The Impact of the Obama-care, Obamatax! It’s Ugly…Surprised?

obamacuts

Back in 2009, while discussing the link between taxing pieces recessions and job growth Mr. Obama (blessed be his name) stated that “the last thing you want to do is raise taxes in the middle of a recession because that would just suck up, take more demand out of the economy and put business in a further hole” Sage advice… But even a clock is right twice a day.

Fast forward to today and we are still in a very weak economy job growth has been negative in real terms for the last three years and the Supreme Court has officially declared Obamacare to be a tax … As in tax increase… As in bad for the economy, and bad for all of us.

recessions

Not only has Obama and the Democrats raised taxes during the middle of a recession, (no it’s not officially over we are simply in the second leg of it) through the use of lies, lies and more lies they have managed to enact the single largest tax increase in the history of this country (especially when you count premium mandates and penalties). We have heard about lost policies, premium increases over 300%, the deductibles increasing by up to 300%, of doctors retiring or refusing to participate in Obama care, of entire hospitals and medical groups opting out of Obama care and a couple of scattered positive stories about somebody with cancer who would’ve died without Obamacare… We haven’t heard about his what the anticipated impact of this huge hit to every individual’s disposable income is going to do to the economy once the plan goes into effect… I can tell you right now it’s going to be ugly.

obamacare-cartoon-5

Here in the United States we suffer from a lack of demand because people have stopped spending borrowed money and started the task of paying back. When families have no disposable income due to a lost job or pay freeze brought on by the recession… They don’t buy things like they did before the recession. When you take those same people who are living on less than they’ve ever lived on in the last decade. When you increase their medical insurance by 2 to 300% or anywhere from $200 to a $1,000 a month you further reduce their ability to buy goods and services which keep the country chugging along.

Economic theory predicts that the link between income shocks and consumption is strongest in the case of permanent or unpredictable income shocks. Hence, consumption may fall as a direct consequence of a fallen income induced by job loss, reduced hours or productivity, and negative returns from assets, and more so if these are long-term changes to a household economic resources. Just so no one accuses me of only using ‘rightwing’ sources for the information and alaysis of whats coming I decided to look to the University of California at Berkely for my data and specifically to a recent study that indicates that

Obamacare will kill the economic recovery and throw nearly 6 million Americans out of work.

Those are the extraordinary implications of academic research by Christina D. Romer, who chaired the CEA from January 28, 2009 – September 3, 2010. In a paper entitled: ”

The Macrcoeconomic Effects of Tax Changes ” published by the prestigious American Economic Review in June 2010 (during her tenure at the White House), she stated: “In short, tax increases appear to have a very large, sustained, and highly significant negative impact on output.”

 

The AER paper, co-authored with her husband and fellow UC Berkeley Professor, David H. Romer, examines the impact of tax increases and reductions on U.S. economic growth for the period 1945 to 2007. One of the innovations in the paper is its focus on “exogenous” changes in taxes, that is changes in taxes that were meant to either increase the rate of economic growth (not simply offset a recession), such as the Kennedy, Reagan and Bush tax cuts, or to reduce the budget deficit, such as the Clinton tax increase. Excluded were “endogenous” tax changes that were purely countercyclical, such as the 1975 tax rebates, or were used to “offset another factor that would tend to move output growth away from normal”, such as the tax increases to finance the Korean war and the introduction of the payroll tax to finance Medicare.

“The behavior of output following these more exogenous changes indicates that tax increases are highly contractionary. The effects are strongly significant, highly robust, and much larger than those obtained using broader measures of tax changes.”

Wow! That’s about as strong a statement as you will ever read in a paper published in the AER.

The Romers’ baseline estimate suggests that a tax increase of 1% of GDP (about $160 billion in today’s economy) reduces real GDP by 3% over the next 10 quarters.

In addition, the Romers used a variety of statistical tests to take into account other factors that could influence economic growth at the time of the tax changes, including government spending, monetary policy, the relative price of oil, and even whether the President was a Democrat or Republican (it doesn’t matter much). A summary of the statistical work estimates that a tax increase of 1% of GDP would lead to a fall in output of 2.2% to 3.6% over the next 10 quarters.

“In all cases, the effect of tax changes on output remains large and highly statistically significant,”

they write.

“Thus the finding that tax changes have substantial impacts on output appears to be very durable. That including controls for known output shocks has little effect on the estimated impact of tax changes is important indirect evidence that our new measure of fiscal shocks is not correlated with other factors affecting output.”

Finish this story here…

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1 comment
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