Obama Will be Bad News for Wealth Producers
By: Irwin M. Stelzer
Examiner Columnist
November 7, 2008
It won’t be as bad as those who fear we have put a socialist in the White House, or as much fun as those who put him there are hoping.
Obama will certainly take from the not-so-rich to give to the not-so-poor. That’s what his plan to raise taxes on families earning more than $250,000 per year in order to fund payments to those earning $50,000 or less (who don’t pay income taxes, but do pay social security taxes) is all about.
But word is that Obama is not eager to add fuel to the recessionary fires, and so might wait until January 1, 2011, when the Bush tax cuts expire, and just let them die a natural death.
Call that a tax increase if you like. To him, it is simply restoring tax rates to the levels prevailing during the glory days of Bill Clinton. Throw in the demise of Bush’s cuts in inheritance tax, and if you are earning decent money in 2011, it will be more expensive for you to live, or to die.
So it’s not very good news for what some call “the wealth-producing sector.” The fact is that wealth producers come in a variety of sizes. There are the megarich -- the Buffets, Gateses, private equity guys who got out in time. For them, Obama’s tax increases do not even rise to the level of petty cash. Which is why so many of this crowd support him.
Then there are the wealth producers who start small businesses, men and women for whom every dollar counts as they scramble to pay the rent and meet their payrolls. They are the ones in Obama’s crosshairs, and they are the ones who have to hope that Joe Biden was talking off message when he expanded the group facing tax increases to families earning more than $150,000, rather than $250,000.
And if they want to lose sleep, they might guess at the cut-off point that Nancy Pelosi, Harry Reid, and Charlie Rangel have in mind. Or what will happen when workers lose the right to secret ballots in union-recognition elections.
The more important economic effect of the electorate’s decision to propel Barack Obama into the Oval Office will be the growth of government. Now, those who put George W. Bush into the White House are not too well placed to complain, since their man presided over the largest and most expensive expansion of government since Lyndon Johnson created his Great Society.
Government will become a bigger presence in the health-care sector. Workers will pay, but won’t know it. I can tell you from experience that employers don’t look only at wages when deciding whether to take on a new worker. They look at the total cost of putting him on the payroll.
And the higher cost Obama will load onto small businesses means they will be able to hire fewer workers. And workers who do get hired will pay for the cost of their health care by being offered a lower wage. The advantage for Obama is that they won’t know what hit their pay packet, or why they got turned down.
Two other of the areas likely to be affected are worth worrying about. One is energy. Obama wants to make coal so expensive that no new coal-fired electric plants will be built. That’s a long-held objective of the environmental movement. As is “no new nukes”. And no new drilling.
In short, Obama and his congressional allies will ratchet up fuel efficiency standards, and enforce laws like the one that mandates the use of ugly and dangerous mercury-laden light bulbs. Having prevented new supplies from coming to the market, they will have no choice but to mandate such cuts in use. A sneaky form of rationing, no coupon books needed.
The other is the financial services business. There is no doubt that reforms are needed. But there are reforms that point financial types in the right direction, but leave them free to innovate and make capital widely available, and there are reforms that unleash hordes of regulators on the industry, driving up its costs and perhaps sending some firms looking for more favorable climes.
Unless some of the very good advisors around the new president can be heard above the hard-left din coming from Capitol Hill, we are in danger of stifling the creativity and risk-taking that has made America’s capital markets the envy of the world.
Examiner columnist Irwin Stelzer is a senior fellow and director of the Hudson Institute’s Center for Economic Studies.
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