Diary

Dishonest Obamanomics

A fascinating fact about economics is that there are two sides to every action. This holds true whether an individual believes the Government should take care of the populace or if a person thinks the Government should stay out of individual lives. Barrack Obama must understand that no matter what policy he pursues, negative effects abound. The fact that Obama does not share these obvious facts underscores the dishonesty of his economic policies. Obama holds that he will: create five million green collar jobs, increase the minimum wage to $9.50, and raise taxes on capital gains and dividends. On the surface these features will appeal to many citizens, at least those folks that do not understand economics. We all must pay attention to truth and know what Mr. Obama’s policies truly mean for our economy.

Green collar jobs appear to be a euphemism for employment working with “environmentally friendly” companies. Barrack Obama plays to the heart of voters that see our environment as a fragile shell that currently teeters on the brink of devastation. With that said, it’s hard to argue that there’s little harm in changing the way we utilize energy and do so with a more responsible attitude. Green collar jobs are a good idea. Let’s work with wind, solar, and even nuclear; there’s much more upside than downside with this belief. The piece of this that belies the dishonesty is the lost jobs in the existing energy economy. Where Obama’s policies may create five million jobs, and I don’t challenge the number, it’s important to know that the equal number of jobs created in the green collar must, by definition, come from the, existing oil industry For folks that repair gasoline powered vehicles or drill for oil in Texas, Pennsylvania, and Oklahoma or employees that work for local power companies where the power comes from coal, oil, or gasoline, they won’t have jobs any longer. When wind, solar, and nuclear plants need workers, they will come from the existing work force. There is no economic possibility that five million net new jobs will come from green companies during Obama’s term. Obama has a good idea with creating green collar jobs, it’s just that most won’t be net new jobs, they will be job transfers.

When it comes to minimum wage, a topic extremely misunderstood, Obama plays to emotions rather than economics. First, let’s be clear, the vast majority of employees making minimum wage are either full-time students or retirees. With that said, Economics 101, supply and demand, dictates, by definition, that when minimum wages go up, employment goes down. A simple example: a small business that has an annual budget of $200,000 for salary can employ seventeen employees full time at $5.85 per hour, but only eleven employees at Obama’s minimum wage of $9.50. To offset these six newly unemployed workers, Obama tells this small business owner that they will receive tax credits for health care. Tax credits for health care are mutually exclusive from changing the minimum wage. The tax credits don’t come close to compensating for the reduced work force nor does it compensate for the lost revenue businesses will face due to the fact that they now cannot deliver the goods or services they once produced with nearly 50% more employees. One other feature of increasing the cost of labor is the cost of goods. If minimum wage goes up, and a company can’t afford to lose staff, they must raise their prices. No matter what happens in this scenario, the consumer suffers. Raising minimum wage costs jobs and health care tax credits cannot do anything to mitigate this fact.

The other major pillar of Barrack Obama’s economic policy states that he will raise taxes on dividends and capital gains. He also states that he will “only” raise taxes on families making over $250,000 per year and individuals making $200,000 per year. When the average person hears about dividends and capital gains they inherently think of rich people and everyone knows it’s okay to tax the rich. In truth, over 50% of Americans own stocks and everyone of these people will get hit by Obama’s policies. Obama’s tax policy, in reality, will raise taxes on the majority of people in the country. This fact should not only disturb based off the lack of honesty, but because taxation on capital creation (dividends and capital gains) reduces overall economic growth. When the government takes money from wealth creation there is nothing for investment which will take away from job growth, innovation, and overall economic expansion. One last example, if a small business receives $100,000 in dividends they could invest that money in research and development leading to hiring new employees or delivering a new product; if the government, under Obama, taxes that capital at 25%, there’s now $25,000 less for reinvestment in to the business. This policy fundamentally means that the government will take money from a business intent on growing and give it away as the government sees fit. Taxing dividends and capital gains impacts everyone and, in the end, harms economic prosperity.

When discussing economics one can never be right, unless they employ true honesty. The saying about every coin has two sides perfectly explains the study of money and wealth; and it’s all too clear that Mr. Obama hides with great care the devastating drawbacks to his key economic policies. Know before voting that there cannot be five million net new jobs due to environmental policy, that increasing minimum wage will increase unemployment, and that taxation on capital gains and dividends will impact nearly all Americans causing harm the underlying economy. While understanding economics must be a top priority for our leaders, know what there policies truly mean before voting in November.

Eric JefferyFairfax, [email protected]

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