Tuesday, July 17, 2012

Is Obamanomics More Like Chitty Chitty Bang Bang or Evel Knievel?

Chitty Chitty Bang Bang is a children’s fantasy story written by Ian Fleming later made into a 1968 movie about a junked race car which was transformed by an eccentric inventor into a magical automobile which could sprout wings when it hurled off a cliff.

Evel Knievel
Evel Knievel was a Montana born daredevil who gained national attention from the mid  1960s through the  1970s for his attempts to jump over objects like the fountain at Caesar’s Palace in Las Vegas on New Year’s Eve 1967, 13 buses at Wembley Stadium and the Snake River Canyon in Idaho.  While Kneival did have some successes in his stunt entertainment career, he also managed to break 433 bones during his career. 

Despite the near rocket power engine of the Skycycle X-2, the drouge parachute deployed early and the prevailing winds dragged it back south into the canyon short of the goal.  Having enough horsepower to make the leap  is not the only factor of success, as Knievel nearly managed to make the 1966 Caesar’s Palace jump and the 1975 Wembley jump but did landed hard and crashed. The problem with being a daredevil is once one engages in risky showmanship then that individual becomes practically uninsurable. 

Unfortunately, Obamanomics and petty partisan showmanship is threatening to thrown the American economy off the financial cliff.  President Obama has fully invested in class warfare by demanding that the rich pay their fair share and demands that Bush era tax rates expire for those making $250,000 or more a year.  The problem is that windfall from such a demogogic economic policy would only raise $40 Billion per annum, which would only fund the Federal government for eight days. Yet the Taxmaggedon  hikes would shrink the economy by 1.3% and cost 710,000.  This is foreseeable as small businesses would be walloped by these proposals.  It sounds compelling to stick it to millionaires (or those who make $250,000 per year), but many of those are S-Corporations, which are small businesses that combine personal and business income for tax reporting purposes.  Small businesses are the job generators in America.

Congressional Democrats has gotten into the high flying daredevil act on the economy.  To gain political leverage for Obama’s class envy policy of raising the rich’s taxes, Senate Democrats are willing to raise everyone’s taxes unless there is a tax hike for the rich.  Senator Patty Murray (D-WA) the prospective Chair of the Senate Banking committee in the 113th Congress, has declared that she will filibuster any lame duck session fix unless Democrats get their way.  This would mean that the Bush Tax rates would expire for everyone and taxes would go up across the board.

Of course, taxes for Obamacare will commence.  The .9% payroll tax on upper income tax payers and the 3.8% tax on “unearned income” will further erode any steam in America’s economic engine.

Super-Committee Protestors on Capitol Hill
Another impediment to economic growth from the District of Calamity is sequestration.  In order for President Obama to be given authority to raise the debt limit by $2.1 Trillion  in August 2011, Obama agreed to the bipartisan Budget Control Act of 2011. 

 Congress agreed to a $900 Billion spending cut and commissioned a Super-Committee to find another $1.5 Trillion in cuts.  Since the Super-Committee was stymied in reaching legislative agreements, a triggering mechanism will activate a series of automatic across the boards cuts split evenly between military and civilian spending.  A Chmura Economics and Analysis report indicates that a staggering 2.1 million jobs will be lost due to willy nilly sequestration. The reality of these cuts on the military side will mean that personnel rather than weapons in development will be slashed.  Lest this report be dismissed because the  Aerospaces Instustries Association sponsored report is looking after its own, the Economic Impact of the Budget Control Act of 2011 notes that 48,059 jobs in healthcare, 98,953 in construction, 473,250 in manufacturing and 617,449 federal jobs are at risk. That will affect the well-to-do economy of federal workers between the beltways, but the prospective layoff notices may not be issued until after election day in November.  How convenient.

Considering that the $837 Billion of Porkulus stimulus spending of 2011 has done nothing to increase jobs vis-a-vis doing nothing, the combination of prevailing winds should further ground prospective economic growth.  We may not have to wait until New Years Eve 2013 to discover that our economy will not soar to Vulgaria like Chitty Chitty Bang Bang. But without a parachute  and without significant economic propulsion, the American economy will likely crash after being pushed off the fiscal cliffs just like Evel Knievel on an unlucky jump.

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