McCAIN: CREATE AND GROW THE WEALTH
OBAMA: "SPREAD THE WEALTH AROUND"
A SHARP DISTINCTION
October 26, 2008
"It is the economy" and the government which typically affects the economy by three avenues: spending, taxing and regulating. Presidential candidate Barack Obama has proposed massive tax increases. Given the state of the current economy, this is dangerous. Obama proclaims that he want to "spread the wealth" and redistribute income. John McCain proposes holding the line on tax increases. It is a fact; in the past whenever taxes were raised amidst an economic downturn it triggered a massive falloff or a deterioration in quality and quantity of output. It was the tax increases of the early 30's that worsened the Great Depression and it was Bush's 1990 tax increase that deepened the 1991 recession. In short, to avoid a recession, if the government can't do anything that helps, it should at least avoid doing something that makes the situation worse. Our leaders of BOTH parties should know this fact!
There is a principle in economics that says "don't raise taxes in a recession." Under such circumstances, raising taxes exacerbates recessionary pressures and rarely generates any extra revenue and tends to cause additional economic deterioration. It is at times like that, when the government is asked to "do something". This "do something" tends to translate into additional spending and an expansion of credit. Obama is talking about much higher taxes including higher capital gains tax rates and higher payroll taxes. This would likely be accompanied by a "phase out" of various Bush tax cuts leading to higher income taxes, higher dividend taxes, higher capital gains taxes and higher inheritance taxes. This would drive more capital out of the market place, take more capital out of the pockets of consumers and drive more individuals into the unemployment line. This prospect is frightening. Obama ought to heed the advice of legendary economist Milton Friedman i.e.," I'm in favor of cutting taxes under any circumstances and for any excuse, for any reason, whenever it is possible". Friedman has a school of Economic thought named after him, Obama does not.
John McCain's tax polices are designed to create jobs, increase wages and allow the people -- especially those in the hard-pressed middle class -- to keep more of what they earn. These policies would have the effect of transfusing the economy with fresh oxygen and thus restoring the vibrancy to the economic condition. McCain proposes to block any increase in tax rates while doubling the personal exemptions for families with children, which will reduces the tax burden on working American families. Further, he proposes a new, refundable tax credit that will increase health -care coverage, reduce the cost of health care, and provide more funds for families and individuals to purchase health care. McCain's prescription is just right for our times.
McCain's tax policy stands in strong contrast to Obama's ever-changing tax-increase proposals. Although it is difficult to know just what Obama would do if elected President, it is clear that he wants to raise taxes on personal income, on dividends, on capital gains, on payroll income and on businesses--all of which will have a disastrous impact on the U.S. economy. Obama regards the tax system as a way to redistribute income, and disregards the resulting adverse incentive effects that reduce employment and economic growth. McCain, on the other hand, wants to preserve the favorable incentive effects of the existing tax rates, and reduce taxes in other ways that will strengthen the economy, create jobs, and thus place more capital in the market place of consumer commerce.
Currently, we are in an economic stress period. Martin Feldstein, a highly respected distinguished Harvard Professor of Economics recently stated that "we are in the midst of a financial crisis caused by serious mispricing of all kinds of risks and by the collapse of the housing market...the housing problem is contributing to the financial crisis, which in turn is reducing the supply of credit needed to sustain economic activity." The American economy is now very weak and could get substantially weaker. Current economic conditions call for holding the line on interest rates, as further reductions will increase inflation, for extending the tax cuts, for serious long-term national stimulus which improves consumer confidence and reassuring the world that America is open for business and investment.
Thomas Sowell an American economist said it well, "The real goal should be reduced government spending, rather than balanced budgets achieved by ever rising tax rates to cover ever rising spending." Barack Obama's socialist plan to tax and spend and to redistribute the wealth violates the very principles on which this Country is founded. It promises to imperil a nation in economic turmoil and to concentrate ever-more power in Washington which the people may never get back! John McCain's plan incorporates the very essence of American Exceptionalism, It leaves decisions where they should be made; by individuals not government. A sharp distinction to be sure! And that is how we see it FROM OUR PERSPECTIVE.