pay for the investments that built this country and provided the basic security that helped millions of Americans reach and stay in the middle class — things like education and infrastructure; science and technology; Medicare and Social Security.”
But spending on all of those items soared during the Bush years, and they have rocketed up all the faster under Obama. To no avail, because government spending is not the foundation of increased economic growth and prosperity. Increased production, spurred by ever stronger incentives, is.
Of course, essential to all of President Obama’s essential spending is to increase tax rates on the rich, otherwise known in English as the nation’s investors and job creators. As President Obama tutored us in Kansas last week:
But we don’t have unlimited resources. And so we have to set priorities. If we want a strong middle class, then our tax code must reflect our values. We have to make choices…. Do we want to make the investments we need in things like education, and research, and high-tech manufacturing? Or do we want to keep in place the tax breaks for the wealthiest Americans in our country? Because we can’t afford to do both. That’s not politics. That’s just math.
So there you have the Obama formula for economic growth and prosperity. After the greatest runaway spending spree in American history during the Obama Administration, the answer is for government to increase spending even more, financed by increasing tax rates even more on the very investors and job creators that produce the jobs for the middle class and working people in America’s economic system. That is a perfect prescription for another recession, not the long, long overdue recovery America is still waiting for under Obamanomics. Obama tells us, “It is wrong that in the United States of America, a teacher or a nurse or a construction worker who earns $50,000 should pay a higher tax rate than somebody pulling in $50 million.” That would be wrong if it were true. But it is not.
What Obama is peddling to America on tax policy is only the ugliest example of his well-established rhetorical style of calculated deception. It is based on what he thinks the average voter does not know and will not know, and can be manipulated to believe to Obama’s political advantage. For the picture he is painting of the rich getting away without paying their fair share while working people bear most of the tax burden is the opposite of reality.
Even before Obama was elected, under those “failed policies of the past,” the top 1% of income earners in 2007 paid 40% of federal income taxes (up from 17.6% when Reagan entered office), while the CBO just reported that they earned 17% of the income in 2007. Moreover, that 40% of federal income taxes paid by the top 1% was more than paid by the bottom 95% combined, according to official IRS data. While the top 1% paid 40% of federal income taxes, the bottom 40% paid no federal income taxes as a group on net. Today 47% pay no federal income taxes.
Yet, Obama has already enacted under current law further tax increases on the nation’s job creators, investors and small businesses going into effect in 2013, when the tax increases of Obamacare become effective and the Bush tax cuts expire. Consequently, that year the top two income tax rates would rise by close to 20%, the capital gains tax would soar by nearly 60%, the tax on dividends would nearly triple, and the Medicare payroll tax would rocket up by 62% for these disfavored taxpayers. This alone would take us well beyond the Clinton tax rates, despite Obama’s outdated talking point that he is still repeating from 2008.
This is in addition to America suffering with virtually the highest corporate tax rate in the industrialized world at nearly 40% on average, counting state corporate rates. As I have previously noted, even Communist China imposes only a 25% rate, with the rate in the EU even less on average. Our Canadian neighbors, enjoying a booming economy since Obama was elected in America, will enjoy a 15% rate next year, down from 16.5% this year.
Yet Obama barnstorms America calling for still more tax increases on American business, large and small, and the job creators and investors on which jobs and prosperity for working people depend. The galloping regulatory burdens he is now imposing effectively involve still further tax increases stifling production. It all adds up to a brew for another recession in 2013, unless the American people force a change in course in 2012.