Tag Archives: President

We’ve averted the fiscal cliff – or have we?

Passed by the Senate at a 2 am vote on January 1, 2013; passed by the house at an 11 pm vote that same night; signed into law by the President on January 2, 2013, the American Taxpayer Relief Act of 2012 is perceived as a deal struck by congress at the eleventh hour that largely eliminated the Fiscal Cliff.

Has this legislation really averted the Fiscal Cliff?

The Fiscal Cliff is the sharp decline in the budget deficit that could have occurred beginning in 2013 due to increased taxes and reduced spending as required by previously enacted laws.

But the deal to avert the Fiscal Cliff doesn’t achieve any of that. Instead, it…

A) Does not reduce the Federal Government’s budget deficit

B) Does not avoid increased taxes

C) Does not reduce spending

A) The Fiscal Cliff deal does not reduce the budget deficit.

The Congressional Budget Office (CBO) estimates the legislation to avert the Fiscal Cliff will reduce revenues and increase spending, overall adding nearly $4.0 trillion to the Government deficits over the next 10 years.

B) The Fiscal Cliff deal does not avoid increased taxes.

As a result of the deal, the Tax Policy Center, a nonpartisan Washington research group, estimates that taxes on 77.1% of U.S. households are going up in 2013.

Among the households facing higher taxes, the average increase in taxes would be $1,635, the Tax Policy Center said.

  1. The two-year old 2% cut to payroll taxes is being allowed to expire. The payroll tax, which was reduced to 4.2% in 2011 and 2012, returns to 6.2% in 2013. This is expected to take about $120 billion out of the economy, which should have a negative impact of about 0.7% on GDP growth.
  2. Marginal income and capital gains tax rates are increased for those with annual income over $400,000 for individuals and $450,000 for couples. The top income rate is going up from 35% to 39.6%. The top capital gains rate increases from 15% to 20%.
  3. A phase-out of tax deductions and credits for incomes over $250,000 for individuals and $300,000 for couples is reinstated.
  4. Estate taxes are set at 40% of the value above $5,250,000, indexed for inflation, up from 35% of the value over $5,120,000.
  5. A 2.3% tax on gross sales of medical devices (such as heart valves and hip replacement parts – a tax firms making equipment must pay even if they have no profit at all.
  6. A new 3.8% surtax on investment income (possibly including profits from the sale of a home) for individuals making more than $200,000 a year or couples with $250,000 or more.
  7. An increase of Medicare tax on wages above $200,000 for individuals and $250,000 for couples.  The current 2.9% Medicare payroll tax will be increased to a total of 3.8%.
  8. A raise in the threshold for allowed Itemized Medical Deductions from 7.5% of adjusted gross income to 10%, burdening those with the largest medical expenses by limiting how much of these costs they can deduct on their taxes.

C) The Fiscal Cliff deal does not reduce Government spending.

The budget sequestration created by the Budget Control Act of 2011 (the directed automatic across-the-board cuts totaling $110 billion per year for 10 years beginning on January 2, 2013, split evenly ($55 billion each) between defense and non-defense discretionary spending) is delayed by two months.

The American Taxpayer Relief Act of 2012 does include, however, over $67 billion in tax breaks for ‘renewable energy’, Hollywood, multinational corporations, Puerto Rico and Virgin Islands rum industry, NASCAR, plug-in electric scooters and others.

The Private Sector is Doing Fine

In a press conference in Washington on June 8, 2012, President Obama said that “the private sector is doing fine”.

He added that “Where we’re seeing weaknesses in our economy have to do with state and local government, oftentimes cuts initiated by governors or mayors who are not getting the kind of help that they have in the past* from the federal government“.

Several times during his remarks, which included taking questions from three reporters, the president suggested that the private sector was in a good place. “We’ve seen record profits in the corporate sector,” he said.

 

With an official unemployment rate of 8.2%, and with private jobs down 4.6 million since they peaked in January 2008 – does this make any sense?

Of course it does!

Here’s why.

According to the Census Bureau, in March 2010**, the economy had 223,800 fewer small businesses*** than it did two years earlier.
Now that all the weak businesses that couldn’t ride the storm and couldn’t hold on during the recession have failed and gone under – now the private sector is doing just fine!

As to the federal government not helping out governors and mayors as it has in the past* – that can easily be explained by the federal government running out of money, partially because its work force has grown during the same period by 11.4% – a staggering 225,000 more federal-government employees.

 

Alright!  Calm down. Relax. There is a solution to this. Really. A simple one.

David Axelrod, president Obama’s top campaign strategist said on Sunday June 10, 2012, that the country needs to “accelerate” job creation in the private sectorby hiring more teachers, police and firefighters.

“The private sector, we need to accelerate job creation in the private sector,” Axelrod told CNN’s “State of the Union,” before adding: “One of the ways that we can do that is putting teachers and firefighters and police back to work because those are good middle-class jobs.”

Told that teachers and firefighters are part of the public sector, Axelrod continued to defend his statement. “But that will help accelerate the recovery,” Axelrod said.

 

A footnote on federal-government employment

  • During President Reagan’s 8 years in office – the federal government’s workforce grew by 12,000 employees.
  • President Carter, during his 4-year term, added 100,000 new federal employees.
  • President Obama, in his 3½ years in office, has so far added 130,000 new federal employees.

* Referring to the $780 billion stimulus of early 2009 which funneled massive funding to state and local governments.
** More recent data is not yet available
*** Companies with under 100 employees

High Gas Prices – Mission Accomplished!

The Promise

In January 2008 – one year before he took office – Obama said that under his [energy] plan, prices of electricity will skyrocket!

A year later, in January 2009, he was sworn into office as President. 

On December 12, 2008, the Wall Street Journal published an interview with, Dr. Steven Chu, Director of the Lawrence National Laboratory (Obama’s future Secretary of Energy) in which he declared as a national goal to bring gas prices up to European levels.

Dr. Chu said: “Somehow we have to figure out how to boost the price of gasoline to the levels of Europe…“.

Raising U.S. gasoline prices to European levels, said Chu, would encourage — or, more accurately, force — Americans to move to neighborhoods closer to work and dump their trucks and SUVs for Chinese bikes and scooter-like Smart Cars.

Six weeks later, on January 21, 2009, he was sworn into office as President Obama’s Secretary of Energy. 

The Premise

We ended 2008 with an average U.S. retail price of $1.67 for all grades of gasoline. In contrast, the price of a gallon of regular gasoline that summer was $6.78 in Greece, $8.24 in Italy, and $9.39 in the Netherlands – a whopping $7.72 higher than in the U.S. – according to Eurostat, the statistical office of the European Union.

The U.S. Energy Information Administration reports that the average U.S. household purchases 1,100 gallons of gasoline per year.

This means that a $7.72 price increase per gallon would cost the average American family an extra $8,492 per year

The Reality

Since Obama took office, gas prices in America more than doubled.

The average price of a gallon of gasoline in February 2009 was $1.928. On April 8 2012 it rose to $3.929 – a whopping 103.79% – more than double!

Gas_prices_chart

In fact, while just barely, Obama has seen an even higher gas price increase than Carter dealt with under his administration.

President
Gas Price Change
Average Price in February of First Year of Presidency
Average Price in Last Month of Presidency
Carter + 103.77% 0.637 1.298
Reagan – 66% 1.382 0.918
George H.W. Bush + 20% 0.926 1.117
Clinton + 32% 1.108 1.472
George W. Bush + 20% 1.484 1.787
Obama, Comparing Current Price as of April 8, 2012 + 103.79%
1.928 3.929

Mission accomplished! Well, almost. We’re not yet at $9 a gallon, but we’re on track getting there. 

The Affirmation

On February 28, 2012 Secretary of Energy Mr. Chu reaffirmed this policy: When asked ‘point blank’ whether it was the overall policy of the Dept. of Energy to lower prices of gasoline in America, he answered: “No!”

In testimony before Congress, when Rep. Alan Nunnelee (R-Miss.) asked Chu whether it’s his “overall goal to get our price” of gasoline lower, Chu interrupted him and said: “No, the overall goal is to decrease our dependency on oil, to build and strengthen our economy.”