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October 5, 2011

Responding to President Obama's Deficit Cutting Plan

Recently, President Obama called a press conference to announce how he was going to finance his proposed jobs bill.

“In the long run, our prosperity also depends on our ability to pay down the massive debt we’ve accumulated over the past decade.

“If we don’t act soon, the debt will begin to crowd out everything else.”

Unfortunately, we are already there Mr. President. Growth in the first quarter was less than 1/2 % and second quarter GDP was only 1.4%. Growth is being held down and annual government deficits are 5 times what they were in 2007. This means the private sector is spending more money financing government deficits than making business investments. As we’ve learned from Solyndra, the government does not make very good use of that money. Remember this comment the next time a liberal says the “crowding out” effect isn’t real.

“So Washington has to live within its means. The government has to do what families have been doing across this country for years. “

Mr. President, the average American family that looks to live within its means, does so by cutting spending, not automatically increasing its income by 10%. That’s why you saying that and then asking to increase taxes on anyone does not make any sense.

The President goes on to state that he does not want to cut spending to the point as to harm education, small businesses, and middle class families from relief. If the government’s involvement in these people’s lives is so dire to their success, what does that say about the state of big government in the lives of Americans today? Is there a middle class family or small business out there that believes it can succeed without big government?

President Obama went on the enact the “Buffett Whine” in which he stated that secretaries and teachers pay more in income taxes than millionaires. He states this simply because Warren Buffett does. Buffett states this because he is comparing his capital gains taxes to his secretary’s income taxes, which are as different as any two types can be. The top 25% of income earners in America pay 86.3% of all income taxes.

The President went on to bash the Speaker of the house for not supporting any “revenue enhancements.” We’ve heard of taxing just the rich before. In the late 1960s, we passed the Alternative Minimum Tax. From Wikipedia:

Although the AMT was originally enacted to target 155 high-income households, it now affects millions of middle-income families each year. The number of households that pay the tax has increased significantly in the last decade: In 1997, for example, 605,000 taxpayers paid the AMT;[49] by 2008, the number of affected taxpayers jumped to 3.9 million, or about 4% of individual taxpayers.[50] A total of 27% of households that paid the AMT in 2008 had adjusted gross income of $200,000 or less.[51]

The primary reason for AMT growth is the fact that the AMT exemption, unlike regular income tax items, is not indexed to inflation. This means that income thresholds do not keep pace with the cost of living.[52] As a result, the tax affects an increasing number of households each year, as workers’ incomes adjust to inflation and surpass AMT eligibility levels.

Should we really be so gullible again?

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