In early July, I welcomed readers to the POR (Pelosi-Obama-Reid) Economy:
House Speaker Nancy Pelosi, presidential candidate Barack Obama, and Senate majority leader Harry Reid aren’t merely talking the economy down; they’re taking it down. …
Businesses and investors are responding to their total lack of seriousness by battening down the hatches and preparing for the worst. …
These three and their party appear not to care one whit about the damage ever-higher energy prices and the prospect of punitive taxes are doing, right now, to both the economy and the stock market. They have set and reached a new low in legislative negligence.
One quarter into the POR Economy, I regret to inform readers that I greatly underestimated the damage these three would do and how quickly they would do it.
Three factors, all courtesy of the POR triumvirate, have led us to this point. As noted, I saw two of them coming: energy foolishness and tax increases.
The oil-averse stubbornness of the POR Economy’s architects has ranged from the offensive to the ridiculous. Pelosi infamously asked protesters, “Can we drill your brains?” Reid, who apparently moonlights as a epidemiologist, dolefully informed us that fossil fuels are making us sick. Obama erroneously told us that we can solve our energy problems with tune-ups and tire inflation. Thankfully, because of public pressure in an election year, the offshore drilling ban has expired. But Democrats have made it clear that reinstituting the ban is a “top priority” for next year — never mind the trillions in royalties that could fill federal and state coffers.
Taxes? Congress has no interest in extending the tax system that has been in place during the last six years. Obama is on record saying that having “fair” (i.e., higher) rates of taxation on capital gains is more important than their impact on economic growth or tax receipts.
At his campaign’s website, Obama has backed off of his original plan to apply the full Social Security payroll tax rate of 12.4% (6.2% employer-paid, 6.2% employee-paid) to all earned income above $250,000:
Instead, he and Joe Biden are considering plans that would ask those making over $250,000 to pay in the range of two to four percent more in total (combined employer and employee).
(“Ask”? And, as if we don’t know the answer, what if they say, “no thanks”?)
But Obama has otherwise doubled down on his redistributionist ideas, in the process claiming that he will deliver “tax cuts” to 95% of Americans. That’s a pretty good trick, considering that over a third of Americans pay no federal income tax already.
On Monday, the Wall Street Journal properly called this claim an “illusion”:
For the Obama Democrats, a tax cut is no longer letting you keep more of what you earn. In their lexicon, a tax cut includes tens of billions of dollars in government handouts that are disguised by the phrase “tax credit.”
But if the two previously known factors of energy and taxes weren’t bad enough, the third — one I didn’t anticipate — has been brutal. It can be traced largely to Barack Obama and others with his equal-results-regardless-of-merit mindset.
You see, thanks to blockbuster research done by Ragnar Danneskjold at the Jawa Report, we know that Obama was a plaintiff in a lawsuit against banking behemoth Citibank in 1994, ultimately settled out of court in 1998. In essence, the suit demanded that the bank approve an equal percentage of minority and non-minority mortgage loan applicants. Danneskjold writes: “The net result of this sort of litigation was, of course, that banks like Citibank started approving more subprime loans in the 1990s.”
Lawsuits like this fueled the explosive growth of these high-risk loans to minority borrowers who could not qualify for conventional mortgage financing. Government-sponsored enterprises Fannie Mae and Freddie Mac (a.k.a. Fanron and Fredron) also responded to these legal pressures by lowering credit score thresholds for subprime and conventional loan approvals.
The high default and foreclosure rates that followed ultimately led to the crackups at Fan and Fred. Those failures in turn contributed to liquidity problems in the banking system that were apparently so serious that Congress rammed through a $700 billion bank “bailout” package. Despite such supposedly corrective measures, equity markets have steeply dived.
All of this likely makes Barack Obama the first U.S. presidential candidate in history to cause an economic downturn even before the general election has been held.
After experiencing barely one quarter of the POR Economy, can it really be that the American people want four more years of this?