President Obama Facing Challenges

By: John Hampton

President Obama will be faced with many challenges in the upcoming election. It will be difficult for him to divert attention and camouflage the truth, as focus continues to sharpen. It is incumbent upon us as American citizens to do our own homework and research on critical issues affecting us all.

How many times have we heard the rhetoric about Warren Buffett paying less in taxes than his secretary? It’s true; Buffett does pay a lesser rate, as do many millionaires, Democrat and Republican alike. For example: after releasing his 2010 and 2011 returns, we learned that Mitt Romney paid taxes at a rate of about 15% on his $21 million annual income. But it’s not because of anything illegal or unethical, and it’s not because of tricky accounting gimmicks. Buffett’s secretary probably paid somewhere in the 30% range.

The disparity between the two can be explained in terms of capital gains vs. income tax. Currently, the top tax rate on capital gains (profits made from selling assets that have been held for at least a year) is 15%. The top income tax rate on wages above $388,000 is 35%. If you make less than that, then you pay a little less. Right now, Romney is able to live off the income made from his investments. He no longer receives a pay check like most working Americans. But when he did receive a paycheck, he paid at the income tax rate. Any person wealthy enough to live on interest income, is permitted by the tax code to pay at the capital gains rate. This lower rate is meant to encourage long term investment, which in turn enables businesses to expand and the economy to grow.

My guess is that all Democrats living in the 1% pursue the same strategies. You don’t make into the 1% without exercising every advantage available. Of course wealthy Democrats openly advocate for higher taxes because it’s the politically correct thing to do. It also helps to keep the “Occupy” crowd from raising awareness to the fact that they themselves (Democrats) take advantage of the same opportunities. Only a change in the capital gains rate would affect the 1%. I’m not in favor of that, but if the Democrats really believed the system was unfair, why didn’t they change it when they had the majority? They didn’t change it because they don’t want Americans to know that they too avail themselves of the same advantages as their opponents. If that information became widespread knowledge, it would eliminate their ability to use it against Republicans. It could even spark a demand for an increase in the capital gains rate, something that would indeed affect their wallets.

After being elected Governor of Massachusetts in 2003, Romney relinquished his annual salary of $135,000 throughout his term. In addition, he donated the inheritance he received from his father to charity. OK so he didn’t need the money, but nevertheless, those actions certainly do not fit the ruthless capitalist image of Romney that the Democrats would like us to believe.

The unemployment rate has gone from about 9.2% last August to the current rate of 8.3%. This seems difficult to understand with the number of marquee companies that have announced layoffs during roughly the same time period. For example: in July of 2011, Cisco Systems Inc. (networking equipment maker) announced it would be cutting 6,500 employees. In September of 2011, Bank of America announced plans to layoff 30,000 employees over the next few years, Merck & Co (pharmaceuticals) said that it planned to cut 12-13% of its workforce by 2015, and  Lockheed announced it would eliminate 1,500 jobs from its aeronautics branch in response to pressure limiting U.S. defense spending.

In October of 2011, Business Insider ran a story with the title – Bloodbath At Goldman: Way More Layoffs In Securities And Investment Banking Than Originally Planned. In February of this year, PepsiCo announced plans to layoff 8,700 employees, and just this month GM announced it would layoff 1,300 employees.

From the Bureau of Labor Statistics website under the heading Mass Layoffs (Monthly) – In January 2012 employers took 1,434 mass layoff actions involving 129,920 workers. Under the heading Extended Mass Layoffs (Quarterly) – In the fourth quarter of last year 1,638 extended mass layoff events took place impacting 266,971 workers.

Of course there are always businesses hiring somewhere, but if things are really improving why would so many prominent names be cutting their work forces? It is not difficult for the government to manipulate employment/unemployment numbers in order to produce a desired result. Referring back to the Bureau of Labor Statistics, I will give you a brief overview of how the unemployment figure is calculated. Each month the government conducts what they call a Current Population Survey (CPS). About 60,000 households consisting of approximately 110,000 persons makes up the sample unit. “Highly trained and experienced Census Bureau employees” conduct interviews both in person and by phone.

The interviews are the main source of data used to determine total unemployment, so of course the information must be accurate. However, during the interview respondents are never specifically asked if they are unemployed, nor are they given an opportunity to state their own labor force status. Unless they already know how the government defines unemployment, many of them are still unaware of their actual status even after the interview is completed.

Also, the person conducting the interview is not the one who determines the respondent’s labor force classification. The same interviewers that the government’s own website describes as “highly trained and experienced”, are apparently incapable of making that decision on their own. Instead, they dutifully ask the survey questions in the prescribed manner and enter the data into a computer. The computer then makes the final decision to classify someone as either employed, unemployed (you have no job, you are available to work, and you are actively looking for work) or not in the labor force (neither employed nor unemployed). So, if you have exhausted all your unemployment benefits, you still have no job, and you see no point in continuing to look for something that doesn’t exist, the government considers you no longer in the labor force.

The official number the government uses when reporting unemployment is called the U-3 rate. It is the proportion of the civilian labor force that is unemployed and actively looking for a job. A different rate, called the U-6 rate, includes marginally attached workers (those who have stopped looking) and those working part-time. Some part-timers working as little as one hour per week are counted as employed when using the U-3 rate. The contrast between the two rates is stark. U-3 is at 8.3% and the more comprehensive U-6 is close to 15%.

I found some video from last week of the President speaking at the Daimler Mount Holly Truck Manufacturing Plant in North Carolina. He was speaking of his strategy to reduce gas prices and dependence on foreign oil. Among other things he related that: We must develop every source of American energy if we are going to control our energy future. We must develop wind, solar, nuclear and bio fuels. We need to invest in the technology that will help us use less oil in our cars and trucks, our buildings and factories. And as we start using less, that lowers the demand and prices come down.

According to the Energy Information Administration, American dependence on foreign sources of oil has been declining since its 2005 peak. And the agency estimates that about 49% of our imports now come from the Western Hemisphere. About 12% comes from Saudi Arabia. So Americans have been doing a pretty good job of using less gas and oil as the President described, yet prices continue to climb dramatically! That belies the President’s statement.

Of course the Iranian threat to block the Strait of Hormuz is a factor in rising prices. And even though unseasonably warm temperatures have created an excess supply, it still hasn’t helped because oil companies are now exporting record amounts of oil and gas to the highest overseas bidders. And the devaluation of the Dollar undertaken by this administration continues to increase the cost of everything we buy. The President said that even though our own consumption has declined, world consumption has increased. Countries like India and Pakistan are growing and using more oil. And he noted that China will soon be adding 100,000 more vehicles to their roads.

The President says he wants us to be energy independent. I certainly agree with that. But at the same time, it sounds like he is saying that since we are now part of the “global” economy, we must learn to share with everyone because there is only so much oil to go around, and as long as he remains President, domestic sources will remain as they currently are – underground and off limits!

About two weeks ago there was a story on the Fox News website entitled: Schumer urges Saudis to pump up oil production as gas prices rise. Schumer, Democratic Senator from New York, wrote a letter to Secretary Clinton urging her department to convince Saudi Arabia to increase production. He went on to say that nothing being proposed by Republicans would bring relief at the pump more quickly than increased Saudi production. He also posited that lower production levels have a negative impact on global markets and warned that Iranian threats and interventions have shaken the markets and could harm the American economic recovery, suggesting that immediate action by the Saudis could offset that impact.

So there you have it folks! The President wants us to decrease our dependence on foreign oil, but at the same time, a high profile Democratic senator is saying that the most effective way to bring down gas prices and ensure the health of our economic recovery is to grovel at the feet of the Saudis and hope they agree to increase production.

Are energy alternatives necessary going forward? Of course they are and had they been developed 20-30 years ago we would be reaping the benefits today. But consider green energy Solyndra that went bankrupt and took half a billion taxpayer dollars with it. And production of the Chevy Volt has been temporarily halted because current inventory has far outpaced demand. Only 8,000 Volts were sold in all of 2011. And many of those were recalled due to a fire hazard. This halt in production is responsible for the 1,300 GM layoffs I mentioned earlier. It may be the latest in energy efficient vehicles, but Americans don’t want it. As usual, the Obama administration is not listening. Ener1, another green company, received a $118 million U.S. Energy Department grant to make electric car batteries. Just this past January, they filed for chapter 11 bankruptcy.

The President says we cannot drill our way out of high gas prices. On the other hand, the road to wide spread use of green energy will not be paved for years to come. Continue to develop alternative sources in the background without destroying billions of taxpayer dollars in the process. When sufficient demand exists, the market will be in a much better position to deliver. But for now, the future is still oil. We have it, we need to produce it, and we need to use it here at home. If we do that, we don’t need to care about how many additional cars the Chinese put on their roads. Does anyone think that mass American vehicular deployment is being discussed by Chinese government officials? And maybe we won’t have to listen to the President of the United States suggesting that, in the spirit of fairness, we must reduce our own consumption in order to facilitate expanded consumption by other countries.

I believe we need to keep these and other key issues front and center as the election year evolves. Let us not only encourage our representatives to promote conservative based ideas that will enable America to rise from her knees and rebuild her foundation, but also to keep the pressure on the Democrats and expose their big government agenda at every opportunity. Let us ourselves promote these same ideas.

There is no doubt that both Republicans and Democrats are responsible for leading America to the place she finds herself today. However, another four years of Barack Obama will certainly be the knockout punch that ends her reign as undisputed champion, and relegates her to the state of mediocrity now mandated by today’s global standards.

About The Author John Hampton:
John Hampton lives in Tehachapi CA and is quite concerned about the policies and motives of the current Administration. He believes in a system that holds our freedoms sacred, promotes personal responsibility, prudence and high moral standards.

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