Obama and the Economy

 By Scott Feldman

Not a good Friday on the economic front. The government reported the unemployment rate had jumped from 6.1 percent in September to 6.5 percent in October. That's another 240 thousand jobs cuts last month bringing the nation's unemployment rate to a 14-year high.  Long Island numbers come out next week. September showed an unemployment rate of 5.2 percent up from 3.9 percent for the same period a year ago. Long Island Association economist Pearl Kamer expects the new jobless rate number could be anywhere from 6 to 6.5 percent.

So, against that backdrop, President-elect Obama held a news conference saying the country is facing the greatest economic challenge of our lifetime and "we're going to have to act swifly to resolve it." He said, "immediately after I become president I will confront this economic crisis head-on by taking all necessary steps to ease the credit crisis, help hardworking families, and restore growth and prosperity." Obama's comments came just a short time after he and Vice-President-elect Joe Biden met privately with economic experts to discuss ways to stabilize the troubled economy.

Pearl Kamer tells me Obama shouldn't think about raising ANY taxes, including hiking the tax rate on capital gains and dividends. She says, "when you raise taxes in a severe recession you simply exacerbate the recession because you're restricting disposable income." And given the latest unemployment numbers, she says the government should extend jobless benefits. She'd also like to see an infusion of federal dollars to help local and state governments with infrastructure projects. Things like repairing streets and sewers and construction of the third rail for the Long Island railroad. Subsidies too would be important for our emerging technologies, nano-tech and bio-science.

In talking to Long Islanders on the streets, they hope Obama won't raise their taxes. He's talking about a boost in the tax rate for anybody making over 250K. Small business owners say they need a tax break, not a tax hike to keep afloat in an economy where consumer spending is shrinking every day. And they'd like to see the new administration put some pressure on the banks to loosen credit.

Carl and Dorothy Rennhack from Bohemia were telling me, "there has to be some changes made. 8 years under Bush has been awful." These are Republicans who went Democrat this past Tuesday. They're retirees living on a fixed income struggling to pay their bills, including higher health care premiums. I asked them if they thought things would be better under Obama than Bush.  Carl's reply, " We certainly hope so. Truthfully, I don't think we can do worse." For his part, Obama says Congress needs to pass an economic stimulus package either before or just after he takes office in January. It's clear that right from the get-go, Obama will have to be laser focused on finding ways to remedy the dismal economy.

Comments

[John]

Obviously, cutting taxes is the way to go. History shows that lower tax rates lead to greater tax revenues, because more money is moving around. Instead, between personal income tax, sales tax, and corporate taxes passed on to the consumer, the aggregate tax is something near 60%! Gee, and you say the economy has been slowing?

Not that Mr. Obama is likely to be reading the News 12 blog comments, but he needs to cut taxes, especially on productive people. Wage-earners and companies that make products expand the economy. People who inherit money, loan money, or gamble it in reselling (stocks, real estate, etc.) are draining the money out of the economy without contributing, and so should carry more of the burden.

In particular, the tax break for offshoring jobs MUST absolutely stop. If American companies keep sending jobs to China, India, and Russia, then clearly there are fewer of us who will be able to help the economy get back on its feet.

Or he can bring back the New Deal. Indebt the country further to the banks (because the money needs to be borrowed from somewhere), and give us all jobs fixing the potholes and repainting buildings. It's socialism, but so is buying out major banks and insurers. At least this would give people a paycheck and get things ready for the next administration.