As featured in The Wall Street Journal, Money Magazine, and more!
     

President-Elect Obama’s Approach to the Economy

This article was written by in Economy. 23 comments.


CNN Money is presenting an in-depth feature explaining where President-elect Obama stands on a variety of economic issues. Here are some highlights:

  • Temporarily eliminate taxes on unemployment benefits.
  • Tax oil profits and use the money to help fund $1,000 rebate checks for consumers hit by high energy costs.
  • Tax carried interest as ordinary income rather than as an investment gain, thereby subjecting it to much higher tax rates than 15%.
  • Raise capital gains and dividend tax rates to 20% from 15% for couples making more than $250,000 and singles making more than $200,000.
  • Require any financial institution participating in Treasury’s Troubled Asset Relief Program to put a 90-day moratorium on foreclosures for homeowners “acting in good faith.”
  • Leave all tax cuts in place for everyone except couples making more than $250,000 and single filers making more than $200,000. Those high-income groups would see their top two income tax rates revert to 36% and 39.6% from 33% and 35% respectively.
  • Provide a federally funded match on retirement savings for families earning below $75,000.
  • Raise minimum wage to $9.50 an hour by 2011 and tie future rises to inflation.

Those are just a few of the changes Obama would like to bring to the economic system in the United States. There are many more points outlined by CNN Money. I encourage everyone to read through the list to understand what the new president’s economic goals will be.

Feel free to discuss in the comments of this post for economic thoughts or in the Consumerism Commentary Community (C3) for general thoughts about the election.

Update: If you tried to register to participate in the C3 today and couldn’t, please try again. I was just informed that there was a problem with the registration page.

Updated December 22, 2011 and originally published November 5, 2008. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.

Email Email Print Print
avatar
Points: ♦127,475
Rank: Platinum
About the author

Luke Landes, also known as Flexo, is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about him and follow Luke Landes on Twitter. View all articles by .

{ 23 comments… read them below or add one }

avatar Rassah

I just hope they hold off on those tax changes for a while. We don’t want another Hoover situation. I also kinda doubt we can afford the match on retirement savings, considering we’re already having issues funding Social Security. And as for tying minimum wage to inflation, would that run the risk of the two chasing each other and pushing inflation up even faster? Or would the Fed’s tight control on cash keep the supply of it low enough that a rise in wages will only lower demand for workers?

Reply to this comment

avatar Pete

Now that the elections over we can all sit back and watch as the election promises fall by the wayside – one by one..

Reply to this comment

avatar Tom

Temporarily eliminate taxes on unemployment benefits.

~Good idea, for now

Tax oil profits and use the money to help fund $1,000 rebate checks for consumers hit by high energy costs.

~Undecided…. I read that Oil Companies are operating off of very slim margins. It’s the volume of oil sold that’s making record profits. A small tax would have a huge impact.

Tax carried interest as ordinary income rather than as an investment gain, thereby subjecting it to much higher tax rates than 15%.

~Don’t care… from my understanding it will only be private equity and hedge funds that are affected

Raise capital gains and dividend tax rates to 20% from 15% for couples making more than $250,000 and singles making more than $200,000.

~Horrible idea… any tax on captial gains and dividends will hurt retirement, savings regardless of income.

Require any financial institution participating in Treasury’s Troubled Asset Relief Program to put a 90-day moratorium on foreclosures for homeowners “acting in good faith.”

~Depends on “acting in good faith”… I am still undecided on bailing out troubled homeowners, I don’t agree with their choices of ARM or Interest Only mortgages… seemed ridiculous.

Leave all tax cuts in place for everyone except couples making more than $250,000 and single filers making more than $200,000. Those high-income groups would see their top two income tax rates revert to 36% and 39.6% from 33% and 35% respectively.

~Bad idea… I do believe that this is punishing success.

Provide a federally funded match on retirement savings for families earning below $75,000.

~Excellent… i’m in that category… go right ahead. How much is the match?

Raise minimum wage to $9.50 an hour by 2011 and tie future rises to inflation.

~I don’t know about the minimum wage… but I agree with future rises tied to inflation. If that’s the case… tie everyones minimum raise to inflation.

Reply to this comment

avatar JohnS

Match on retirement accounts!! Where is this money going to come from? I agree with the other poster they have issues with Social Security which is supposed to be the government equivalent of your retirement money.

Tax oil companies – Bad idea. They’ll just pass the tax onto us and we pay higher gas prices. One of the other posters already pointed out that they have a very small profit margin. If you want to tax someone tax those with a high profit margin – say Microsoft (26% profit margin and run by one of the richest men in the world).

Horrible ideas all for the economy

Reply to this comment

avatar Mr. ToughMoneyLove

Unless Obama plans on vetoing any bills that don’t conform to his ideas, the Democrat leadership of the House and Senate are going to set the tax and spend agenda, not Obama. The pent-up demand will be hard to control.

Reply to this comment

avatar ym

Kiss your 401k’s goodbye as well.

Glad I bought the SDS and DUG at the close yesterday. Obama’s policies are going to be a disaster for the markets. I will be shorting all the day down to S&P 600.

It is funny that the middle class supported him, when all his policies are designed to help low income families at the expense of the middle class.

This country will sure experience change, but I don’t think it will be the change the middle class is looking for.

Burn baby burn…

Reply to this comment

avatar Miranda

While I don’t agree with the windfall tax, I do think that the subsidies and tax breaks Big Oil enjoys should be taken away. And I don’t think Obama’s policies will be so bad for the middle class.

Like #3, I’m not fussed about the carried interest tax, although I’m still mulling the capital gains thing to a certain extent.

Reply to this comment

avatar Emily

Since when did people making over 200 K a year become middle class? And since when did a 39 percent tax bracket become extremely high? Taxes are still at all time lows!! Does anyone get this? Just check out what they used to be, 90%. Most wealthy people have the money to hire good accountants and they end up paying much less. I am sick and tired of hearing about this wealth redistrbution shit. Our government needs to be funded by someone. Get over it Richies!! Everyone needs to pay taxes!

Reply to this comment

avatar ym

Emily -

I’m sick of hearing that the “rich” need to pay their share. 50% of the people in this country don’t pay any tax. The top 25% of earners in this country pay almost all the tax.

Reply to this comment

avatar mskalinin

That’s just the point though. Not everyone DOES pay taxes, a lot of people get back more money at the end of the year than they paid in taxes. The “rich” pay more than 70% of our taxes, and now Obama wants them to be responsible for even more. The message I see is “Be successful, but not TOO successful.”

Rich people are not Mama and Papa, at least not in my opinion.

Reply to this comment

avatar bob

emily – just curious what you consider rich? does a family of 5 making $200k living in new england qualify as rich in your mind? my wife and i currently make around 200k and pay close to $50k in taxes, incl fed, state and real estate (this doesn’t even include the 6% sales tax we pay on everything purchased here).

if you think this is nothing, do you care to share how much you make and how much you pay in taxes? i’d be willing to bet that i probably pay more in taxes that you make in income for the year

Reply to this comment

avatar ym

couldn’t agree more……….be successful, just not too successful

obama will bring change to this country……a clear message that hard work and success are punished, while laziness and mediocrity are rewarded

Reply to this comment

avatar Luke Landes ♦127,475 (Platinum)

The punishment for “success” isn’t as drastic as it sounds. Tax rates are currently historically low and you don’t pay your marginal tax rate on your entire income. In 2008, someone earning $200,000 pays 33% on only about $4,000 of income, and the rest of the income is taxed at an overall rate of about 22%.

Someone earning $350,000 pays 35% on only $300 of income, and the rest of the income is taxed at about 22% in total.

That’s before deductions and credits common for those earning that kind of income.

Those earning significantly more usually have options for deferring a significant portion of their income or having at least part of their income taxed at capital gains rates.

Reply to this comment

avatar deepali

Thanks for the extra info, Flexo. I think a lot people (on both sides) have a lot of knee-jerk uninformed reactions to the taxes issue.

In response to what you actually posted, I don’t think Obama’s ideas are all reasonable. Frankly, I can’t remember a time when any presidential candidate put forward a realistic plan. I think intelligent people are suppose to realize this and discern for themselves what is actually possible and what is just rhetoric.

I think Obama’s plan to “tax the rich” got a lot of undeserved flak. He’s not “raising taxes” on people who make over 250K – he’s just not planning on renewing Bush’s tax cut. The rate will simply revert to pre-Bush tax cuts.

The one I am not excited about and am hoping will gain no traction is raising the capital gains tax. I imagine there are a lot of members of Congress who will be affected and not excited about it either.

Reply to this comment

avatar Alan

For those who invest in the stock market or mutual funds, we are the true owners of big oil companies. Their profits translate into stock value increases and dividend payouts for our retirements. Taxing those profits will hurt us more than the oil company.

Reply to this comment

avatar James

If you want a good look at historical tax brackets, here is a good sight. It has the top and bottom brackets from 1913 through 2000.

http://www.ntu.org/main/page_printable.php?PageID=19

One thing becomes very clear, the percentage of taxes paid by the rich are indeed at historical lows. Since 1988 the highest tax brackets has been below 40%. Also, the really wealthy end up paying a lot less since the majority of their income comes from capital gains related income. I believe it was Warren Buffet that said that his secretary pays a higher percentages of taxes than he does. While yes he pays more, the point is that the percentage he pays is less.

If you want to look at some shocking times, look at 1944-45 and 1950-1963. During those years the upper tax bracket was taxes at 90%.

So, rolling back the tax breaks for the wealthiest 2% of Americans to 39.6% is pretty good if you look at our 95 years of paying income tax.

I for one do not believe in the “trickle down theory”. In fact, more people are employed by small business than they are by mega corporations. If 95% of small businesses bring in less than $250,000 worth of income, then they don’t have anything to worry about. Going with this logic, if you give tax breaks to the middle class (those that are starting and/or running small businesses) then they will be able to create new jobs and grow. Trickle down is BS and the last 20 years has proven this with the widening gap between the rich and the poor. I believe that this country needs to grow from the inside out. Empower the middle class and they will be the ones that will generate growth in this country.

On a side note, if you look closely it has been the middle class that I believe is the cause of the current economical issues. Not because they did something wrong (though many did), but because they have simply run out of money to spend. They are over extended and are unable to continue fueling this economy. Get the middle class back on its feet and the wheels of industry will begin anew.

Just my 2 cents :)

Reply to this comment

avatar Sarah

Does anyone on this blog know the actual budget deficit? I heard that gained a new digit recently at $10 trillion, but I’m not sure if anyone actually knows the real amount:

http://www.usatoday.com/news/washington/2006-08-02-deficit-usat_x.htm

Whatever the amount is, we’re adding another $55 billion next week to it:

http://www.bloomberg.com/apps/news?pid=20601009&sid=aDYSwRgY8cLg&refer=bonds

I’m not sure if people really understand what this means. Today, if you divide $10 trillion by 300 million Americans, that is roughly $33,000 that every man, woman, and child in America owns. That is TODAY. The Government Accountability Office (don’t laugh, they are actually good auditors), at http://www.gao.gov did a study on this, updated April, 2008, titled
The Nation’s Long-Term Fiscal Outlook”

http://www.gao.gov/new.items/d08783r.pdf

The very first sentence of this says, “Our updated simulations continue to illustrate that the long-term fiscal outlook is unsustainable. (See fig. 1),” and this report was issued BEFORE the market crashed.

I’m sure the readers of this blog manage their own finances responsibly, and we all understand the importance of eliminating interest accruing on debt. My point is that SOMEONE has to pay for this, and the sooner the better.

Someone above mentioned “punishing success,” but it’s not a simple as that. This is “success” for the wealthiest only. The figures in this NY Times editorial suggest to me that “success” has been achieved at the expense of the Middle Class.

http://www.nytimes.com/2007/08/29/opinion/29wed1.html

I feel that the ones who succeeded the most, due to government policies that exploded our nation deficit deserve to pay more. I can not afford to pay my $33,000 share of the national debt, can you?

Don’t flame me without backing it up with documented facts. I’ll just ignore you.

Reply to this comment

avatar Andy

Raising the social security tax to 4% on all income for individuals making over $250,000 is most definately a new tax. That jumps the tax rate of 39% to 43% immediately.

That is now a 7% tax increase and the money is going to come from somewhere. I don’t know anyone who is going to volunteer 7% of their income because Obama said we have to be our brothers keeper.

Labor is the easiest way to cut expense. So my guess is that is where they are going to start.

Most union contracts are tied to minimum wage. When minimum wage increases, most union wages increase at the same amount.

This will result in either higher cost for product, or elimination of expense. Again labor is the easiest way to cut expense.

Obama’s plan is not going to hurt the rich. They can find ways to recoup the loss in their income. His plan is going to help the poor. They are the people who will benefit most. The members of the middle class will see a token of benefit from his plan, but most likely that will be at the expense of the loss of jobs by some of their fellow employees.

95% of small business owners earn less than $250,000 a year and they should be fine. It’s the five percent of small business that does earn more than $250,000 but less than $5 million and employs nearly 90% of the people that work for small business. Those are the people who are going to see job cuts.

Reply to this comment

avatar Rassah

This election I voted on the assumption that the new president will try to win by convincing more ignorant people with populist speech, but has enough education and understanding of the economy to know that it’s best to listen to the experts, and to know how to pick the best experts.
In other words, I don’t believe what Obama said in the campaign, and what he actually believes and plans to do, are the same things. McCain I think would have been a disaster since he just doesn’t understand the economy at all. Granted that’s still better than someone who doesn’t understand the economy, and yet still makes all the decisions himself, like our “The Decider”

Reply to this comment

avatar Dan

Dang, I picked the wrong year to break the $75k barrier. Federal match?! I’m gonna miss out on that!

Reply to this comment

avatar Matt

If you are an adult and you can’t earn more than the minimum wage, then you are a loser. Simple as that. It is not your employers responsibility to pay you more than you are worth just because you have squandered your educational opportunities.

Reply to this comment

avatar Regina

One thing that I could relieve the American people of their financial burdens and possibly save Fannie May, Freddie Mac, GM, ford, and all other motor viehicle companies, is not by bailing them out. I will be the first to admitt that the American people got ourselves into a financial crises. Raising taxes to Bail these companies out is not going to help. All that it is going to do is put more of a financiwl burden on all (rich and poor) American people. The problem is not that people can not afford their house notes or their vehicle notes, its the interest rates that come with those notes that people can not afford. If the government wants to raise taxes they might get stronger support from the American people if they used it not as a Bail out for the companies but by bailing out the people. If our government would decide to pay off the interest rates attatched to all mortgages, and vehicle notes, that would allow the premiemums to go down and people would have more money to spend on other things this would help boost our economy. My house not would decrease by $250. a month my car not would decrease by $100.per month this would allow my family to invest $350. a month into the economy. I know that it does not seem like much but other people who have a greater interest rate and mortgage rate then I would be able to invest more into the economy. After all if you take just $350. per month times the amount of people in this country the government would be paid back at least three times the amount they spent by the time our homes are paid off. That to me is what would make all the difference in the world.

Reply to this comment

avatar Dan

Regina,

I for one would be quite p.o.’ed if the government bailed out individuals who took on mortgages they couldn’t afford.

For years I got pressure from my friends, “Dan, you should buy a house! You don’t need to save 20% down! Look at us!”

I did the responsible thing. I resisted that pressure. I continued to rent while I continued to save.

If the government bails out everyone who bought a house under terms they couldn’t afford, and leaves those of us who actually had a realistic plan hanging in the wind, what good is that going to do?

Reply to this comment

Leave a Comment

Connect with Facebook

Note: Use your name or a unique handle, not the name of a website or business. No deep links or business URLs are allowed. Spam, including promotional linking to a company website, will be deleted. By submitting your comment you are agreeing to these terms and conditions.

Notify me of followup comments via e-mail. You can also subscribe without commenting.

Previous post:

Next post: