I understand the historical nature of Barack Obama's inauguration. I understand the euphoria African-Americans must feel with a black man as president. I understand the wave of optimism sweeping the country because we have broken the racial divide. I can even understand some of the frenzy the media has showered over this man, but is it me or has this guy been elevated to the position of a god? Will he indeed calm the waters and part the red sea? I am beginning to wonder. Even the crowd during the inauguration shouted, "Obama, Obama, Obama!" President-elect Obama has even had a coin made in his honor before even becoming the president? What president has given several economic press conferences before becoming the president of the United States? A group of singers from Kenya were introduced in some of the festivities, and one of the singers said, "We in Kenya hope he is a good representative for our country." I couldn't help but think I thought he was representing the United States not Kenya. This inauguration is being transmitted to 240 countries, and it is estimated that it will be the most watched event ever on television. I understand why, but I am not interested in the pomp and circumstance of this man. I am interested in how Barack Obama can make this country a better country.
The slogan for the Obama campaign has been change we can believe in. Change in what? I have yet to hear what change he is talking about. Change can be deleterious to the country as well as beneficial. Is the change increasing taxes on the very people who create the jobs? Is the change instituting cap and trade schemes that will further crimp businesses? Is the change printing more money causing inflation or hyperinflation? Let's not forget that 58 million people did not vote for Obama. He won an electoral landslide, but not a popular vote landslide. These 58 million voters were not voting for John McCain so much as they were voting against Barack Obama. Barack Obama comes from the Chicago corrupt political machine with a line of nefarious relationships. Will all this come back to haunt him?
In President Reagan's inaugural address, he stated, "Government is not the solution to the problem, Government is the problem." In fact, if you read, President Reagan's inaugural address. It is a propos for what is happening in today's economic environment. But, Barack Obama believes that government is the solution, not the problem, a 360º turn from what this country was founded on and what Reagan stood for – individual responsibility.
Barack Obama's eloquence in his oratory skills is self-evident, but his rhetoric disguises an agenda that may cripple this economy even further. In order for Barack Obama to be successful, he will have to renege on just about every policy he put forward during his campaign. In Obama's inaugural speech, he said, "The market can't march along if it favors only the prosperous." What does that mean? It is code for the redistribution of wealth. This is the basic tenet of Obama's philosophy when time after time this philosophy has been proven to be toxic to the economy. Obama wants to increase taxes on the very people who create jobs. He wants to raise the capital gains rate and dividend rate. And, then he wants to send checks to people who do not pay taxes. This has proved counter to a growing economy.
President John F Kennedy believed that lower taxes were the answer to growing the economy. Kennedy in reference to his tax reduction bill stated,
There is no doubt in my mind in my mind that this tax reduction bill, in and of itself, can bring about an increase in the gross national product of approximately $50 billion in the next few years. If it does, these lower rates of taxation will bring in at least $12 billion in additional revenue.
Unfortunately, President Kennedy did not see the passage of his bill; he was assassinated before it passed. The Kennedy tax cuts caused the economy to grow rapidly in 1964, 1965 and 1966.
Four presidents succeeded Kennedy and all four, LBJ, Richard Nixon, Gerald Ford and Jimmy Carter enacted policies that were very destructive to the economy. LBJ began his great society to end poverty in America. This was the beginning of the social welfare state, an abysmal failure, which did not end until Bill Clinton. He then signed an income tax surcharge to help finance the Vietnam War and then instituted the infamous Alternative Minimum Tax, (ATM). Nixon enacted the Clean Air and Clean Water statutes which imposed costs far exceeding their benefits. He began the modern era of regulation giving super powers to the Environmental Protection Agency and which ended up crippling many blue-collar industries over the next decade. In 1971, Nixon took the dollar off the gold standard which maintained confidence in the US dollar. This was a major reason for the oil embargo and the surge in oil prices. It was also the beginning of a sustained hyperinflation until the Reagan administration. In 1971 Gold was 35 dollars an ounce. By 1980, gold was selling at 850 dollars an ounce. Nixon then instituted his wage and price controls which proved disastrous in a free market. Ford enacted a wind falls profit tax, a campaign promise that Barack Obama touts today. This was Ford's attempt to deal with rising oil prices – sound familiar? In addition he signed an energy bill with price controls and fuel efficiency standards for cars. These policies also proved to be ineffective. Then comes Carter. Carter opposed California's proposition 13 saying it would increase the unemployment rate – it did just the opposite. Carter believed in price controls and high taxes. Carter had no idea how to fight the raging inflation. In fact, he capitulated when he finally stated, "It is a myth that government can stop inflation." From the mid 1960s to 1982 (when Reagan's tax cuts began to take effect), the stock market and the economy were on a downward trajectory.
What is interesting to note is in every case when tax rates were cut, the stock market soared, and when tax rates were increased, the stock market has dropped. The stock market is reflective of the health of the economy. Ronald Reagan's tax cuts reversed the trend of the four previous presidents and caused a 25 year economic boom. When earnings grow, the stock market increases. We will always have recessions in good times and bad, but the trick is for the government not to overreact in economic downturns like it is doing today. Economic policy plays a major role in the health of the country. Interest rates on short term treasuries are currently -0- and the government keeps printing money to bail out every Tom Dick and Henry. This will only result in hyperinflation possibly similar to that of the 70s or worse. The stock market is down 272 points today sitting at 8004, 40% below its all time high. There is 7.2 trillion dollars in cash sitting on the side lines, but no one wants to put their money back to work with so much uncertainty in an Obama administration. I have been a net seller of stocks because I fear we are headed for rough waters. If Obama came out and said he was not going to raise capital gains tax, or raise the tax on anyone else or if he said he was going to cut the corporate tax and create incentives for business, you would see an economic revival. This has always proven to be the case. Even, President Coolidge understood this when he cut taxes, and which helped contribute to the roaring 20s which we have all heard of. But Barack Obama thinks more like Jimmy Carter or Franklin Delano Roosevelt, two failed presidents than Ronald Reagan or even John F. Kennedy.
Ronald Reagan said in his inaugural speech
The business of our nation goes forward. These United States are confronted with an economic affliction of great proportions. We suffer from the longest and one of the worst sustained inflations in our national history. It distorts our economic decisions.
The economic problems of the day distort the economic decisions of our day. My fear is Barack Obama is going to enact policies that will not work in the mistaken belief he is helping the economy. This was the case with both Hoover and Roosevelt during the great depression. An economic downturn that should have lasted a few years turned into the Great Depression by bad economic policy. By 1932, New Zealand, Japan, Greece, Romania, Chile, Denmark, Finland and Sweden began seeing industrial production levels rise again – but not the United States. Bad economic policy created the Great Depression that lasted until World War 2. In 1937 there was a depression within a depression. Will Barack Obama enact policies that will worsen the economy? The one caveat with the Roosevelt presidency is he understood the danger of Nazism. I am doubtful whether Barack Obama understands the danger of radical Islam. Obama has made the comment that he may not be able to enact all of his policies due to our economic crisis. Well if he can't enact them when the economic crisis is bad, why should they be enacted at all?
Barack Obama also stated in his speech, "We will warm back the specter of a warming planet" which of course is code for cap and trade schemes that do not work. France has tried it, and their CO2 emissions have actually increased. According to Rasmussen 59% of people do not believe global warming is caused by human activity. It seems Al Gore is losing his battle. Of course this won't phase the new Obama administration. His administration will enact cap and trade policies that will not work and further crimp economic activity, and make us less competitive on a global scale.
The idea of green jobs is also a myth. Obama wants to spend oodles of money to create jobs and his so-called green jobs. Hoover and Roosevelt tried public works throughout the Depression, and it did not revive the economy. The government does not create jobs. The private sector creates jobs. If you decrease taxes that incentivizes businesses to expand, it will cause entrepreneurs to take risks, and it will increase the flow of venture capital.
There is not one line that will be memorable in Obama's speech. Reagan said, "Government is not the solution to the problem, Government is the problem." Roosevelt said, "The only think we have to fear is fear itself." And Kennedy, "Ask not what your country can do for you; ask what you can do for your country." But in Obama's speech, there was nothing.
Our enemies must be salivating at the mouth with a Barack Obama presidency.
I hope I am wrong but the policies of Barack Obama seem to be headed in the wrong direction.
Sources: The End of Prosperity by Arthur B. Laffer, Stephen Moore, and Peter J. Tanous
: The Forgotten Man by Amity Shales