TCS Daily


Will Barack Obama Be a One-Term President?

By Alfred G. Cuzán - March 10, 2009 12:00 AM

It may be in bad taste to ask this question now, when Mr. Obama is basking in the glow of the honeymoon with the public every new president enjoys. What prompts it is the recently released federal budget.

According to Office of Management and Budget estimates, this year federal outlays as a percent of gross domestic product, the fiscal ratio, will soar to almost 28%. This is a staggering seven percent point increase from last year. By 2012, under rather rosy scenarios, this ratio is expected to have subsided some, but still be more than a full percentage point above what it was last year. It will probably be even higher than that, and history shows that voters have generally rejected presidents under whose tenure this ratio went up at the same -- or an accelerated -- rate as in the preceding term.

The figure above tells the story. It tracks the percent of GDP spent by the federal government from one presidential election year to the next, starting in 1872. Years in which the incumbent won a majority of the major party vote are indicated by white dots, all others by black dots.

Examine the slope of the line connecting the dots. Note that only three times did incumbents hang on to The White House at the end of a term in which the fiscal ratio did not decline -- or at least moderate -- its rate of growth relative to the previous term. The only exceptions have been Franklin Roosevelt in 1944, Ronald Reagan in 1984, and George W. Bush in 2004.

The Roosevelt exception, coming at the peak of World War II (the last popular war), needs no explanation. Reagan's fiscal expansion amounted to less than 1% and was accompanied by a vigorous economic expansion. Neither condition applied to George W. Bush, and it showed: in 2004, he barely squeaked through, winning reelection by the smallest margin in the major party vote of any sitting president in more than a century.

Barring no surprises, such as a war, Mr. Obama's reelection will largely depend on two things. First, whether the economy makes a strong comeback during the second half of this term, as it did in Reagan's case. If it does, his reelection is practically assured. Second, if the economy is still in recession or undergoing a weak recovery, it will depend on whether spending growth has moderated relative to the previous term (as it did in Roosevelt's first term).

There are reasons to doubt that either of these conditions will hold. In contrast to Reagan, who set out to incentivize entrepreneurship and cut taxes and spending (the fiscal ratio actually fell in his second term), Mr. Obama appears bent on a different approach. If the new budget is a reliable guide, taxes, spending, and bureaucratic burdens are all likely to rise significantly in the next four years.

As the effect of these measures make themselves felt in people's lives and pocketbooks, the public will grow increasingly disenchanted with Mr. Obama. This will render his reelection anything but a sure thing.

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137 Comments

The economy
Increasing taxes has always led to a slowdown in the economy, and Obama has some significant tax increases planned.
BOth directly from increases in rates, and indirectly by gutting deductions.

Secondly, the deficit is not going to shrink anywhere near as fast as Obama projects, because the economy is not going to recover as fast, or as soon as he projects.

Indeed
The deficit will grow as a percentage of GDP as the spending increases while the GDP falls. That's a given for those of here on Planet Reality.

BTW, Roy claims that Obama will bring 'fiscal sanity' back.

Believe it or not, the two can be reconciled if Obama and his Dem cronies enact a VAT to supplement the income tax, like it is in Europe. Watch the 'cap & trade' wallet-rape morph into a VAT before it is all said and done.

Chances are the voters won't like it much. Huge increases in the growth of spending are still huge increases in the growth of spending.

So, Bush was Obama's Hoover. McCain paid that price, so its moot. So, if Obama keeps spending growing faster than even with Bush, according to this guy he's toast.

Of course, that's if we even have free and fair elections going forward. Something like $4 billion of the Porkulus Bill is to fund ACORN starting in 2011 or so. They are trying to take the Australian ballot from us in the the workplace with card check, so why not in federal elections later on?

Obama's idea of how to conduct a 'fair election' straight from the Robert Mugabe School of Government, Saul Alinksy Building:

http://www.youtube.com/watch?v=neGbKHyGuHU

third option: they just won't know about it...but the taxes might make that difficult
People can be tracked by their cell phones right now -- even with them turned off (you have to pull out the battery) and they don't know about it, mostly.

Of course, we aren't taxed for every mile we 'travel' while holding our cell phones, either.

California has been pushing for this the last few years. I predict a thriving 'back alley' shop business that will deactivate the units. Better yet, rip the units out, take them home and keep them in the garage so the state thinks your car is always there.

Free market roads
The best way to pay for roads is to charge those who use them.
GPS or cell phones can be used like an odometer to tick off the distance traveled with the added benefit of a flexible rate based upon time of day and road.
Before everyone goes crazy about being tracked, you can be tracked now with your cell phone and millions use transponders to pay for tolls, and cars can be tracked using Onstar.
I would start out making this a cheaper or cost neutral alternative to gas taxes and those who will use electricity or hybrids will pay the same as those using gas.
With a free market road, if you don't want the electronics to keep track of the toll, take a different road.

Value Added Taxes...
A VAT is applied to a business transaction on the assumption that the purchaser...charged the Value Added Tax...will be converting such imputs into output with profits created and the government wants its share.

The best way to do this is to tax the actual wealth created through each such transaction...income tax...rather than to simply assume that all the players involved earn the same margins. In a competitive market the larger, better capitalized operation should be more profitable per unit. His advantage against any smaller players would be magnified if the VAT...per unit of imput...was the same for everyone. In addition, the larger player would very liekly pay less per unit of raw material imput and his VAT burden would, for that reason, be even lighter...increasing his profit margins further.

In this case the larger player could literally reduce his price point below the cost of his smaller competitor...yet still make some profit...until the weaker operation would be driven out of business. Such an outcome might not actually be in the best interest of the larger economy or the nation. Small companies are the engines of domestic growth.

Governments that are able to enforce their income tax laws do indeed have corporate income taxes rather than value added taxes.

can't buy gas without an active unit.
One version of the tech-rumors I've heard would require the gas pump interrogate the unit in the car before the pump would fuel the car. The tax would be incorporated in the purchase at the point of sale.

Older cars would be given x years for full compliance. After that, no handshake with the on board unit, no gas. Encryption protocols and all that would obviously be TBD.

Its just one version of how the government could squeeze another few pennies from us serfs.


Less than one term
Obama will be out of office already by the summer of '12, by direct public action. No, I don't mean impeachment. That would be too good for him. It will be much more embarrassing than that, for both him as well as everyone who voted for him. None will admit they did, but of course, in the age of internet and video, well... even human memories aren't THAT short.

He will thus outdo Johnson, who didn't even bother to run for re-election because the writing on the wall was too big for even him to deny. And remember the landslide Johnson got. He won HUGE. Approval ratings after election even Obama would envy. But his approval started south as soon as he got to work topping FDR with his Great Society programs, and never looked back.

And no, I'm not kidding. Wait and see.

In A Word
"Will Barack Obama Be a One-Term President?"

Yes.*


*If the establishment media allow it.

What establishment media? They are all going bankrupt.
They may have shot their wad getting BHO elected.

We already have a system that charges people for how much they use.
It's called the gas tax.

The gas tax is preferable to this proposal because bigger vehicles cause more damage to the roads, and bigger vehicles also use more gas.

This new tax won't go up if you are hauling a trailer, or your pickup is filled to the max. Since your gas consumption will increase in such situations, so will the gas tax.

Since there is already a tax that does what this one claims to do, and does it better, there is only one reason left why the govt wants to switch to this tax.

However
Small companies are the engines of domestic growth.

-------------

Big companies are a much more reliable source of brib ... er, political contributions.

Electric cars, air cars, CNG cars, ....
The government will have less incentive to 'bless' them as road worthy if they can't collect fuel taxes.

He's gonna crack up under the strain before too long.
I believe he may do himself *serious* harm when the pressure becomes too great for him to handle. Remember, he has no real long-term friends, no trusted family network, no place to turn to.

He has his ego.

that only charges people for how much FUEL they use, not how much ROAD they use
super-efficient cars and trucks wear down the roads like less efficient ones do.

So, paying a mileage tax is way better. Paying with smart pricing (traffic on the freeway during rush hour vs. at midnight) is even way better.

So, how do out-of-state vechicles get fuel when visiting Disneyland?
They won't be in the system. Not for that state's or even in any other system at all if their home state doesn't have an equivalent.

All nice and dandy, but...
...those points aren't the issue: raising additional revenue is. A.K.A., squeezing more blood out of the turnip.

Income tax revenues are maxed out. Basically, I'm not talking about the marginal rates applied, but the actual total revenues raised. There is an upper limit. See Hauser's Law.

http://en.wikipedia.org/wiki/Hauser%27s_Law

"Governments that are able to enforce their income tax laws do indeed have corporate income taxes rather than value added taxes."

Most have BOTH. The ones that have gotten good at squeezing that blood out of the proverbial turnip certainly do. The smart one's swap the VAT for the corporate income tax or have low corporate income tax rates and/or good/high deductions for them.

Compliance costs are cheaper/easier for smaller businesses with the VAT vs. the corporate income tax. At least in the States. And the corporate tax loopholes in America give the big players more advantages over the smaller ones, since the big players have their own bought-and-paid-for whores called 'congressmembers' that ensure it so. I would thus contend that the VAT would thus be overall better for the smaller players in the aggregate.

Fairness has nothing to do with it. Increasing taxes and getting away with it does. Like payroll & income tax withholding, it is 'hidden' and thus the government can get away with it more than otherwise.

That or some some other embedded tax like 'cap & trade'.

Some guy ran the numbers, talked to economists who specialize in tax policis and figured this out. He wrote this article: "A European-style tax?
Like it or not, there's only one way we're going to be able to pay for our ballooning deficit: a value-added tax." http://money.cnn.com/2008/12/01/news/economy/tully_vat.fortune/index.htm?postversion=2008120209

I happen to disagree that we have to go that route. The Feds are sitting on TRILLIONS (lowball estimate, nobody really knows how much) in real assets they can sell off. Additionally, we can just cut the growth in spending and increase economic growth to get ourselves out of the mess.

But that's just me.

summer of '12?
He'll resign? Hand the keys to the car over to Biden?

Please elaborate.

Also, it wasn't Johnson's socialist spending kick that doomed his re-election, Vietnam did that. Or, is that wrong? (and I am not implying it is, just asking)

Please elaborate. I'd like to learn more of how you see it going down.

They'll get bail out money. You watch (literally)!
If it isn't buried in the recently-passed porkulus bill, they'll get it in the Porkulus II bill they are already drafting.

They won't let their propaganda whores go down any more than they'll let ACORN close its doors, trust me.

Neither did the Clintons
Harry Truman said it best, "If you want a friend in this town, get a dog."

He doesn't need 'friends'. He just needs to buy people off -- like Chavez and Mugabe do and the Clintons did.

Greed & fear overcomes all.

Trouble is....
Stupid governments will force people to use such a system instead of encouraging a switch.

Big companies are much more...
Small companies in any industry are very busy putting their earnings back to work...attacking fresh market opportunities...and they don't have as much income to pay income taxes on...or profits to send along to their favorite politicians.

Of course, large governments and large banks enjoy the benefits of dealing with large industrial players. After crushing Stagflation in 1982 and as we entered the Post Keynesian period of Supply Side economics...that we seem to have recently concluded...the government deregulated much of the practice of financial capitalism. This favored the largest players because smaller entities are generally able to operate under the radar of strict regulation anyway. It was always the big guys who had the most to lose by failing to comply. Therefore, fewer rules and less enforcement set the corporations free to misbehave. While it lasted...some 25 years...this top-down approach supported an ever expanding government and our economy itself did very well. It worked. We grew. Until the paradigm reached its own technical limits, so to speak.

Therefore, it is difficult to fault Supply Side economics and it is understandable that many in positions of power want us to return to it. However, just as with the mature Japan economy...try as the best of us might...we are stuck on an economic plateau, with slow growth going forward and periods of deflationary recession likely to occur.

The big banks are not very likely to underwrite small companies that are far riskier than their large industrial clients...who they are also not lending working capital to. For our economy to start expanding in a sustainable manner again we need lots and lots of healthy, very small banks.

hate to disagree…
But I will. The "first" thing wears off pretty fast. It isn't enough for a second term. What will get him re-elected will be the state of the economy in 2011-12 and how much help the middle class and poor feel he gave them.
Yes, he will probably wrap up the black vote, but likely not by the margin he had in this election. Women and Hispanics will be the key demographic (as the were this time around).

If the election were held in 2010 I do believe he would have real trouble holding the hispanic vote and I know a majority of women wouldn't back him.

Of course, this all pivots on who he has to run against. If the candidate is a loser from the get-go, he will probably win no matter what happens; better the devil we know than one we don't!

right...
Zyndryl,

You said "we can just cut the growth in spending and increase economic growth to get ourselves out of the mess."

Of course, this is the only way out. We can probably not hope to actually reduce government spending so much as to reduce the rate of growth in government spending...but that should be enough if we can get the economy expanding again.

If we are in a garden-variety...but very serious...recession as some economists still propose then what we are seeing today is understandable in that context...and we should start recovering in the 4th Quarter as the stimulus spending finds traction, consumer confidence returns and the banks take a deep breath.

If, however, this is something fundamental regarding our practice of capitalism itself and we are indeed headed into a 10 or 20 year deflationary recession with brief periods of very slow growth...a depression really...then what we are seeing today would make sense too.

Either way, March 2009 was going to look about like this. So we need to wait and see what happens for some months more.

It doesn't do us much good to blame President Obama for this...although we will...if the problem is really the capitalism itself. Supply Side economics having run its course and ending in a financial catastrophe...just as Keynesian economics ended in Stagflation. Let's not get distracted by the politics of all this as the next election cycle begins a year from now. It will be just about then that we might be able to agree about what is really happening to us.

There is a lesson in Japan and we need to think about that. The Japanese are no dummies. They really do understand financial capitalism, multinational banking, Supply Side industrial companies and global economics. Their currency is strong and they are still very wealthy. But their economy remains in terrible trouble after 20 years of total immersion in the same sort of stasis we are dropping down into ourselves.

Cutting rate of growth is a cut
Rush used to discuss this repeatedly.

Reducing the GROWTH of government from 4% to 3% was considered by DC to be cutting the actual size of government. There were howls of protest when such 'cuts' were attempted.

What do you expect though from a government that assumes ALL the money in country belongs to it?

How 'free' is the market in Japan?
Japan is an oligarchy with a culture that punishes individual initiative.

That couldn't have anything to do with their malaise?

Preposterous
I'm no lover of Obamas political goals; but unless there are some really big surprises behind the curtain your point about him being unstable and lacking in a personal support network is ridiculous. On the contrary, he has a demonstrated history of building support networks, and he has achieved a much above average family life vis a vis most politicians.

too cynical
Give him credit for an underlying political philosophy, even if you don't approve of it (as I don't, if it is what I suspect - a grounded belief that a European style socialism is better than an American style more individualistic culture).

I think he actually sees himself as a messiah leading his people out of the wilderness.

An amazing assertion backed by a false analogy
The fast acceleration of opposition to the Vietnam War by his own partisans brought Johnson down. Fast turnarounds in public sentiment are nothing new; but they have never brought a president down during his term - see George the Firsts quick dropoff in popularity between the winning of Gulf War I and the election. George the Second managed to improve his vote total in 2004 despite growing resistance to the Iraq War.

And, if by "direct public action" you mean assassination that will be the greatest disaster in U.S. history.

Ahhh...
...amazingly, I didn't get the 'direct public action' thing at first.

But I disagree on the 'greatest disaster in U.S. history' part. It will be a huge blow to the Dems...with 'negatively charismatic' Biden in office to take the blame for Darby Obama and the Liberal People. For the rest of us, well...

Early retirement of Obama works for me. Not that I am advocating violence here (in case the SS is monitoring this).

So what?
Being deluded doesn't mean you attract more friends vis a vis people more grounded in reality.

And just because I'm cynical doesn't mean I am incorrect. Why do people automatically equate 'cynical' with falsehood? Now that is delusion...

you're too late in attempting to disassociate yourself
NSA computers located in Turkmenistan to avoid the need for warrants to monitor internal U.S. communications have already logged this thread and have no doubt already fully reported on the identities, histories, financial positions, voting records, driving habits, preferences as to groceries and fast food, sexual habits, internet log history, library book withdrawal records, grade school, high school and college transcripts, associations and secondary associations of all participants in this thread to the proper authorities.

Fortunately there's a good chance that the guys who are supposed to be monitoring the output in the half dozen or so copied agencies were probably all out on donut breaks when the couple dozen terabytes or so of data transmitted over, assuming any of them reported to "work" today. But the teletype printouts are in the various multi-ton capacity bins, no doubt stamped "Cosmic Secret/No Congress/No subpoena response." Later today they will be carefully copied in triplicate and then bundled up and transferred to long term storage by the illegal immigrant contract workers who clean up at the NSA, FBI, etc.

King Abdullah will get his copy in a few days after Saudi intelligence has had a chance to translate the entire package into Arabic.

For Roy and Bob Jones...
...This one is for you:

"The Nobel-prize winning economists that are advising the President are deeply committed to the apparently-logical view that if consumers demand something, producers will supply it. When consumers demand less, all government has to do is demand more and everything gets good again. Right?

Wrong. From the business and market perspective, nothing could be worse than an aggressive, activist government threatening higher taxes and tighter regulations. The uncertainty created by activist government simply destroys business confidence. Business doesn’t supply more because demand is higher. Business supplies more when the risk-adjusted returns to capital justify the additional production. Economists have suggested long before Keynes was born that supply creates demand, not the other way around."

http://www.realclearpolitics.com/printpage/?url=http://www.realclearpolitics.com/articles/2009/03/grading_obamas_economic_policy.html

The'd have to pay a flat tax probably.
Given how confiscatory the CA govt is, they might have a 15% hotel-style tax added to any out of state purchase of gasoline, oil, etc.

Nope, he will be here for 8 years.
The media will not abandon him. If necessary, they will put the blame on congress.

If that doesn't work, all problems will be blamed on w. bush, rush limbaugh and TBD boogy man. Boogy man as we all know will be determined by focus group polling when it is necessary.

Lastly the typical BO voter is duuuuuuuuuuumb per a Zogby poll.

And here are some other interesting tidbits from the same Zogby poll (512 Obama Voters 11/13/08-11/15/08) about BO's true believers:

57.4% could NOT correctly say which party controls congress (50/50 shot just by guessing)

71.8% could NOT correctly say Joe Biden quit a previous campaign because of plagiarism (25% chance by guessing)

82.6% could NOT correctly say that Barack Obama won his first election by getting opponents kicked off the ballot (25% chance by guessing)

88.4% could NOT correctly say that Obama said his policies would likely bankrupt the coal industry and make energy rates skyrocket (25% chance by guessing)

56.1% could NOT correctly say Obama started his political career at the home of two former members of the Weather Underground (25% chance by guessing).



The stupid will keep voting for the messiah just as they keep demanding more handouts from the "success class."

Yeah but when the "poor" demands stuff, govt. takes $$ from the "success class"
So long as a majority of residents (citizens and illegals) want stuff from government, our congress and president will provide it.

And why not? It costs a congress-critter (ditto BO) nothing to give away money which is not theirs. And since 99% have no ethical standards beyond the next election, cost shifting is the result.

The result is a small minority, what I call the "success class" covering the costs for the majority what I call the "parasite class." Every year, the providers (the minority which pays half the bills) becomes smaller relative to the ever increasing majority.

As california proved, that is an unstable system. And what does BO propose? Why allowing even more people to not pay taxes but still receive more and more stuff from those who do.

In 50 years society will look back on this time as the "age of stupidity." Of course, in 50 years they will be paying BO's public debt bill.





That's why we need a new frontier
One of the reasons why taxes were low in the 19th century was because people could vote with their feet, horse, Connestoga wagon and train ticket quite easily.

Those destined for success left for the territories, which didn't pay into the federal kiddy. Even today, residents in the Virgin Islands and Puerto Rico don't pay Federal income taxes.

The way technology is advancing with things like 3-D printing for buildings (http://www.contourcrafting.org/) and (later) molecular manufacturing, the seas and then space will become the new accessible frontiers -- people will find it more and more affordable to just pack up and leave the tax man and regulatory man and all the parasites they serve behind. That's why I follow the activities of groups like the Seasteading Institute (http://www.seasteading.org).

In the next twenty years this will be possible. That's when I plan on blowing this taco stand.

It seems that people are wising up
"Polling data show that Mr. Obama's approval rating is dropping and is below where George W. Bush was in an analogous period in 2001. Rasmussen Reports data shows that Mr. Obama's net presidential approval rating -- which is calculated by subtracting the number who strongly disapprove from the number who strongly approve -- is just six, his lowest rating to date."

"There is also a clear sense in the polling that taxes will increase for all Americans because of the stimulus, notwithstanding what the president has said about taxes going down for 95% of Americans. Close to three-quarters expect that government spending will grow under this administration."

"There is no real appetite for increasing taxes to pay for an expanded health-insurance program. Less than half would support such an idea, which is 17% less than the percentage that supported government health insurance when Bill Clinton first considered it in March of 1993."

"All of this is not just a subject for pollsters and analysts to debate. It shows fundamentally that public confidence in government remains low and is slipping. We face the possibility of substantial gridlock along with an absolute absence of public confidence that could come to mirror the lack of confidence in the American economy that the Dow and the S&P are currently showing."

On the not-so-good side:

"Virtually all Americans, more than eight in 10, blame Republicans for the current economic woes, and the only two leaders with lower approval ratings than Harry Reid and Nancy Pelosi are Republican leaders Mitch McConnell and John Boehner."

From: http://online.wsj.com/article/SB123690358175013837.html

"supply creates demand, not the other way around."
If there's one thing the human race produces in abundance, it's ****. With nearly seven billion of us producing the stuff every day, we have an extravagant SUPPLY.

Would you like some? According to your pet theory, people should by now be DEMANDING the stuff.

I'm running a special. How much would you like?

super efficient cars are also super light cars
which drastically reduces their impact on roads.
Damage to roads goes up with the square of a cars weight.

What about Canadian vehicles?
I see a lot of cars with Mexican tags whenever I go near that border as well.

The small guys fly under the regulation radar??????
Maybe a one person shop might be able to get away with that, but nothing bigger.

As to financial deregulation, there were a couple of small moves in that area, but the increases in regulation were much more massive and pervasive.

Supply side has not run it's course, it was killed by regulations
Increased govt spending has never and I mean without exceptions, never caused an increase in economic activity.

The reason is quite simple if you stop to think about it for a minute.

Before govt can spend a dollar, it has to get that dollar, and there are only three ways govt can get a dollar.

1) It can increase taxes.
2) It can borrow it.
3) It can print it.

Those are the only avaialable options.

Options 1 and 2 do nothing to increase the number of dollars in circulation, they just move the money from one pocket to another. That is, they take the money from the people who earned it, and give it to those the govt deems more worthy.

Option 3 is nothing more than a hidden tax. It does this by making the dollars that people hold worth less.

As to blaming Obama, why not, since he is the source of the problem. Blaming capitalism for problems that were caused by govt makes no sense.

Deregulation?
I'm guess Forest never heard of Sarbanes-Oxley and FDICIA.

Both were touted laws to protect the integrity of capital markets.

How's that working?

Supply of GOODS creates its own demand
But since you can't distinguish a "good" from a "bad", your preoccupation with defecant can only be the result of the fact that you are full of it and need to excrete it from oral orifice as well.

Guano makes many rich

That 'idiot' Rush already beat you on that analogy
Rush (I am paraphrasing):

Use one hand to fill up with all the hope Obama will give you. Use the other to defecate in.

See which fills up first and fastest.

Your info a little out of date
The guano trade dried up over a hundred years ago. Chemists came up with artificial phosphates to sell as fertilizer.

There's limit beyond which supply doesn't create demand. After everyone's bought as much of some product as they need, the rest just sits there on the shelf. Doing no economic work.

I was just in Myrtle Beach. There are tens of thousands of repossessed RVs there, sitting door to door on huge lots. There's no market for them.

By the theory, there should be a demand created by their existence. But there isn't.

And there they sit.

Okay, here's another example
I was just down in Myrtle Beach. On the south end of town there's about two miles of parking lots, each maybe 200 yards deep. They are filled with as many unsold RVs as you can get on the lots, parked elbow to elbow.

What would that be, 20-30,000 empty RVs? Or more?

Since supply creates demand, why don't you go down there and buy a couple of thousand? You can undoubtedly make a killing selling them.

which might encourage more 'mileage tax' evasion
since it could be cheaper for people to pay the flat tax.

And, it might be ruled as violating the interstate commerce clause as it would negatively effect interstate travel. If so, lots of people will be going to Vegas not just for the gambling, but the car buying -- especially if Nevada is smart enough to allow for out-of-state car registration for all those Californians.

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