Will you Vote With Your Head or With Your Heart?

The closing days of the political campaigns have ramped up the passion and pushed aside the logic. We might all benefit in the long run if we take a deep breath and ponder the future and the impact we might have on it. Isn’t our collective future worth an hour of objective reasoning?

On his website Barack Obama states that “Obama and Biden will cut income taxes by $1,000 for working families to offset the payroll tax they pay.”  Payroll taxes are imposed on wages and salaries in addition to income taxes. There are no tax deductions or exemptions for payroll taxes. Medicare and federal unemployment taxes are payroll taxes. A tax on an employee’s salary or on the income of a self-employed individual is called Income Tax. Pull out your W-2 form from last year, Federal income tax withheld is in box 2. The payroll tax withheld is shown in boxes 4 and 6 labeled Social Security and Medicare.

The IRS reports that about one third of those filing tax returns do not pay any Income Tax. Of those some already receive a tax credit call the Earned Income Tax Credit. This tax credit reduces the payroll tax burden on low income earners and is supported by both parties. It is to some extent a social welfare credit because it offsets government pension (Social Security) and socialized medicine (Medicare) programs. In essence, the top one third of earners are already paying a portion of the bottom one third’s programs. The government controls these programs and will change them as they see fit without direct input from the people who pay into them.

What Senator Obama advocates is raising the portion of taxpayers receiving this social welfare from one third to a bit more than one half. This is an expansion of social welfare to be sure, but perhaps not the initiation of it. Since it appears that it is simply a matter of degree and not one of strict policy change we might feel that there is not a significant issue. This would be a naïve position.

The first failure of this policy of more tax for the wealthy is the golden rule. That is, the one with the gold makes the rules. The top 5% of tax filers are the top 5% not because the government allows them to be, but because they have risen to that level through whatever process they employ. The purpose of this article is not to judge how they got there. What we should recognize is that they have an uncanny ability to stay there, and they stay there with the help of the government. Republican or Democrat, Congress, there real source of tax policy, is influenced by their wealth. Yes, we can blame the President, but the culprit resides down the street at the capitol.

The source of this first failure is the influence that comes at a high price which is affordable only by those with the means to pay it. That top 5% includes large corporations and massively wealthy individuals, but it also includes powerful organizations like unions and special interests such as environmental lobbies, gun lobbies, and foreign governments. You get to purchase a stake in that influence once every two years with a vote. And as we have seen this year, even that can be bought by groups such as YPM and ACORN.

If you visited the Federal Election Commission’s website and took the time to analyze the date you’d find that 75% of Barack Obama’s fantastic fundraising comes from large donors and institutional (special interest) donors. Only about one fourth comes from small donors. What is equally telling is that the Democratic and Republican parties (not the presidential election funds) funds are about even and enjoy a very healthy income from special interests. Money it seems trumps the will of the people in every instance except one. That would be the candidates that honor their pledge and their position on campaign reform by accepting federal funds. In this case, it is John McCain.

The second failure of Senator Obama’s plan is more subtle and takes some insight to figure out. Simply put it is his failure to follow through on his promise to do the big things. Fortunately we don’t have to look too far back to see the character of this candidate. Even more importantly, we can see the trend before we vote on November 4^th. You have already seen Senator’s Obama’s behavior regarding campaign finance. Other great ideals have suffered the same fate when balanced against his need to win.

Bipartisanship, without any track record in this area was subject only to his promise to transcend party. All pretense of that promise is gone from his campaign rhetoric. In foreign policy, education, health, the economy, military, and other areas his policies have leaned further and further to the left as the campaign moves forward. The reason for this might be a general feeling within the Democratic party that there will be no need for bipartisanship if they win big in November. Another reason not so readily apparent might be the willingness to show special interest supporters he will back them in an effort to shore up their support before the election. This second reason takes on meaning if you believe the polls that show the gap failing to widen. It makes even more sense when you understand that these special interests bet on both horses and merely favor one.

Failure to support bipartisanship is underscored by Nancy Pelosi’s comments recently when she stately bluntly that a Democratic Congress would write and pass their own legislation on a second stimulus package. Congress will have no need to represent the American People, only their own party and more the point their own special interests. The President, however, would be expected to represent the whole of America and not just one segment of the population. We have seen by Barack Obama’s actions in the closing weeks of the campaign less and less instead of more and more movement to the center. In fact we have seen arrogance suggesting that he believes he has already won without the need to listen to the voters will.

The third failure of Senator Obama’s plan fails to take into consideration the realities of the market. Companies learned hard lessons during previous recessions. One of those lessons was not to wait until things got worse to take action. The activity seen in the job market and on the sales floors today is a result of companies looking ahead and planning for a downturn. There is good news and bad news in this factor. The good news is that by acting in advance of find a bottom good companies will generally survive and recovery will happen faster than in the past. The bad news is that to react to trends companies must forecast the future. Remember the golden rule, that the people that run companies are not idiots suggest that they are hedging their bets. They can see the media bias, the campaign hype, and the effects of both on the voting public. They will position their companies for the worst and hope for the best and that means job losses and salary stagnation.

The effects of the third failure means lower stock prices, fewer jobs, lower salaries and most importantly less tax revenue. The contributors to campaign coffers are not going to be willing to trim their expectations just because there is less money in the form of taxes. The stick they swing is just as large tomorrow as it is today and they will expect their rewards to follow. If not, they will deal a blow no politician can accept, they will shut the tap. The politicians with the biggest debt to pay their contributors will speak with the loudest voices. In the end the 95% tax promise will go the way of bipartisanship. In fact it has already started with a “refinement” of the plan to require certain qualifications for recipients.

On November 4^th or sooner if you are voting early you will have to decide who you can believe. Who has established a behavior that will triumph over temptation? Who has kept their commitments even though it has cost their ambition? At the end of the day will you get what you paid for or will you get what you expect? Will you vote with your heart because you hope for change or will you vote with your head because you know (in your heart) we need a man who can deal with the reality of Washington?