Monday, August 25, 2008

Team Obama Embracing Supply-Side Policies???

Turns out, at least according to Larry Kudlow, that Barack Obama may be moving back to the center to embrace Supply Side policies!

Kudlow claims that "Team Obama is moving toward the supply-side and pivoting toward the political center on key aspects of its tax policy. Writing in Thursday’s Wall Street Journal, Obama advisors Jason Furman and Austan Goolsbee outlined a plan that would only raise tax rates on capital-gains and dividends from 15 percent to 20 percent for individuals making more than $200,000 and on family incomes above $250,000. Prior to this, investors worried that Obama would double the 15 percent tax rate on cap-gains and bring the 15 percent rate on dividends back to 40 percent."

Of course, Kudlow rightly isn’t thrilled about the Capital gains hike at all, as he notes, “Obama’s 20 percent rate on investment, investors would suffer a 6 percent incentive loss on their cap-gain incomes and another 5.5 percent incentive drop on dividends. The cost of capital would rise under Obama and investment returns would decline by more than 11 percent. Uncle Sam will keep more and investors will retain less, all while the economy is languishing.”

Kudlow also notes that “the Obama people acknowledge at least some effects from supply-side incentives. And perhaps they are implicitly recognizing the likelihood that higher tax rates on cap-gains and dividends will generate lower revenues and a higher budget deficit.

"It also seems clear that the Obama tax plan is not a growth policy, but a social policy that uses tax fairness as a means of redistributing income. There’s a long history of failed redistributionism, and this is where the Obama plan falls apart.”
Adding, “Plus, the world’s changed since the 1990s. The flat-tax revolution coming out of Eastern Europe has slashed marginal rates on individuals and corporations, resulting in strong growth and big revenue gains that keep budget deficits down."
Still, as Larry Kudlow says, “Team Obama’s small shift toward the supply-side remains a positive development.”


conservative brother said...

It's all an illusion JMK. Obama's economic plan has been trashed by the overwhelming majority of of economists, financial advisors,investors and the financial community in general. Last week an economic advisor was on CNBC. The panel ate him for lunch. If Obama can't understand something as simple as how the supply of oil increases and decreases price, why would anyone expect him to understand the overall concept of supply side econ? Oh yeah, three weeks ago the co host of Happy Hour on Fox Business destroyed another Obama advisor on his economic plan. They will never figure it out. All the plans in the world won't jump start an economy's growth when fuel prices are too high thus choking off disposable income to fuel the economy,

JMK said...

I agree that his plan is STILL regressive, Tyrone.

I'd also agree that it would be disastrous.

For people like us, Baack Obama is merely "a Liberal Democrat." I reviled Mario Cuomo (and I'm half Italian) and the Kennedy's (I'm half Irish) becase they were, to me, "just Liberal Democrats."

But to millions of others, Barack Obama stands as a beacon of "hope," of "racial healing," of "youthfulness."

And many, many of those people will be voting this year.

One of the deficiencies of modern democracies is that even the laziest, most gullible and least informed voters have every much right to vote as the best informed and most knowledgable voters.

I know all too well that somewhere, some goober in a trailer-park will almost certainly be cancelling out my vote, as he/she does EVERY year, but that's all the more reason for me to cancel out theirs!

Tyrone, I don't think Obama is that dumb that he doesn't understand that supply and demand and ONLY supply and demand controls the prices of ALL commodities (including oil) any more than Warren Buffet is dumb enough not to understand why he pays appx. 5% of his earnings in taxes, while is $40,000/year secretary pays 38% of hers in taxes.

Buffet's income is shielded by Trusts and Foundations and his "income" is all "investment income" that's taxed at the Capital Gains rate.

Smart people often say dumb things like to convince the rest of us that (1) they care about us, more than themselves (which is BS) and (2) how unfair the current system, which they oppose on the grounds that it allows others to accrue wealth, really is.

The bottomline is that Barack Obama is a Liberal Democrat and adheres to the Pelosi/Reid agenda, which is a legacy of the Ted Kennedy agenda, which is "governemnt knows how to spend your money a lot better than you do."

I wouldn't vote for ANY Liberal Democrat, but at this point, I'll take whatever solace I can (considering the odds on McCain) and Kudlow's piece noting the slight shift in the Obama Team's policies (yes, it all could be a ruse) is at least "slight solace."

I agree with you on the issues Tyrone, BUT we're swimming against the tide right now. We all may have to ride out some very tough times, because that's what Liberal policies ALWAYS beget.

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