Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Stock Maket Trading Lesson - How to REALLY Trade Markets - 26th Nov 21
SILVER Price Trend Analysis - 26th Nov 21
Federal Reserve Asks Americans to Eat Soy “Meat” for Thanksgiving - 26th Nov 21
Is the S&P 500 Topping or Just Consolidating? - 26th Nov 21
Is a Bigger Drop in Gold Price Just Around the Corner? - 26th Nov 21
Financial Stocks ETF Sector XLF Pullback Sets Up A New $43.60 Upside Target - 26th Nov 21
A Couple of Things to Think About Before Buying Shares - 25th Nov 21
UK Best Fixed Rate Tariff Deal is to NOT FIX Gas and Electric Energy Tariffs During Winter 2021-22 - 25th Nov 21
Stock Market Begins it's Year End Seasonal Santa Rally - 24th Nov 21
How Silver Can Conquer $50+ in 2022 - 24th Nov 21
Stock Market Betting on Hawkish Fed - 24th Nov 21
Stock Market Elliott Wave Trend Forecast - 24th Nov 21
Your once-a-year All-Access Financial Markets Analysis Pass - 24th Nov 21
Did Zillow’s $300 million flop prove me wrong? - 24th Nov 21
Now Malaysian Drivers Renew Their Kurnia Car Insurance Online With Fincrew.my - 24th Nov 21
Gold / Silver Ratio - 23rd Nov 21
Stock Market Sentiment Speaks: Can We Get To 5500SPX In 2022? But 4440SPX Comes First - 23rd Nov 21
A Month-to-month breakdown of how Much Money Individuals are Spending on Stocks - 23rd Nov 21
S&P 500: Rallying Tech Stocks vs. Plummeting Oil Stocks - 23rd Nov 21
Like the Latest Bond Flick, the US Dollar Has No Time to Die - 23rd Nov 21
Why BITCOIN NEW ALL TIME HIGH Changes EVERYTHING! - 22nd Nov 21
Cannabis ETF MJ Basing & Volatility Patterns - 22nd Nov 21
The Most Important Lesson Learned from this COVID Pandemic - 22nd Nov 21
Dow Stock Market Trend Analysis - 22nd Nov 21
UK Covid-19 Booster Jabs Moderna, Pfizer Are They Worth the Risk of Side effects, Illness? - 22nd Nov 21
US Dollar vs Yields vs Stock Market Trends - 20th Nov 21
Inflation Risk: Milton Friedman Would Buy Gold Right Now - 20th Nov 21
How to Determine if It’s Time for You to Outsource Your Packaging Requirements to a Contract Packer - 20th Nov 21
2 easy ways to play Facebook’s Metaverse Spending Spree - 20th Nov 21
Stock Market Margin Debt WARNING! - 19th Nov 21
Gold Mid-Tier Stocks Q3’21 Fundamentals - 19th Nov 21
Protect Your Wealth From PERMANENT Transitory Inflation - 19th Nov 21
Investors Expect High Inflation. Golden Inquisition Ahead? - 19th Nov 21
Will the Senate Confirm a Marxist to Oversee the U.S. Currency System? - 19th Nov 21
When Even Stock Market Bears Act Bullishly (What It May Mean) - 19th Nov 21
Chinese People do NOT Eat Dogs Newspeak - 18th Nov 21
CHINOBLE! Evergrande Reality Exposes China Fiction! - 18th Nov 21
Kondratieff Full-Season Stock Market Sector Rotation - 18th Nov 21
What Stock Market Trends Will Drive Through To 2022? - 18th Nov 21
How to Jump Start Your Motherboard Without a Power Button With Just a Screwdriver - 18th Nov 21
Bitcoin & Ethereum 2021 Trend - 18th Nov 21
FREE TRADE How to Get 2 FREE SHARES Fractional Investing Platform and ISA Specs - 18th Nov 21
Inflation Ain’t Transitory – But the Fed’s Credibility Is - 18th Nov 21
The real reason Facebook just went “all in” on the metaverse - 18th Nov 21
Biden Signs a Bill to Revive Infrastructure… and Gold! - 18th Nov 21
Silver vs US Dollar - 17th Nov 21
Silver Supply and Demand Balance - 17th Nov 21
Sentiment Speaks: This Stock Market Makes Absolutely No Sense - 17th Nov 21
Biden Spending to Build Back Stagflation - 17th Nov 21
Meshing Cryptocurrency Wealth Generation With Global Fiat Money Demise - 17th Nov 21
Dow Stock Market Trend Forecast Into Mid 2022 - 16th Nov 21
Stock Market Minor Cycle Correcting - 16th Nov 21
The INFLATION MEGA-TREND - Ripples of Deflation on an Ocean of Inflation! - 16th Nov 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Obama's Attack on the Middle Class

Politics / US Politics Mar 30, 2009 - 07:35 PM GMT

By: Paul_Craig_Roberts

Politics Best Financial Markets Analysis ArticleObama and his public relations team have made it appear that his trillion dollars in higher taxes will fall only on "the rich." Obama stresses that his tax increase is only for the richest 5 percent of Americans while the other 95 percent receive a tax cut.


The fact of the matter is that the income differences within the top 5% are far wider than the differences between the lower tax brackets and the "rich" American in the 96th percentile.

For Obama, being "rich" begins with $250,000 in annual income, the bottom rung of the top 5 percent.  Compare this "rich" income to that of, for example, Hank Paulson, President George W. Bush's Treasury Secretary when he was the head of Goldman Sachs.

In 2005 Paulson was paid $38.3 million in salary, stock and options. That is 153 times the annual income of the "rich" $250,000 person.

Despite his massive income, Paulson himself was not among the super rich of that year, when a dozen hedge fund operators made $1,000 million.  The hedge fund honchos incomes were 26 times greater than Paulson's and 4,000 times greater than the "rich" man's or family's $250,000.

For most Americans, a $250,000 income would be a godsend, but envy can make us blind. A $250,000 income is not one that will support a rich lifestyle.  Moreover, many people prefer lesser incomes to the years of education, long work hours and stress of  personal liability that are associated with many $250,000 incomes. In truth, those with $250,000 gross incomes have more in common with those at the lower end of the income distribution than with the rich.  A $250,000 income is ten times greater than a $25,000 income, not hundreds or thousands of times greater.  On an after-tax basis, the difference shrinks to about 6 times.

The American tax code taxes the $250,000 income at the same rate as it taxes a $100,000,000 or higher income.  On an after tax basis, after the federal government grabs 30% in income taxes and state government grabs 6%, the "rich" man or woman or family earning $250,000 has $160,000.  In New York City, where there is a city income tax in addition to state and federal, this sum diminishes further.  State sales taxes take another 6 or more percent of most consumption expenditures.

When all is said and done, the after-tax value of a $250,000 income in New York City is about $140,000.

Is this rich?  It might be in a small town in Alabama, but not in New York City.  The "rich" person or family won't be purchasing a Manhattan apartment, much less a brownstone.  They won't be driving a luxury car.  Indeed, they won't be able to afford a parking garage for an economy car.  If they fly anywhere, it won't be in a first class seat.

For the most part, $250,000 incomes are located in large cities where the cost of living is high.  For example, a husband and wife who are associates at major law firms, each of whom works 60 hour weeks and has no job security, earn $125,000 each. They might both have student loans to pay down. For the Obama administration to lump these people in with Hank Paulson or billionaire hedge fund operators is propagandistic.

What is the difference between the $250,000 "rich" income and the $245,000 "non-rich" income?  After Obama's tax scheme goes into effect, the $245,000 income will benefit from a tax cut, and the $250,000 will have a tax increase.  Will people in the 96th percentile ask for pay cuts that will drop them into the 95th percentile?

In America, the truly rich are those in the top 0.5% of the income distribution.  These are the people with yachts, private airplanes, and who are still rich after they lose half their wealth in a stock market collapse caused by government policy that accommodated financial gangsters.

"Oh well, I was worth $600,000,000 last year and only $300,000,000 this year.  Perhaps we should stop drinking $1,000 bottles of rare vintages and move down to $100 a bottle wines.  Probably shouldn't buy that new yacht or that villa in the south of France."

The upper middle class with $250,000 gross incomes are major losers of the financial collapse.  Many of the people in this income class are leveraged to the hilt in order to maintain appearances and can be swept away as easily as the very poor.  But those who were frugal and invested for their future have lost 50% of their savings.  These wiped out people are the ones who will bear the brunt of Obama's tax increase.

If the tax rate on a multi-million dollar annual income goes up by 5 percentage points, the cutbacks won't really affect the lifestyle.  But for the $250,000 gross income group, it means no prospect of private schools and Ivy League education for the children, who will be attending state colleges with the rest of the non-rich.

Obama is attacking the only income class that has any independence—the upper middle class professionals.  The real rich are few in number and seldom present any opposition to government.  Recently, the New York Times reported (March 23, 2009) that the 400 richest Americans' "share of the nation's total wealth has nearly doubled to more than 22 percent."   The average income of the 400 richest Americans is $263 million annually.  That is 1,052 times the income of the "rich" $250,000 income.

What the Obama administration is really doing is taxing ordinary people in order to bail out the super rich. The 95% of Americans who get the tax cut will find that it is offset many times by the depreciation in the dollar and the raging inflation that will result from monetizing the multi-trillion dollar budget deficits made necessary by the bailouts of the banksters.

In the United States, government has become expert at manipulating both left-wing and right-wing ideologies.  It keeps those on both ends of the spectrum set at each other's throats in order to ensure the government's continuing independence from accountability.

Historically, the definition of a free person is a person who owns his own labor.  Serfs were not free , because they owed their feudal lords, the government of that time, a maximum of one-third of their labor.  Nineteenth century slaves were not free, because their owners could expropriate 50% of their labor.

Today, no American is a free person. The lowest tax rate, not counting state income, property tax and sales tax, is 15% Social Security tax and 15% federal income tax.  The "free American" starts off with a 30% tax rate, the position of a medieval serf.

In medieval Europe, when tax rates reached beyond 30%, serfs rebelled and killed their masters .

Paul Craig Roberts [ email him ] was Assistant Secretary of the Treasury during President Reagan's first term.  He was Associate Editor of the Wall Street Journal .  He has held numerous academic appointments, including the William E. Simon Chair, Center for Strategic and International Studies, Georgetown University, and Senior Research Fellow, Hoover Institution, Stanford University. He was awarded the Legion of Honor by French President Francois Mitterrand. He is the author of Supply-Side Revolution : An Insider's Account of Policymaking in Washington ; Alienation and the Soviet Economy and Meltdown: Inside the Soviet Economy , and is the co-author with Lawrence M. Stratton of The Tyranny of Good Intentions : How Prosecutors and Bureaucrats Are Trampling the Constitution in the Name of Justice . Click here for Peter Brimelow's Forbes Magazine interview with Roberts about the recent epidemic of prosecutorial misconduct.

© 2009 Copyright Paul Craig Roberts - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in