President Obama is busy again today with his budget proposals. All the man talks about lately is helping the middle class, but his policies and his proposals have the opposite effect. Let's take a look at some of Obama's greatest hits to the middle class:
1. For the last six years, interest rates across America have been lower than at any time since the Depression. While the Federal Reserve is nominally independent, there is no doubt that the Fed policy of very, very low interest rates has the blessing of Obama's White House. So think about that for a minute. According to the media, the reason for low interest rates is to help the economy to grow, but is that really correct? Remember, over the last five years, the Fed has pumped over three trillion dollars into the money supply to keep rates low, but the economy has limped along with very low growth except for one or two quarters that are aberrations. So why keep rates so low? The reality is that this is the result of the enormous federal debt. The government owes eighteen trillion dollars in direct debt, and that does not include all of the trillions more where there is a federal guarantee or an indirect federal obligation. Remember, a one percent increase in the interest rate being paid on the federal debt would cost the feds roughly 200 billion dollars each year. That means that a return to a 6% rate on thirty year bonds means a cost increase of more than half a trillion dollars each and every year. Those payments would squeeze the government to the point where other programs would have to be cut or interest rates would rise even further, so the Fed keeps the rates low.
And who does the low interest rates hurt? The answer is the middle class. The poor have no cash on which to earn interest. The wealthy have enough money to invest in the stock market are reap the reward of the growth of stock prices due to all this excess cash. But the middle class is the group that has to save for things. They save for retirement. They save for their children's education. They save for a down payment for a house. They save for a car. With low interest rates, however, there is really no point in saving.
A couple that is about to retire may have saved up 150,000 or 200,000 dollars. Before Obama, that couple could expect that upon retirement, they would earn something like $7500 or $10,000 per year in interest to supplement their Social Security payments. While that would not allow for an extravagant life style, it certainly would support a reasonable income during retirement. Obama's policies, however, have taken that interest income away from these middle class folks. In effect, Obama has used the interest rates to tax away all that interest income and give it to the government instead so that the interest on Obama's enormous debt can be covered. It is a devastating blow to the middle class.
2. Obamacare is another place where Obama sucked enormous amounts of cash out of the middle class. Sure, there were poor who got insurance that they did not have previously. Remember, however, that given the large deductibles that Obamacare policies come with, having the insurance really does not allow those with low incomes to increase their medical care in most cases. They still cannot afford the costs included in the deductible.
Obamacare hit the middle class hardest. All those folks whose incomes put them above the level where they get subsidies have been devastated by the major increases in the cost of insurance. A single 30 year old who used to have no insurance now is forced to pay roughly $6000 per year for insurance that then requires that person to cover the first $5000 in costs just to meet the deductible. You tell me: how many 30 year old singles have and extra $11,000 per year to pay for healthcare?
3. Now comes Obama again with proposals that target the middle class. All those people who opened 529 accounts to save tax free for college for their children were threatened by Obama with having the full amount taxed. The idea was so idiotic that Obama had to withdraw it less than one week after he proposed it. Does anyone at the White House ever consider the implications of the policies they propose? I doubt it.
Another of the new tax proposals is to hit heirs with capital gains taxes on property that they inherit. There was a decade long battle over the estate tax and that was resolved only two years ago with a permanent fix to that tax. Now, Obama wants again to hit middle America with a major blow. Remember, the estate tax only hits estates over $5 million; only the wealth get affected. The proposed capital gains tax, however, hits everyone. Did your father leave you his coin collection worth $50,000? If he had it for a long time, you may owe nearly $10,000 in capital gains taxes if you do nothing more than keep it. If you inherit a small business, a painting, a piece of real estate or a small stock portfolio, the tax will come crashing down on you. Wealthy folks could pay the tax if they have to. Middle class Americans, however, will surely be forced to sell whatever it is that they have inherited just to cover the tax.
It is truly disgusting to listen to Obama talk about "helping" the middle class when what he really has done is to help himself to the assets of the middle class.
1. For the last six years, interest rates across America have been lower than at any time since the Depression. While the Federal Reserve is nominally independent, there is no doubt that the Fed policy of very, very low interest rates has the blessing of Obama's White House. So think about that for a minute. According to the media, the reason for low interest rates is to help the economy to grow, but is that really correct? Remember, over the last five years, the Fed has pumped over three trillion dollars into the money supply to keep rates low, but the economy has limped along with very low growth except for one or two quarters that are aberrations. So why keep rates so low? The reality is that this is the result of the enormous federal debt. The government owes eighteen trillion dollars in direct debt, and that does not include all of the trillions more where there is a federal guarantee or an indirect federal obligation. Remember, a one percent increase in the interest rate being paid on the federal debt would cost the feds roughly 200 billion dollars each year. That means that a return to a 6% rate on thirty year bonds means a cost increase of more than half a trillion dollars each and every year. Those payments would squeeze the government to the point where other programs would have to be cut or interest rates would rise even further, so the Fed keeps the rates low.
And who does the low interest rates hurt? The answer is the middle class. The poor have no cash on which to earn interest. The wealthy have enough money to invest in the stock market are reap the reward of the growth of stock prices due to all this excess cash. But the middle class is the group that has to save for things. They save for retirement. They save for their children's education. They save for a down payment for a house. They save for a car. With low interest rates, however, there is really no point in saving.
A couple that is about to retire may have saved up 150,000 or 200,000 dollars. Before Obama, that couple could expect that upon retirement, they would earn something like $7500 or $10,000 per year in interest to supplement their Social Security payments. While that would not allow for an extravagant life style, it certainly would support a reasonable income during retirement. Obama's policies, however, have taken that interest income away from these middle class folks. In effect, Obama has used the interest rates to tax away all that interest income and give it to the government instead so that the interest on Obama's enormous debt can be covered. It is a devastating blow to the middle class.
2. Obamacare is another place where Obama sucked enormous amounts of cash out of the middle class. Sure, there were poor who got insurance that they did not have previously. Remember, however, that given the large deductibles that Obamacare policies come with, having the insurance really does not allow those with low incomes to increase their medical care in most cases. They still cannot afford the costs included in the deductible.
Obamacare hit the middle class hardest. All those folks whose incomes put them above the level where they get subsidies have been devastated by the major increases in the cost of insurance. A single 30 year old who used to have no insurance now is forced to pay roughly $6000 per year for insurance that then requires that person to cover the first $5000 in costs just to meet the deductible. You tell me: how many 30 year old singles have and extra $11,000 per year to pay for healthcare?
3. Now comes Obama again with proposals that target the middle class. All those people who opened 529 accounts to save tax free for college for their children were threatened by Obama with having the full amount taxed. The idea was so idiotic that Obama had to withdraw it less than one week after he proposed it. Does anyone at the White House ever consider the implications of the policies they propose? I doubt it.
Another of the new tax proposals is to hit heirs with capital gains taxes on property that they inherit. There was a decade long battle over the estate tax and that was resolved only two years ago with a permanent fix to that tax. Now, Obama wants again to hit middle America with a major blow. Remember, the estate tax only hits estates over $5 million; only the wealth get affected. The proposed capital gains tax, however, hits everyone. Did your father leave you his coin collection worth $50,000? If he had it for a long time, you may owe nearly $10,000 in capital gains taxes if you do nothing more than keep it. If you inherit a small business, a painting, a piece of real estate or a small stock portfolio, the tax will come crashing down on you. Wealthy folks could pay the tax if they have to. Middle class Americans, however, will surely be forced to sell whatever it is that they have inherited just to cover the tax.
It is truly disgusting to listen to Obama talk about "helping" the middle class when what he really has done is to help himself to the assets of the middle class.
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