The Real State of the Union

UNCLE SAM WANTS YOUR MONEY

My Rebuttal:
While President Obama touts about the 5.6% unemployment in December as another sign of a “recovery” generated by his economic policies, he fails to mention a record 92.9 million Americans are no longer in the labor force, as the labor participation rate hit a new 38-year low last month, at 62.7%. Approximately 11 million people have dropped out of the workforce in the past six years. Unemployment rates for Hispanics (9.9%) and African Americans (13%) are still very high and some will see more competition for jobs when millions of illegal immigrants are allowed to compete for some of the same jobs.  The White House implementation of more taxes and government regulation has not worked. You cannot “tax your way to prosperity”.

Equally illustrative is that the current median household income for the United States is $52,250. Real median household income peaked in 2007 at $57,006 and is now $4,756 (8.34%) lower. That means the average family is making almost five thousand less per year than they were seven years ago. Yes, the middle class is really struggling and political policies are partly responsible.

43-percent-federal-income-taxes-2013

click to enlarge

The National Debt has climbed over $7 trillion under President Obama; up to $56,493 per person. On January 20, 2009, when he was sworn in, the debt was $10.626 trillion. Today it’s slightly more than $18 trillion. Take a look at the U.S. Debt Clock.

While the bottom 43% of wage earners pay zero income tax, the top wage 10% (earn over $125,000) earners pay 68% and the top 25% (earn over $73,000) pay 85% of all the income tax. Excuse me, but who’s getting the raw deal here?

For Every Person Added to Jobs Rolls Since January 2009, 75 People Added To Food Stamp Rolls.  Since President Obama took office in January of 2009, a net of just 194,000 new jobs have been created (that’s “net” – the difference between jobs gained and jobs lost). During that same period, 14.7 million people have been added to the food stamp rolls.  Encouraging people to have their handout is not helping. How dare the administration brag about the success of their policies while this has happened under their regime?

Did I mention Obamacare? We were promised that we were going to save $2,500 per year on our premiums and be able to keep our doctor. My family has had a high deductible medical plan with BCBS for years. The prices have been slowly going up over the years, but starting next year my old plan will be taken away. Next year my premium is expected to rise from $660/month to about $1,100 per month. The coverage is simple; it pays for our checkups and leaves us with a $12,000 family deductible for the year! That means I’ll be asked to pay over $13,000 a year in premiums for the privilege of paying the first $12,000 of medical expenses out of my pocket. Yippee.

HOLD ON TO YOUR WALLET!

In addition to the new taxes created to pay for Obamacare, President Obama has just asked for a MASSIVE TAX INCREASE to further distribute wealth from savers to new government programs.

COPY CODE SNIPPET

He would like to change the law and tax distributions from our children’s 529 College Savings Programs. These were promised to have tax-free  growth during the accumulation phase and when we invested our money in them and distributions for post high school education related expense were also tax-free. These accounts are commonly used by middle class families. There are about 12 million 529 accounts open today, and they have an average account balance of approximately $21,000. I have three of these accounts for my kids and have spent the past 16 years funding them. The proposed tax would cost me upwards of $60,000 in tax if this proposal became law!

President Obama also proposed taxing are savings and investments yet again by proposing to tax the gains from investments that we pass on to our heirs at death. If you bought McDonald’s stock for $50 per share and it grew to $90 and you passed it on to your child when you died, the child would own it as if they bought it at $90 with no tax on the gain. Now the president wants to have tax paid on the gain.  He’s calling this “closing a trust fund loophole”.

Speaking in Dover, New Hampshire on Sept. 12, 2008, candidate Obama said: “I can make a firm pledge. Under my plan, no family making less than $250,000 a year will see any form of tax increase. Not your income tax, not your payroll tax, not your capital gains taxes, not any of your taxes.” [Video]

The good news (for some):
Thanks in large part to government borrowing (National Debt) the stock market has more than made it back to where it was at its old peak. This is great for the top 25% of Americans (my clients) that participated in the rally and is a large reason for greater wealth disparity in this country. This means absolutely nothing to the 93 million people out of work or the average person with little or no money in the market. The perspective of my readers is greatly skewed to those that have benefited significantly from this upward movement.
The Gross Domestic Product (GDP) had a nice spike in the fourth quarter of 2014, the annual deficit was the lowest it’s been in years in 2014 (record tax revenues helped offset spending) which meant our national debt ONLY grew by about ½ a trillion dollars.

Gas prices have tumbled due to an oversupply as there has been a global slowdown in demand without a slowdown in production (supply). This makes most consumers very happy and hopefully will be reflected in many prices that have transportation costs built into their price.

I’m not going to mention foreign policy or race relations as I would rather focus on the State of the Union Economically.

Related Blog Posts:

Economic & Investment Review

Unworkable Obamacare

Who Pays Income Tax and How Much?

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Posted in Government & Politics, World Economics and tagged , , , , , .

2 Comments

  1. Brad, I appreciate all of your blog posts. But, as I listen to some of the criticisms and read them, I am left wondering what your proposals would be for improving the lot of the middle class.
    Unemployment is high in minority communities and people talk about the number of people on food stamps. Should we let people starve because they can’t find employment? What is to be done?
    I am anxiously awaiting what Governor Rauner will do with the sad state of the economy in Illinois. Generally speaking, the state has no source of income except for taxes. No investment income. How are we to pay for the things taxes pay for except by taxes?

    I am sure you have some ideas on this, so what is to be done?

    • Hi Edith,
      Tax revenues generally go up when tax rates go down due to the spur of economic growth. So I would lower taxes, starting with corporate rates so that our blue chip companies move there plants back to the U.S. Hypothetically if manufacturing was cheaper in the U.S. than elsewhere, plants would be moved back here creating tons of jobs and thus more tax revenue. The U.S has about the highest, least competitive tax rate in the world.

      I don’t want anyone to starve, but our definition of poverty is pretty crazy when many of today’s “poor people” have cell phones and cable TV and really poor people are living on a dollar a day in some countries. President Clinton signed a bill that Welfare was temporary and it worked, people got to work when the handouts stopped.
      Business owners are the ones that hire people, confiscating more of their money hinders growth. Growth is the driver for more jobs, a growing economy and of course, more tax revenues.
      Small business owners are getting hammered with minimum wage hikes. Minimum wage jobs were not designed to be enough to support a family. When a business sees the min. wage go from $8 to $10/hour that’s a 25% increase in their wage expense! That comes directly out of the business owner’s pocket, how fair is that to the creator of the business and the jobs that went with it. This is a job killer because because rather than raise prices, they will cut jobs to offset the age increase. ideally if they had 10 employees, they would cut back to 8 to break even. Article Link

      The economic impact of this is huge, then people go on unemployment or welfare and worse, never get the chance to gain that work experience and possibly move up in their job to manager or whatever is next.

      As for Rauner and IL, he has little power as Madigan runs the show. If IL were a private business it would declare bankruptcy and rewrite their pension contracts which is the biggest reason for their fiscal issue. I would consider bankruptcy if groups like the teachers union wouldn’t renegotiate their contracts. Most of the unfunded liabilities are for pensions and retiree healthcare. Detroit has set a precedent.

      I would also lower our business tax rates and regulations. We have lost many large and small businesses to neighboring states that actively market that they are more business friendly than IL. Change that immediately. Chicago and the outlying areas should be the hub for major Midwest corporations. Of course, if businesses come back to IL, that creates, job opportunities and growth and more tax revenues.

      That’s enough for today.

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