Hopefully President Obama Will Break A Few Campaign Promises

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Copyright © 2008 Arlo Mooney


Although I did not vote for President Barack Obama, I wish him well and I hope that he is as successful as President Bill Clinton. If Obama governs as a centrist as Bill Clinton did, he should not have any problem getting a second term. But if he chooses to govern to the left, he will have a troublesome and short four years as Jimmy Carter once had.

Why John McCain Failed...

John McCain failed in his quest for the presidency for a number of reasons, but primarily because he could not or would not explain the underlying problems with Obama's economic policies.

Perhaps he could not explain the problems of Obama's campaign promises regarding the economy, because he did not understand them himself. Perhaps the problems simply could not be explained in a sound bite.

But I believe that John McCain failed in his quest for the White House, because he would not accept advice from the faithful who were not part of his internal campaign team. Perhaps his people shielded him from outside input.

My wife says that the McCain team probably thought of me as a stalker in the wild. I had sent explanations of the problems of Obama's economic plans several times, but it would seem that my help never escaped the email box. ;-)

Great presidents of years past were great because they surrounded themselves with really smart people. The measure of a great president - be it Bill Clinton, Ronald Reagan, John F. Kennedy, Franklin D. Roosevelt and others - can be succinctly described by their ability to find and get people who best understood the needs of the nation and how to solve those problems faced by average Americans.

In the end, the American people were worried about the economy, and yet, John McCain could not show us why his approach to the economy would be better than Barack Obamas. That is why he lost his bid for the White House.

What Is In It For Me?

Barack Obama understood something else that John McCain seemingly could not. President-elect Obama understood that people vote on the premise of what is in the deal for them.

A tax cut for 95% of Americans and a tax increase for the richest Americans is something that resonated for many people.

So long as the tax payer thinks that they will gain more than they lose, they are frequently happy to hear promises of this type.

This is where the McCain campaign failed to understand the marketing of a politician. Jumping up and screaming about how the 42% who do not pay taxes now will receive a check from Obama, as if that were a bad thing, alienated the 42% who do not pay taxes. To argue that this was the equivalent of "welfare" was to stomp on the hopes and dreams of 42% of the electorate.

To have told the story to the American people in a way that could have swayed the electorate to McCain would have been to explain the underlying economy of Obama's plan. But John McCain could not or would not do so.

The rich voted on principles different than the economy, because the rich understand what I am getting ready to show you now.

Shifting The Tax Burden To Business

Under the basic structure of Obama's tax plan, he is going to eliminate most taxes paid by those who work for a living. On the surface, that seems like an awesome plan. Even I would benefit from lower taxes under Obama's plans.

But here is the problem...

The Republicans utterly failed to tell us this story, so that most of us could understand the fallacy of this plan.

Higher taxes for business will not eliminate jobs directly, as described by the Republican brand! As a business owner, I have a hand's on understanding of this scenario.

Businesses will do what is possible to bring the same amount of after-tax profits they have seen previously. Especially when the business is a sole proprietorship like mine, our profits become our incomes. So, if I need $70,000 per year to sustain my lifestyle, I will find ways to increase my business back to the level I need to be at to sustain my standard of living.

Taxing my profits only ensures that I must earn more money, so that I can maintain my standard of living. Laying off people is not an acceptable option, because fewer staff will ensure a shrinking ability to earn the money I need to keep my standard of living.

Since I am not willing to lower my standard of living and laying off people is not an option, I will have to find other ways to make the difference. The only way that I am going to be able to maintain my business is to increase my prices. And so long as the consumer feels that my products and services are necessities in their lives, my customers will pay the higher prices.

How This Affects You...

The bakery company will not cut its profits or lay off people; instead, it will increase the price of a loaf of bread.

The lumber store will not cut its profits or lay off people; instead, it will increase the cost of lumber.

The oil companies will not reduce its profits or lay off people; instead it will increase the cost of gasoline.

All in all, the prices of all products and services will increase to reflect the new tax environment.

As prices eventually increased to reflect higher fuel prices during the summer of 2008, so will all prices increase to reflect higher business taxes and the increasing prices of all raw materials, due to higher business taxes. Increasing prices for any reason will increase the rate of inflation for everything in the United States.

Amazingly, the 42% who did not pay taxes under George Bush will now be paying the new taxes on everything they buy. And you will pay those taxes, because you cannot stop eating or buying goods and services.

Whereas 42% of Americans do not pay taxes now, all Americans will soon be paying for Obama's "new taxes on the rich".

Maybe that check that Obama will send the 42% who do not pay taxes now will offset the increase in the cost of living - maybe it will not.

Will Obama's Economic Policies Reflect A Net-Gain Or A Net-Loss?

If the tax cut for the middle-income and the checks for the lower-income families are greater than the increased cost of goods and services, then this plan will be a net-gain for all middle- and lower-income families home finances.

If the tax cut fails to add enough money to the budgets of families to offset the increased cost of goods and services, then the American people's personal finances will experience a net-loss.

It is all about standard of living. Will you in four years have a better standard of living under Obama's tax cuts? Or, will you find that the increased cost of products and services have eaten away the benefit that you received from Obama under his tax cut for 95% of American taxpayers?

In Conclusion...

I am not very optimistic about middle- to lower-income families finding a net-gain under Obama's tax plans... But, I hope that I am wrong.

Many pundits suggest that Barack Obama will not be able to keep all of his campaign promises, and it is still my hope that in four years we will be able to look back to see that Obama's tax plan was one of the promises that Obama did not keep.




About the Author:
Arlo Mooney has dedicated himself to helping people properly manage their personal finances, by helping them to understand the gravity of their personal financial decisions. With his background in economics, he strives to help people understand complex economic principles, by explaining conditions in ways that few people have the patience or skill to do. Read more of Arlos' thoughts at: http://cash-advance-payday-loans.org/blog