Thursday, October 30, 2008

Great Perspective on YOUR Vote!!!

This is an opinion piece from The Wall Street Journal
by Daniel Henninger

The True Meaning of 'Historic Vote'
Shifting America's animating idea from creation to protection

The most basic explanation for why Barack Obama may win next Tuesday is that voters want economic deliverance. The standard fix for this in politics everywhere is to crowbar the old party out and patch in the other one. It is true as well that the historic nature of the nation's first African-American candidacy would play a big role.

Push past the historic candidacy, however, and one sees something even larger at stake in this vote. One sees what Joe (The Plumber) Wurzelbacher saw. The real "change" being put to a vote for the American people in 2008 is not simply a break from the economic policies of "the past eight years" but with the American economic philosophy of the past 200 years. This election is about a long-term change in America's idea of itself.

I don't agree with the argument that an Obama-Pelosi-Reid government is a one-off, that good old nonideological American pragmatism will temper their ambitions. Not true. With this election, the U.S. is at a philosophical tipping point.

The goal of Sen. Obama and the modern, "progressive" Democratic Party is to move the U.S. in the direction of Western Europe, the so-called German model and its "social market economy." Under this notion, business is highly regulated, as it would be in the next Congress under Democratic House committee chairmen Markey, Frank and Waxman. Business is allowed to create "wealth" so long as its utility is not primarily to create new jobs or economic growth but to support a deep welfare system.

The political planets are aligned to make this achievable. In the aftermath of the financial crisis, prominent Democrats, European leaders in France and Germany and more U.S. newspaper articles than one can count have said that the crisis proves the need to permanently tame the American "free-market" model. P.O.W. Alan Greenspan is broadcasting confessions. The question is: Are the American people of a mind to throw in the towel on the system that got them here?

This would be a historic shift, one post-Vietnam Democrats have been trying to achieve since their failed fight with Ronald Reagan's "Cowboy Capitalism."

Of course Cowboy Capitalism built the country. More than any previous nation in history, the United States made its way forward on a 200-year wave of upwardly mobile, profit-seeking merchants, tradesmen, craftsmen and workers. They blew out of New England and New York, rolled across the wildernesses of the Central States, pushed across a tough Western frontier and banged into San Francisco and Los Angeles, leaving in their path city after city of vast wealth.

The U.S. emerged a superpower, and the tool of that ascent was simple -- the pursuit of economic growth. Now China, India and Brazil, embracing high-growth Cowboy Capitalism, are doing what we did, only their cities are bigger.

Now comes Barack Obama, standing at the head of a progressive Democratic Party, his right hand rising to say, "Mothers, don't let your babies grow up to be for-profit cowboys. It's time to spread the wealth around."

What this implies, undeniably, is that the United States would move away from running with the high GDP, high-growth nations rising today as economic and political powers and move over to retire with the low-growth economies we displaced -- old Europe.

As noted in a 2006 World Bank report, spending in Europe on social-protection programs averages 19% of GDP (85% of it on social insurance programs), compared to 9% of GDP in the U.S. The Obama proposals send the U.S. inexorably and permanently toward European levels of social protection. This isn't an "agenda." It's a final temptation.

In partial detail:

Obama's federalized medical insurance system starts the transition away from private medical care and toward Obama's endlessly promised "universal health care." This has always been the sine qua non of planting a true, managed-market economy in the U.S.

Obama's refundable tax credits are direct cash transfers from the federal government. This would place some 48% of Americans, nearly half, out of the income tax system. More than a tax proposal, this is a deep philosophical shift, an American version of being "on the dole."

His stated intent to renegotiate free-trade agreements such as Nafta is a philosophical shift. It abandons the tradition of a hyper-competitive America dating back to the Industrial Revolution, toward a protected, domestic workforce, as in Western Europe. The Democratic proposal to eliminate private union votes -- "card check" -- ensures the spread of a static, Euro-style workforce.

Eliminating the ceiling on payroll taxes changes Social Security from an insurance to a welfare program. Obama's tax credits requires performing government-identified activities, the essence of a "directed economy."

All this would transform the animating American idea -- away from creation and toward protection.

Many voters -- progressive Democrats, the asset-safe rich, academics and college students -- regard this as where America should go. They explicitly want America's great natural energies transferred away from unwieldy economic competition and toward social construction. They want the U.S. to reduce its "footprint" in the world. Monies saved by stepping down from superpower status can be reprogrammed into "investments" (a favorite Obama word) in a vast Euro-style hammock of social protection programs.

One wishes John McCain had been better able to make clear what the truly "historic" meaning of Tuesday's vote is. Once it's done, it's done.

Wednesday, October 29, 2008

You Have to Read This!!!

Obama Affinity to Marxists Dates Back to College Days
Barack Obama shrugs off charges of socialism, but noted in his own memoir that he carefully chose Marxist professors as friends in college.

Barack Obama laughs off charges of socialism. Joe Biden scoffs at references to Marxism. Both men shrug off accusations of liberalism.

But Obama himself acknowledges that he was drawn to socialists and even Marxists as a college student. He continued to associate with Marxists later in life, even choosing to launch his political career in the living room of a self-described Marxist, William Ayers, in 1995, when Obama was 34.

Obama's affinity for Marxists began when he attended Occidental College in Los Angeles.
"To avoid being mistaken for a sellout, I chose my friends carefully," the Democratic presidential candidate wrote in his memoir, "Dreams From My Father." "The more politically active black students. The foreign students. The Chicanos. The Marxist professors and structural feminists."

Obama's interest in leftist politics continued after he transferred to Columbia University in New York. He lived on Manhattan's Upper East Side, venturing to the East Village for what he called "the socialist conferences I sometimes attended at Cooper Union."

After graduating from Columbia in 1983, Obama spent a year working for a consulting firm and then went to work for what he described as "a Ralph Nader offshoot" in Harlem.

"In search of some inspiration, I went to hear Kwame Toure, formerly Stokely Carmichael of Black Panther fame, speak at Columbia," Obama wrote in "Dreams," which he published in 1995. "At the entrance to the auditorium, two women, one black, one Asian, were selling Marxist literature."

Obama supporters point out that plenty of Americans flirt with radical ideologies in college, only to join the political mainstream later in life. But Obama, who made a point of noting how "carefully" he chose his friends in college, also chose to launch his political career in the Chicago living room of Ayers, a domestic terrorist who in 2002 proclaimed: "I am a Marxist."

Also present at that meeting was Ayers' wife, fellow terrorist Bernardine Dohrn, who once gave a speech extolling socialism, communism and "Marxism-Leninism."

Obama has been widely criticized for choosing the Rev. Jeremiah Wright, an anti-American firebrand, as his pastor. Wright is a purveyor of black liberation theology, which analysts say is based in part on Marxist ideas.

Few political observers go so far as to accuse Obama, the Democratic presidential nominee, of being a Marxist. But Republican John McCain has been accusing Obama of espousing socialism ever since the Democrat told an Ohio plumber named Joe earlier this month that he wanted to "spread the wealth around."

Obama's running mate, Biden, recently contradicted his boss, saying: "He is not spreading the wealth around." The remark came as Biden was answering a question from a TV anchor who asked: "How is Senator Obama not being a Marxist if he intends to spread the wealth around?"
"Are you joking? Is this a joke? Or is that a real question?" an incredulous Biden shot back. "It's a ridiculous comparison."

But the debate intensified Monday with the surfacing of a 2001 radio interview in which Obama lamented the Supreme Court's inability to enact "redistribution of wealth" -- a key tenet of socialism. On Tuesday, McCain said Obama aspires to become "Redistributionist-in-Chief."

Obama has managed to cultivate the image of a political moderate in spite of his consistently liberal voting record. In 2006, he published a second memoir, "The Audacity of Hope," that leaves little doubt about his adherence to the left.

"The arguments of liberals are more often grounded in reason and fact," Obama wrote in "Audacity." "Much of what I absorbed from the sixties was filtered through my mother, who to the end of her life would proudly proclaim herself an unreconstructed liberal."

National Journal magazine ranked Obama as the most liberal member of the Senate. The publication is far from conservative, employing such journalists as Linda Douglass, who resigned in May to become Obama's traveling press secretary.

Bill Sammon is the Washington deputy managing editor for FOX News Channel.

Tuesday, October 28, 2008

Barack Obama is a LIAR!!!

I copied this from my friends blog at

This is worth the read!!!

To Barack Hussein Obama,

The New York Times carried a story on Saturday, October 4, 2008, that proved you had a significantly closer relationship with Bill Ayers than what you previously admitted. While the issue of your relationship is of concern, the greater concern is that you lied to America about it.

The Chicago Sun reported on May 8, 2008, that FBI records showed that you had a significantly closer relationship with Tony Rezko than what you previously admitted. In the interview, you said that you only saw Mr. Rezko a couple of times a year. The FBI files showed that you saw him weekly. While the issue of your relationship is of concern, the greater concern is that you lied to America about it.

Your speech in Philadelphia on March 18, 2008, about "race" contradicted your statement to Anderson Cooper on March 14 when you said that you never heard Reverend Wright make his negative statements about white America . While your attendance at Trinity Church for 20 years is of concern, the greater concern is that you lied to America on March 14.

In your 1st debate with John McCain, you said that you never said that you would meet with the leaders of Cuba, Venezuela, Iran, and North Korea without "preparations" at lower levels ... Joe Biden repeated your words in his debate with Sarah Palin ... while the video tape from your debate last February clearly shows that you answered "I would" to the question of meeting with those leaders within 12 months without "any" preconditions. While your judgement about meeting with enemies of the USA without pre-conditions is of concern, the greater concern is that you lied to America in the debate with McCain.

On July 14, 2008, you said that you always knew that the surge would work while the video tapes of you from more than a year ago show that you stated that the surge would not work. While your judgement about military strategy as a potential commander-in-chief is of concern, the greater concern is that you lied to America on July 14.

You now claim that your reason for voting against funding for the troops was because the bill did not include a time line for withdrawal, while the video tapes of you from more than a year ago show that you voted against additional funding because you wanted our troops to be removed immediately ... not in 16 months after the 2008 election as you now claim. While your judgement about removing our troops unilaterally in 2007 is of concern, the greater concern is that you lied to America about your previous position.

You claim to have a record of working with Republicans while the record shows that the only bill that you sponsored with a Republican was with Chuck Lugar ... and it failed. The record shows that you vote 97% in concert with the Democrat party and that you have the most liberal voting record in the Senate. You joined Republicans only 13% of the time in your votes and those 13% were only after agreement from the Democrat party. While it is of concern that you fail to include conservatives in your actions and that you are such a liberal, the greater concern is that you distorted the truth.

In the primary debates of last February, 2008, you claimed to have talked with a "Captain" of a platoon in Afghanistan "the other day" when in fact you had a discussion in 2003 with a Lieutenant who had just been deployed to Afghanistan . You lied in that debate.

In your debates last spring, you claimed to have been a "professor of Constitutional law" when in fact you have never been a professor of Constitutional law. In this last debate, you were careful to say that you "taught a law class" and never mentioned being a "professor of Constitutional law." You lied last spring.

You and Joe Biden both claimed that John McCain voted against additional funding for our troops when the actual records show the opposite. You distorted the truth.

You and Joe Biden claim that John McCain voted against funding for alternate energy sources 20 times when the record shows that John McCain specifically voted against funding for bio fuels, especially corn ... and he was right .... corn is too expensive at producing ethanol, and using corn to make ethanol increased the price of corn from $2 a bushel to $6 a bushel for food. You distorted the truth.

You and Joe Biden claim that John McCain voted like both of you for a tax increase on those making as little as $42,000 per year while the voting record clearly shows that John McCain did not vote as you and Joe Biden. You lied to America .

You and Joe Biden claim that John McCain voted with George W. Bush 90% of the time when you know that Democrats also vote 90% of the time with the President (including Joe Biden) because the vast majority of the votes are procedural. You are one of the few who has not voted 90% of the time with the president because you have been missing from the Senate since the day you got elected. While your absence from your job in the Senate is of concern, the greater concern is that you spin the facts.

You did not take an active role in the rescue plan. You claimed that the Senate did not need you while the real reason that you abstained was because of your close relationships with the executives of Fannie Mae, Freddie Mac, Countrywide, and Acorn ... who all helped cause the financial problems of today ... and they all made major contributions to your campaign. While your relationship with these executives and your protection of them for your brief 3 years in the Senate (along with Barney Frank, Chuck Schumer, Maxine Waters, and Chris Dodd) is of concern, the greater concern is that you are being deceitful.

You forgot to mention that you personally represented Tony Rezko and Acorn. Tony Rezko, an Arab and close friend to you, was convicted of fraud in Chicago real estate transactions that bilked millions of tax dollars from the Illinois government for renovation projects that you sponsored as a state senator ... and Acorn has been convicted of voter fraud, real estate sub prime loan intimidation, and illegal campaign contributions. Tony Rezko has contributed hundreds of thousands of dollars to your political campaigns. You personally used your political positions to steer money to both Tony Rezko and Acorn and you used Acorn to register thousands of phony voters for Democrats and you. While your relationships with Rezko and Acorn are of concern, the greater concern is that you omitted important facts about your relationships with them to America .

During your campaign, you said: "typical white person." "They cling to their guns and religion." "They will say that I am black." You played the race card. You tried to label any criticism about you as racist. You divide America .

You claim that you will reduce taxes for 95% of America , but you forgot to tell America that those reductions are after you remove the Bush tax reductions. You have requested close to $1 billion in earmarks and several million for Acorn. Your social programs will cost America $1 trillion per year and you claim that a reduction in military spending ($100 billion for Iraq ) can pay for it. While your economic plan of adding 30% to the size of our federal government is of concern, the greater concern is that you are deceiving America .

The drain to America 's economy by foreign supplied oil is $700 billion per year (5% of GDP) while the war in Iraq is $100 billion (less than 1% of GDP). You voted against any increases to oil exploration for the last 3 years and any expansion of nuclear facilities. Yet today, you say that you have always been for more oil and more nuclear. You are lying to America .

Mr. Obama, you claimed that you "changed" your mind about public financing for your campaign because of the money spent by Republican PACs in 2004. The truth is that the Democrat PACs in 2004, 2006, and 2008 spent twice as much as the Republican PACs (especially George Soros and You are lying to America .

Mr. Obama, you have done nothing to stop the actions of the teachers union and college professors in the USA . They eliminated religion from our history. They teach pro gay agendas and discuss sex with students as young as first grade. They bring their personal politics into the classrooms. They disparage conservatives. They brainwash our children. They are in it for themselves ..... not America . Are you reluctant to condemn their actions because teachers/professors and the NEA contribute 25% of all money donated to Democrats and none to Republicans? You are deceiving America .

Oh, Mr. Obama, Teddy Roosevelt said about a hundred years ago that we Americans should first look at the character of our leaders before anything else.

Your character looks horrible. While you make good speeches, motivating speeches, your character does not match your rhetoric. You talk the talk, but do not walk the walk.

1. You lied to America . You lied many times. You distorted facts. You parsed your answers like a lawyer.
2. You distorted the record of John McCain in your words and in your advertisements.
3. You had associations with some very bad people for your personal political gains and then lied about those associations.
4. You divide America about race and about class.

Now let me compare your record of lies, distortions, race baiting, and associations to John McCain: War hero. Annapolis graduate with "Country first." Operational leadership experience like all 43 previously elected presidents of the USA as a Navy officer for 22 years. 26 years in the Senate. Straight talk. Maverick. 54% of the time participated on bills with Democrats. Never asked for an earmark. The only blemish on his record is his part in the Keating 5 debacle about 25 years ago.

Mr. Obama, at Harvard Law School, you learned that the end does not justify the means. You learned that perjury, false witness, dishonesty, distortion of truth are never tolerated. Yet, your dishonesty is overwhelming. Your dishonesty is tremendously greater than the dishonesty that caused the impeachment and disbarment of Bill Clinton. Your dishonesty is tremendously greater than the dishonesty of Scooter Libby. You should be ashamed.

Mr. Obama, it is time for us Americans to put aside our differences on political issues and vote against you because of your dishonest character. It is time for all of us Americans to put aside our political issues and vote for America first. It is time for America to vote for honesty.

Any people who vote for you after understanding that you are dishonest should be ashamed of themselves for making their personal political issues more important than character. Would these same people vote for the anti-Christ if the anti-Christ promised them riches? Would they make a golden calf while Moses was up the mountain? Would they hire someone for a job if that someone lied in an interview? Of course not. So why do some of these people justify their votes for you even though they know you are dishonest? Why do they excuse your dishonesty? Because some of these people are frightened about the future, the economy, and their financial security .... and you are preying on their fears with empty promises ... and because some (especially our young people) are consumed by your wonderful style and promises for "change" like the Germans who voted for Adolf Hitler in 1932. The greed/envy by Germans in 1932 kept them from recognizing Hitler for who he was. They loved his style. Greed and envy are keeping many Americans from recognizing you ... your style has camouflaged your dishonesty .... but many of us see you for who you really are ... and we will not stop exposing who you are every day, forever if it is necessary.

Mr. Obama, you are dishonest. Anyone who votes for you is enabling dishonesty.

Mr. Obama , America cannot trust that you will put America first in your decisions about the future.

Mr. Obama, you are not the "change" that America deserves. We cannot trust you.

Mr. Obama, You are not ready and not fit to be commander-in-chief.

Mr. Obama, John McCain does not have as much money as your campaign to refute all of your false statements. And for whatever reasons, the mainstream media will not give adequate coverage or research about your lies, distortions, word parsing, bad associations, race baiting, lack of operational leadership experience, and generally dishonest character. The media is diverting our attention from your relationships and ignoring the fact that you lied about those relationships. The fact that you lied is much more important than the relationships themselves .... just like with Bill Clinton and Richard Nixon ... Monica Lewinski and Watergate were not nearly as bad as the fact that those men lied about the events ... false witness ... perjury ... your relationships and bad judgements are bad on their own .... but your lies are even worse.

Therefore, by copy of this memo, all who read this memo are asked to send it to everyone else in America before it is too late. We need to do the job that the media will not do. We need to expose your dishonesty so that every person in America understands who you really are before election day.

Mr. Obama, in a democracy, we get what we deserve. And God help America if we deserve you.

Be careful what you ask for!

What in the hell is wrong with the people in America?
How can so many people just blindly follow a man who has proven to be a radical idealist?
How can so many people want to vote for someone such as Obama when he has stated he wants to nationalize health care, which has been proven it will ruin health care in America, not fix it?
How can people believe in someone who wants to take their money away from them and give it to others?
Why is it right to take from me to give to another?
Why is it right to take from another to give to me?
Am I capable and able of providing for myself? Yes I am...I am not lazy!
Are you capable and able of providing for yourself? If you aren't, why? Are you lazy?

Let's also not forget the fact that Mr. Obama has this ideal about wealth redistribution yet he allows his own brother to live in poverty. Hypocrisy at it's best.

Wednesday, October 15, 2008

Some visuals for the previous post!

The Obama and McCain Tax Plans: How Do They Compare?

October 15, 2008

by William W. Beach, Karen Campbell, Rea S. Hederman, Jr. and Guinevere Nell
Center for Data Analysis Report #08-09
Either Republican Senator John McCain or Dem­ocratic Senator Barack Obama will have to make very important decisions on tax policy when he takes office in January 2009. First, the U.S. econ­omy will be recovering from the financial crisis and is already predicted to grow less than its usual rate of 3.3 percent over the last 50 years.[1] Second, Pres­ident George W. Bush's tax cuts will expire in 2011, and the President must decide how to extend or make permanent some of the tax cut provisions.

Senator McCain will make the Bush tax cuts per­manent, with the exception of the estate tax. McCain credited the Bush tax cuts with helping the economy recover after the 2001 recession.
Senator Obama, on the other hand, will extend the Bush tax cuts only for those taxpayers who earn less than $250,000 a year—he has deemed the rest of the people "rich." Senator Obama will also enact new tax increases on these rich individuals as well as a series of targeted tax credits for lower-income indi­viduals. Senator Obama believes that the current tax system is not progressive enough and that higher taxes on the rich should be used to give money to low-income individuals or those who do not work at all, such as retired people, reduce the deficit, and reduce the size of Social Security's shortfall.

The candidates do have some large areas of agree­ment. Both agree that:

The Alternative Minimum Tax (AMT) should be indexed for inflation to prevent more and more taxpayers from being forced to pay the AMT. Senator McCain wants to increase the AMT exemption even more in future years;

Many elements of the Bush tax cuts should be made permanent, such as the child tax credit, provisions that reduce the marriage penalty, and lower tax rates for most income brackets;
The capital gains tax rate and the tax rate for qualified dividends should be equal; and
The portion of estates that is tax exempt should be increased. (The candidates differ on lowering the estate tax rate. McCain wants to increase the exemption to $5 million and supports a tax rate of 15 percent while Obama wants to keep the exemption at the 2009 level of $3.5 million and supports a tax rate of 45 percent).

The candidates do have significant differences. Senator McCain's plan extends all of the Bush tax cuts, while Senator Obama's does not extend the cuts for the top two rates. Furthermore, Senator Obama would impose a new tax on those who earn more than $250,000 a year, which would be dedi­cated to paying for Social Security. Senator McCain has proposed a few other cuts, highlighted by a cut in the corporate tax rate and a change in the tax treatment of health care. Senator McCain's tax plan for health care is the following: Currently, workers do not pay tax on the value of insurance they receive from their employers. Senator McCain would end this preferential tax treatment and replace it with a tax credit that would allow families to purchase health insurance. Senator Obama has many new proposals, including several new tax credits. Senator Obama proposes a refundable health care tax credit to help low-income individu­als purchase health care. Many of the other ele­ments of Senator Obama's health care plan are outside the income tax system, such as issuing mandates that children have health insurance.
Both campaigns have engaged in heated rhetoric to explain why their tax proposal is the best for the country. Senator McCain's campaign argues that his plan is the best for economic growth, while Senator Obama's campaign states that his plan is the fairest because it ends tax cuts for the wealthy.

Voters as well as policymakers face conflicting claims about the merits of the two plans, with each candidate representing his plan as the best for the economy and for taxpayers. Voters espe­cially should be able to compare the two tax plans side by side.

Basic Findings
Center for Data Analysis (CDA) analysts used an analytical tool that permits taxpayers and policy­makers to see the side-by-side economic effects of the two plans: We used CDA tax models and tax information from other sources as inputs to Global Insight's (GI) U.S. Macroeconomic Model (the ana­lytical tool), one of the most widely respected fore­casting models.[2] Comparison of the likely economic and fiscal effects of these two competing plans is greatly facilitated by using the same eco­nomic model to evaluate both approaches. This report's findings include:
Jobs respond more to McCain's plan than to Obama's. Job growth over the 10-year forecast horizon is more than twice as high under McCain's plan than under Obama's. Total employment grows an average of 915,800 jobs under Obama, and by 2,126,000 under McCain. Both plans encourage job creation in each year of the forecast, but McCain's approach leads to sig­nificantly larger job growth, and sooner. By 2018, McCain's plan, which makes the Bush tax reduc­tions permanent and lowers the tax rate on cor­porate profits, creates an additional 3,426,500 jobs. Senator Obama, however, raises taxes on many of the economy's key investors and busi­ness owners. Job growth under his plan for that same year is lower, at 1,576,200.

Overall economic activity more vigorous under McCain's plan. Senator McCain's plan yields consistently higher forecasts of economic output than does Senator Obama's. Increases in gross domestic product (GDP) under McCain are, on average, nearly three times higher than under Obama. The growth rate of the economy increases a full half percentage point in 2011 and 2012, when taxes will increase under cur­rent law. Under McCain's plan, the average annualized GDP growth rate increases by 0.3 percent. The Obama plan also leads to higher rates of economic growth as a result of making some parts of the Bush tax reductions perma­nent. The economy as measured by GDP grows modestly more than does the CBO baseline: Growth rates are 0.1 percent higher on average for the 10-year period. By 2018, GDP is $320.7 billion (after inflation) higher under the McCain plan than under Obama's.

More after-tax spending potential under McCain than under Obama. Using the same model to evaluate both plans, our analysis shows that a family of four will have an average of $5,138 more in disposable income under McCain's plan, and $3,631 more under Obama's. This average increase in disposable income is the combination of lower taxes on the average family, higher employment, and increased growth under both plans. By 2018, family-of-four disposable income under McCain is forecast to be $9,750 (after infla­tion) higher than baseline. This same family unit would see its inflation-adjusted disposable income surpass the baseline by $5,620 under Senator Obama's plan.

A Reader's Guide

This report frequently refers to the "baseline" when describing the effects of each candidate's tax plan on the economy and federal finances. What exactly does this term mean?
The baseline view of the future economy (including federal finances) is that no additional tax policy or spending changes are enacted. In other words, the baseline is a forecast of future economic activity under currently enacted law.[3] For example, future economic activity reflects the fact that the tax reductions enacted in 2001 and 2003 expire when current law dictates that they do so. The lower tax rates enacted in 2001 are scheduled to expire at the beginning of 2011.
Tables 1 and 2 in the Appendix show a set of forecasts for most of the leading economic and fiscal indicators. In each case, the effects (of forecasts) of the McCain and Obama tax plans are compared to the baseline, and a difference is shown between that baseline and how the candidate's tax proposal would affect the economy.

However, this report examines only the candidates' tax proposals, not their spending plans. Campaigns offer candidates ample opportunities to present their tax and spending ideas, but very little time for working through the specifics of their proposals. Spending plans are particularly subject to this time constraint.

Details are important to estimating the economic effects of policy change. Campaign tax proposals usually lend themselves to such an analysis, but this is rare for spending plans.

The McCain Tax Plan

President Bush's tax policy was delineated by two major pieces of legislation: the 2001 Economic Growth and Tax Reduction Reconciliation Act (EGTRRA) and the 2003 Jobs and Growth Tax Reduc­tion Reconciliation Act (JGTRRA). Both of these acts significantly reduced tax rates for all income earners but are due to expire on January 1, 2011. The foun­dation of Senator McCain's tax plan is primarily com­posed of the permanent extension and, in some cases, expansion of provisions in both acts:

Keep capital gains and dividends rates at 0 per­cent or 15 percent, depending on the taxpayer's income;

Keep the child tax credit at $1,000 instead of let­ting the credit drop back to $500 in 2011 and maintain marriage-penalty relief;

Maintain reductions in the marginal tax rates from 39.6 percent to 35 percent, 36 percent to 33 percent, 31 percent to 28 percent, and 28 percent to 25 percent, and retain the 10 percent tax bracket;

Add a new provision that would raise the depen­dent-child tax credit annually by $500 from 2010 to 2016, increasing the credit from $3,500 to $7,000;

Double the personal exemption for dependents from $3,500 to $7,000;

Increase the exemption of the estate tax from $1 million to $5 million and lower the estate tax rate from 55 percent to 15 percent.

Phase out the Alternative Minimum Tax (AMT).[4]

Family Tax Relief. In addition to the tax propos­als mentioned earlier, Senator McCain has proposed other ways of granting tax relief to families and mid­dle-income earners. These provisions are not mod­eled because some, like the gas tax repeal, are not likely to be effective in future years. These provi­sions include:

Offer the option of filing taxes through the cur­rent process or through a new, simplified system;
Suspend the 18.4-cent gas tax and 24.4-cent diesel tax from Memorial Day to Labor Day; and
Offer a $5,000 tax credit for an individual who purchases a zero-emissions car.

Pro-Growth Tax Cut Elements Maintained. Key elements of JGTRRA would also be made per­manent. The taxation on dividends and capital gains would continue to decline to 0 percent for fil­ers below the 25 percent bracket. Taxpayers in higher brackets would pay lower taxes on dividends and capital gains. The tax rate on capital gains for these taxpayers declined from 20 percent to 15 per­cent under JGTRRA, which also changed the treat­ment of dividend income. Dividends are no longer considered ordinary taxable income, but instead are taxed at the same rate as long-term capital gains.

Dependent-Exemption Increase. A new tax cut proposal is intended to increase the exemption for dependents, which are usually children but can also be other household members who rely on the tax­payer for support. The current exemption is $3,500 for 2008, and a President McCain would eventually double this exemption. Families with children would be the biggest beneficiaries, since they are most likely to have the most dependents.

While Senator McCain phases in the exemption extension, families with income under $50,000 a year are immediately eligible for the full $7,000 exemption starting in tax year 2009. For a single filer in the 15 percent bracket, this doubling of the exemption would be worth $525; for a married couple in the 25 percent bracket, the doubling of the exemption would be worth $1,850.
The Estate Tax. Senator McCain's plan also calls for raising the exemption and cutting the tax rate for the estate tax. While the estate tax is entirely elimi­nated in 2010 under the current Bush plan, the estate tax returns in 2011 after the Bush tax cuts expire. Effectively, McCain's proposal would raise the exemption for estates from $1 million to $5 mil­lion while cutting the tax rate from 55 percent to 15 percent. This would ensure that fewer Americans are subjected to the estate tax and that those who are will incur a tax rate markedly lower than the current one. In this report, we assume that the exemption is similar to current law and not indexed for inflation.
Health Care. Senator McCain also proposes the creation of a direct, refundable tax credit to offset the costs of health insurance. The credit would be $2,500 for individuals and $5,000 for families and could be redeemed to help pay for health insurance purchased privately or provided through an employer. If health plan premiums are less than the amount of the credit, any excess will be deposited into the individual's Health Savings Account to be used for other health care expenses. As mentioned previously, this proposal is not modeled in the analysis.

Business Taxes. Both small businesses and large corporations are affected by McCain's tax plan. His campaign has proposed to make several changes in the tax code that would cut the tax rate for corpora­tions from 35 percent to 25 percent by 2015. Another McCain proposal is to allow the immediate expensing of equipment investment by businesses from 2009 to 2013.

The Parameters of this Report

The results in this paper are based on the candidates' own specific tax policy proposals. The analysts at the Center for Data Analysis who worked on this report tried, wherever possible, to model the candidates' ideas about tax policy. However, not every proposal had advanced beyond initial conceptualization at the time of this report's publication. For example, vague proposals such as eliminating tax breaks for special interests are not modeled.

More significantly, this paper does not attempt to model the spending bills of the two candidates, nor does the paper attempt to square the budgetary claims of the candidates with their tax cuts.
Senator Obama has voted for the pay-as-you-go (PAYGO) budgetary restrictions, which require that any tax cuts or entitlement spending hikes be offset by a choice of other tax or entitlement reforms. This paper assumes that Senator Obama's plan does not hold to these PAYGO restrictions when comparing the effects of his tax plan to the Congressional Budget Office (CBO) baseline.[5] If Senator Obama were held to the PAYGO standard, he would be required to enact new, unspecified tax hikes to pay for his tax plan. The Obama campaign believes that a more accurate baseline is to assume the permanent extension of the Bush tax cuts, but this analysis uses the CBO baseline.

Likewise, the paper does not attempt to model Senator John McCain's claim that he will balance the budget in four years. Senator McCain's plan cuts taxes more than Senator Obama's, and would require even more budget offsets to balance the budget. The McCain campaign would also like to use a baseline that has a permanent extension of the Bush tax cuts, instead of using the CBO baseline.

This analysis also does not include changes in the health care system. Not modeling the health care plans of the candidates will ensure that the comparison will be similar in scope.

The Obama Tax Plan

Senator Obama's plan will make several provi­sions of President Bush's tax cuts permanent. Signif­icantly, Senator Obama proposes that capital gains and dividends be taxed at the same rate. He would raise taxes on those making more than $250,000 a year, effective in 2009, by repealing the Bush tax cuts for those taxpayers.

Some Expiring Provisions from 2001 and 2003 Made Permanent. Senator Obama also extends several provisions of the 2001 and 2003 tax bills:

Marriage penalty relief;
Doubled child tax credit ($1,000);
Earned-income credit expansion for married couples;
10 percent tax bracket;
Reductions in all regular income tax rates except the top two; and
Tax cuts on dividends and capital gains for tax­payers in all but the top two brackets, which will increase from 15 to 20 percent.

Increase Taxes on High-Income Taxpayers. Senator Obama rolls back the tax cuts for people who make $250,000 a year or more—taxpayers who are considered wealthy. While there is some uncertainty about the details of his plan, Obama campaign materials indicate that the tax rates in the top two brackets would increase to their pre-EGTRRA levels of 36 percent and 39.6 percent. The phase-out of deductions and exemptions for tax­payers in the top brackets would also be re-enacted, which would further increase the top marginal tax rate. Tax rates on capital gains and dividends would also increase up to 20 percent for those filing in the top two brackets.
The Obama campaign anticipates that tax in­creases in the top two brackets would raise substan­tial revenue that would pay for other tax cuts and new spending programs. Compared to the cur­rent-law baseline, however, the Obama plan would reduce receipts after tax year 2010 because the cur­rent CBO baseline already takes into account the in­crease in top rates beginning in 2011. After 2010, there is a net reduction in tax liability for taxpayers in the top two brackets. Revenue in these years would be less than currently projected because tax­payers in the top two brackets benefit from rate re­ductions in the other tax brackets.

Social Security Surtax. Senator Obama has also proposed an additional tax on individuals with annual income above $250,000 to help supply Social Security. The Obama campaign has released few details of this tax, and has stated that it will be somewhere between 2 percent and 4 percent and not effective until 2018.[6] The campaign has not announced whether it will be only on additional wages and salary, or whether it is a surtax on all types of income above $250,000. Furthermore, it is unknown whether Social Security benefits will be paid for the additional taxes collected. It is esti­mated that only 15 percent of the Social Security shortfall will be reduced by this additional tax.[7] While Senator Obama deserves credit for address­ing the looming Social Security crisis, additional adjustments beyond those in his plan will be needed to make the program solvent. If these adjustments come in the form of higher taxes beyond those already in the Obama plan, then eco­nomic activity will decline, decreasing incentives to work, save, and invest.

Extension of the AMT Patch. The Obama plan would extend the Alternative Minimum Tax relief of the current policy in recent years by indexing the thresholds for inflation and allowing individuals to claim personal tax credits.

Child and Dependent Care Tax Credit. The Obama plan would make the child and dependent care credit refundable, and it would increase the rates and thresholds for phase-out of the rates for households earning less than $60,000. This change would increase the maximum credit by $450 for one dependent and $900 for two or more dependents.

Higher-Education Tax Credit. Senator Obama has proposed an American Opportunity Tax Credit, which is a new higher-education tax credit that is an expanded version of the existing Hope Scholarship Tax Credit. Currently, the Hope credit allows tax­payers to take a non-refundable tax credit equal to 100 percent of the first $1,200 of qualified educa­tion expenses plus 50 percent of the next $1,200. Senator Obama's credit would be fully refundable and apply to the first $4,000 of college expenses.

One hundred hours of community service would be required to receive the benefit. The pro­posed credit is refundable, which would allow tax­payers to receive a benefit even if they do not pay federal income tax. Based on available information about the plan, it appears that the current-law income phase-out would also apply to the new credit.

Tax Credits for Low-Income Filers
Senator Obama's plan uses the tax code to increase the income of low-income workers with the following.

Making Work Pay Credit. Senator Obama has proposed a refundable tax credit for low-income earners. Workers would receive a 6.2 percent credit on the first $8,100 of earned income, yielding a maximum credit of about $500 per person, or $1,000 per family. This credit would begin phasing out at an annual income $75,000 for single filers and $150,000 for couples.
Expansion of the Earned Income Tax Credit (EITC). The Obama plan includes an expansion of the EITC, including an increase in the income cap, thresholds for phase-out of the credit, and an increase in the credit rate for families with more than two children. These changes will mean that the maximum tax credit for these families would dou­ble from $555 to $1,100 in 2012. Workers without children would also receive a larger credit under Senator Obama's plan, because the phase-out for the EITC for those without children will be almost dou­bled over the next few years.

Exemption for Low-Income Seniors. Senator Obama has also introduced a tax exemption for seniors earning less than $50,000. Many seniors in this income bracket are paying few taxes under the current system, but they would be exempted from all income taxes under Obama's proposal. This exemption would not affect any refund the senior is currently due. Married couples must both be over 65 to be eligible, and the combined income must fall below $50,000. The Obama campaign has indicated that this exemption will be phased out, but has pro­vided no details on the phase-out rate or level.

Static and Dynamic Analysis of the Candidates' Tax Plans
Static analysis assumes that there will be very few behavioral changes in response to tax cuts or tax hikes. Individuals will not alter their labor or invest­ment behavior.

Using static methods, the McCain plan is esti­mated to reduce tax revenue by $4.0 trillion over a 10-year period from fiscal year (FY) 2009 to FY 2018. (See Table 3 in the Appendix.) Ninety-two percent of this reduction originates from tax reductions associated with supply-side economic incentives such as the reduction in marginal indi­vidual tax rate and reduced taxes for qualified div­idends and capital gains.

The Obama plan is smaller with $3.4 trillion in reduced tax revenues. (See Table 3 in the Appendix.) Approximately 48 percent of the tax cut stems from a series of new tax credits and extensions of existing tax credits. The new "Making Work Pay" tax credit is about the same size as the extension of parts of Pres­ident Bush's tax cuts. About a quarter of the tax cut is through supply-side tax cuts, such as the lower marginal rates. Senator Obama's plan raises $281 billion in revenue by increasing both the capital gains and dividends taxes to 20 per­cent as compared to a 15 percent tax rate.

Dynamic Macroeconomic Anal­ysis of the Tax Plans. The dynamic analysis assumes that individuals and businesses react to real-world changes in income and costs. As a result, economic growth changes, and can lead to higher or lower tax receipts than under the static scoring. Economic growth means that tax cuts will reduce government reve­nues to a lesser degree than a static analysis predicts.

Economic Growth from John McCain's Plan. Table 1 in the Appendix contains year-by-year (in fiscal years) results for key economic indicators from the dynamic simula­tion of the McCain tax plans by the Center for Data Analysis. All figures reported here are adjusted for inflation and refer­enced relative to projected U.S. economic perfor­mance under current law (the baseline).

The CDA analysis found that the McCain tax plan will:
Expand output. GDP will be, on average, $283.7 billion higher over the 2009 to 2018 horizon. Real (inflation-adjusted) GDP growth is between 0.2 and 0.5 percent higher than the baseline. The expansion in the U.S. economy is largely due to the incentives to save and invest in productive capital and technology through reductions in capital gains and dividend taxes, and accelerated expensing of depreciation for capital purchases. These incentives are enhanced by a substantial reduction in the tax rate on corporate income, which lowers consumer costs and allows corpo­rations to expand their investments.

Increase employment. Total employment in­creases an average of 2.13 million jobs over the next 10 years. Peak job increases over the base­line are 3.4 million additional jobs in 2018. The difference between the number of jobs under the McCain plan and the baseline increases each year. The corporate income tax reductions and the in­centives for saving and investment allow business owners to expand their operations and increase their investment in new equipment. Investment leads to expanded out­put that, in turn, increases per­sonal incomes and employment.

Increase disposable personal income. The McCain tax plan is projected to increase a person's disposable income as much as $2,438 above the baseline. A fam­ily of four is projected to have $9,750 more disposable income than the current baseline and an average of $5,138 more after-tax income than the baseline over the next 10 years.

Boost the personal savings rate. McCain's tax plan provides sup­port for greater levels of personal savings, a particularly important development given the tsunami of entitlement spending expected over the next five decades. The personal savings rate is 2.5 times higher than the baseline. In 2018, for instance, the baseline requires a personal savings rate of 2 percent of income. The McCain plan raises the rate to 4.9 percent of personal income. That increase in the rate translates to substantial increases in total savings. The baseline forecast requires an annual average level of personal sav­ings of $3.1 billion (after inflation). The McCain plan raises that annual average to $212 billion, or a 68-fold increase over baseline levels.

The McCain tax plan proposes lower tax rates on businesses. This lowers the cost of doing business and frees more resources for employment in the actual operations of the business. That is, more peo­ple are hired, more raw materials can be purchased (creating jobs at other firms), and more research and development can be undertaken. The latter helps firms find ways to be more competitive and produce more of the goods and services it is in the business of producing.
The lower tax rate on corporations works by free­ing up resources and allowing the U.S. to be more competitive in the global economy. Better commu­nication and transportation technologies (among other things) are making it easier than ever for busi­nesses to locate in whatever country provides the most business-friendly environment. Reducing the tax liability for corporations located in the U.S. allows the U.S. to stay competitive with the many countries around the world that have already cut their corporate tax rates.[8] The U.S. can then attract more businesses. More businesses mean more job and income opportunities for individuals in the U.S. The growth in the differences between the fore­cast of the McCain plan and the baseline for both of these macro variables (income and employment) shows this effect. (See Chart 5.)

The McCain tax plan also proposes an acceler­ated depreciation expense for equipment and tech­nology by allowing a deduction in the first year. When businesses purchase new equipment they can only expense the amount by which the equipment depreciates each year (rather than the full purchase cost of the equip­ment). Accounting for investment cost through a multi-year deprecia­tion expense recognizes that the equipment will be used to generate income for the firm for more than one year. Businesses pay a tax on the net income they earn (that is, after they expense what it costs them to earn that income). The higher the amount that a business can expense as depreciation each year means the less taxable income for which it is liable. This gives businesses an in­centive to make new investment purchases. It is these purchases that allow businesses to expand their output, hire more workers, and make their employees more produc­tive. These effects can be seen in the higher-employment and disposable-income figures projected under the McCain tax plan.

The additional tax savings, besides giving compa­nies a greater incentive to make investment pur­chases, also reduces firms' tax expenses, thereby freeing up those resources for business expansion. These reductions trigger an economic process of investment that expands repeatedly for each year of our 10-year forecast period. More investment leads to more output and jobs that leads to more invest­ment, and so forth. This compounding feedback effect can be seen in the growing differences between the baseline and the McCain plan in Table 1 in the Appendix.
The McCain tax plan provides a better invest­ment and business growth environment than the current baseline. Increasing individual savings feeds businesses' and entrepreneurs' investment ideas. These lead to higher employment and income, which results in higher savings, and the loop con­tinues. This environment is conducive for greater job opportunities, greater economic growth, and greater income for individuals and families.

Economic Growth Under Barack Obama's Plan. Senator Obama's tax plan focuses more on the redis­tribution of income, mostly from taxpayers who earn more than $250,000 a year to middle- and low-income taxpayers. (See Table 2 in the Appen­dix.) Because Senator Obama relies largely on tax credits to achieve this redistribution, his plan does not find a large economic benefit from lower tax rates, nor a more efficient tax structure. This lower economic performance stems in large part from the modest decreases in marginal tax rates on taxpayers earning less than $250,000 and increases in those rates above that level. The incentive to alter savings, investment, and work behavior is shaped more by changes in the taxes on the additional or marginal dollar earned than on the average dollar.

A dynamic simulation of Senator Obama's plan using the same methodology as for analyzing Sena­tor McCain's plan found that under Senator Obama's tax plan:

GDP grows due to increased consumption. The level of output in the economy as measured by the GDP jumps by an average of $101.7 bil­lion (after inflation) in Obama's plan. By 2018, the difference between baseline and the forecast is $187.2 billion in additional output, or about a 1.2 percent increase in the level of GDP. Nearly all of this increase stems from personal con­sumption expenditures. The consumption of households grows by an average of $146.9 bil­lion, and government consumption expands by $6.6 billion. Indeed, household consumption outlays jump by $235.2 billion above baseline in 2018, and over the entire 10-year period average $146.9 billion above what they would have been without Senator Obama's plan. Net exports, however, fall by an average of $59 bil­lion, indicating that imports (which subtract from GDP) grow more rapidly than exports did in his plan. Gross private domestic investment increases by an average of $4.2 billion.[9]

Employment grows modestly. The Obama plan encourages job growth principally through boosting consumption. Average job increases equal 915,800 over the 10-year period. Private-sector employment averages 814,700 additional jobs. The difference between the two results equals public-sector employment growth above the baseline, or an average of 101,100 new gov­ernment jobs per year. These numbers would have been bigger had the Senator not raised tax rates on upper-income taxpayers.

Incomes rise. Senator Obama's plan extends the Bush tax reductions for taxpayers with adjusted gross incomes below $250,000 a year, and this "hold harmless" provision in his plan causes higher after-tax incomes. For a family of four, disposable income (after inflation) rises by an average of $3,631 over the forecast horizon. By 2018, after-tax income has increased by $5,620.
Savings increase. The modest boosts to income stemming from the extension of the Bush tax reductions in Obama's plan lead to increased sav­ings. Personal savings increase by an average $135 billion (after inflation) between 2009 and 2018.

It should be noted that both plans add to the fed­eral deficit. Without any changes to current law, annual deficits turn to surpluses around 2012. Both plans eliminate these surpluses. The 10-year sum of Obama's deficits equal $1,330.7 billion. McCain's 10-year deficit stands at $2,461.5 billion, which reflects Senator McCain's larger tax reductions.

Despite these deficits, both plans stimulate more economic activity. Senator Obama's plan boosts the economy by extending some of the pro-growth ele­ments of President Bush's tax cuts. Compared to the CBO baseline, Senator Obama reduces the cost of capital by maintaining the equal treatment of capi­tal gains and dividends that President Bush enacted. Senator Obama does raise the dividend and capital gains rate to 20 percent, which raises the cost of capital more than Senator McCain's tax rate of 15 percent.

However, many aspects of Senator Obama's tax plan generate little economic activity and could actually reduce economic incentives. Senator Obama raises the marginal tax rate on many low- and mid­dle-income taxpayers. Senior citizens also bear a significantly higher tax burden when they declare more than $50,000 in annual income, so seniors are strongly encouraged to work less. Other tax credits, such as one for homeowners who do not itemize, only benefit existing homeowners and spark little additional economic activity.

Tax credits can boost short-term consumption and employment, but tax credits do not change basic incentives to work, save, or invest. Workers and investors are given no reason to work or invest more in response to the tax credits. Furthermore, tax cred­its complicate the tax code, making it less efficient.

Since over one-third of Senator Obama's tax plan consists of demand-side stimulus through tax cred­its, economic growth is not as strong as it would be under a similar size tax cut that changed work or savings incentives.

Senator Obama's plan increases economic growth compared to the baseline because his plan reduces the tax on capital below baseline forecasts and cuts the marginal tax rates for many workers. However, economic growth is also constrained by higher taxes for many individuals and small businesses. Tax credits do not produce the same economic growth as rate cuts or tax simplification.

The economy improves under each plan as compared to the baseline. The baseline forecast assumes that all of the Bush tax cuts disappear, which raises the cost of capital and marginal tax rates. Both candidates plan to reduce taxes com­pared to this scenario.

Senator McCain's plan is substantially better at spurring economic growth than Senator Obama's. This is not surprising, since Senator McCain focuses on economic growth and job creation while Senator Obama focuses on the redistribution of income. As Tax Policy Center Director Len Burman states, "the major themes of the two plans are, in the case of Senator McCain's plan, that the major emphasis is on economic efficiency—cuts marginal tax rates, improves economic incentives…. In the case of Obama's plan, the goal is primarily to improve pro­gressivity…to lower tax burdens on low-income people and raise them on higher-income people."[10] Each presidential candidate achieves his stated goal,with Senator McCain generating the most new jobs, growth, and additional income for individuals. Sen­ator Obama's plan drives up the tax rate for individ­uals with annual incomes above $250,000 and redistributes money to workers with lower incomes.

William W. Beach is Director of the Center for Data Analysis at The Heritage Foundation; Karen A. Campbell, Ph.D., is Policy Analyst in Macroeconomics in the Center for Data Analysis; Rea S. Hederman, Jr., is Assistant Director of and a Senior Policy Analyst in the Center for Data Analysis; and Guinevere Nell is Research Programmer in the Center for Data Analysis. The authors gratefully acknowledge the contributions of Timothy Busovksy.
This appendix discusses how Center for Data Analysis (CDA) analysts at The Heritage Foundation performed simulations to estimate the economic and fiscal impact of the Senator John McCain and Senator Barack Obama tax plans. In some cases, information currently available about the proposals did not provide enough details for CDA economists to conduct a quantitative analysis. In such cases, they made assumptions on how the proposals would be implemented described below.

Economic Models. CDA analysts used a ver­sion of the Global Insight (GI) U.S. Macroeco­nomic Model[11] to analyze the macroeconomic fiscal and economic effects of each candidate's tax proposal. The model was adjusted in order that its baseline fiscal and economic projections would be consistent with projections from the January 2007 and January 2008 Congressional Budget Office (CBO) budget and economic reports.[12] The CBO baseline forecast assumes that current law will be unchanged during the 10-year budget window. So, the baseline assumes that tax-law changes result­ing from the Economic Growth and Tax Relief Rec­onciliation Act of 2001 (EGTRRA) will expire after 2010 because of the sunset provisions contained in the law. As a result, the CBO baseline serves as a neutral point against which to compare the effects of the two tax proposals.

CDA analysts also used the CDA personal-income-tax microsimulation model to estimate the change in year-to-year federal revenues for most of the individual income tax proposals. The model simulates the effect of tax law changes for a repre­sentative sample of taxpayers. Data for these tax­payers are extrapolated or "aged" to reflect detailed taxpayer characteristics through 2014. The data are aged for consistency with the CBO baseline forecast from the GI model. For purposes of this analysis, the microsimulation produced static reve­nue estimates. In addition, some behavioral changes resulting from the change in capital gains and dividends tax rates have not been included. (Other forms of tax minimization behavior were included.)

Revenue estimates were calculated by compar­ing estimated federal receipts under current law to the estimated revenues that would be collected assuming that the candidate's proposals were adopted and the economy under the new law did not differ from the CBO baseline forecast. In gen­eral, CDA analysts converted the calendar year static revenue estimates, including those produced by the microsimulation model, into annualized quarterly estimates for use in the GI model.

Changing Regular Tax Rates
Revenue Estimate. The average effective per­sonal-income-tax-rate variable in the GI model was adjusted to produce static revenue estimates equal to those generated by the microsimulation tax model.

Economic Effects. Changes in marginal per­sonal tax rates alter the after-tax return on the mar­ginal dollar of labor income. Microeconomic theory suggests that increases in the marginal after-tax return on labor also increase the incentive to work and, therefore, labor force participation. CDA analysts simulated how changes in personal income tax rates would affect work incentives by estimating the amount that the labor force partici­pation rate in the model would change in response to the individual income tax proposals.

A meta-study conducted by the CBO found elasticity estimates ranging from 0.1 to 0.2 per­cent.[13] In other words, a 1 percent increase in after-tax labor compensation could cause a 0.1 percent to 0.2 percent increase in labor force par­ticipation. For this simulation, a labor force adjusted elasticity of 0.17 percent (measured as a share of the overall baseline labor compensation) was used to estimate the change in labor force par­ticipation. An elasticity on hours of 0.096 percent also was employed.

Changing Capital Gains and Dividend Tax Rates

Revenue Estimate. CDA analysts used the microsimulation tax model to estimate differences in collections resulting from extension of the low rates on capital gains and dividends in McCain's proposal, and the changes to these rates in Obama's proposal. The revenue effects of changing the capital gains and dividends tax rates were sim­ulated in the GI model by adjusting the average personal income tax rate.

Economic Effects. Although the capital gains and dividend tax rates are applied to individual income, these proposals change the tax rate on income generated by the corporate sector of the economy. The GI model lacks a variable that mea­sures personal taxation of corporate income. To simulate this provision, CDA analysts incorporated the economic effects of changes in personal taxation of corporate income by adjusting the top federal tax rate on corporate income without altering the aver­age tax rate on corporate income. This approach allowed the revenue change resulting from each candidate's proposal to be represented accurately as a change in personal income tax collections; yet it also allowed the model to capture the effect that each tax-change proposal would exert on the after-tax return to capital in the economy.

Separate percentage changes in capital gains and dividend tax rates were calculated by dividing the estimated revenue differences by the appropriate tax base. A weighted average of the change in the two rates was computed to represent the overall increase or decrease in taxation of corporate income resulting from personal income tax pro­posals. This weighted average took into account the share of each type of corporate income in total corporate income, the proportion of each type of corporate income that is taxable as individual income, and the estimates of the effective tax rate on each type of corporate income.[14] Changes in this tax rate have a direct effect on the after-tax return to capital in the economy.[15]

Extending Expiring Provisions and Creating New Tax Credits

CDA economists used the microsimulation tax model to estimate differences in collections result­ing from making permanent the 10, 15, 25, and 28 percent individual income tax brackets; the higher child tax credit; the Alternative Minimum Tax relief and extended relief under McCain's proposal; and the extension of the marriage penalty relief. Reve­nue collections also differed on the basis of Obama's itemized-deduction income thresholds.

Obama's proposed "Making Work Pay" credit, "American Opportunity Tax Credit," his exemption of seniors earning less than $50,000, his expansion of the child and dependent care credit, and his pro­posed expansion of the earned income credit were also modeled through microsimulation.

Modifying the Estate Tax

Revenue Estimate. CDA analysts used a Con­gressional Budget Office estimate of estate tax revenues under current law as the basis for its calcu­lations of the two candidates' estate tax plans. CDA researchers applied a set of equations to approxi­mate the revenue differences caused by the McCain and Obama proposals. Because the estate tax is a tax on wealth, not on income, CDA analysts reflected the revenue differences by adjusting a variable in the GI model that represents tax collections not related to income flows captured in the National Income and Products Accounts (NIPA).

Economic Effects. CDA researchers estimated two behavioral effects associated with the estate tax proposals. First, CDA analysts estimated the economic effects of amounts spent on tax-avoid­ance activities by owners of estates that might be subjected to the estate tax. It was assumed that tax-avoidance spending by the individuals was a response to long-run rather than short-run changes in the estate tax law. Taking into account that the longer time period reflects the assumption that tax-avoidance activity is related to the estate tax, it is optimized for the estate tax law prevailing in the year the estate owner expects to die, not for any year before that.[16]

CDA analysts adjusted the GI model's price index for miscellaneous business services in order to reflect changes in the demand for estate-tax-avoidance services resulting from changes in the estate tax law. The business-services price-deflator variable was adjusted so that nominal spending on miscellaneous business services changed by 30 cents for every dollar of change in the long-run projection of federal estate tax collections.[17] The inflation-adjusted consumption of miscellaneous business services was not assumed to change under either candidate's proposal for the estate tax.

A change in the cost of capital was also an assumed occurrence as a result of changes in the estate tax. Because it is a tax on capital, the estate tax increases the minimum rate of return sought by investors. This minimum return is an assumed factor in the decision to engage in new projects. All other things being equal, projects that do not have projected returns above the minimum will not be initiated.

Previous research indicates that if the estate tax had been repealed prior to 1997, the required return on investments would have fallen by approximately 3 percent.[18] CDA analysts reduced this estimate by 0.54 to reflect the 1997 reduction in top federal estate tax rates. The percentage was further adjusted in the simulation of the Obama proposal to reflect the continued, albeit somewhat diminished, existence of the estate tax under his proposal. A variable in the model representing the 10-year Treasury bond rate was reduced to reflect a reduction in the minimum required rate of return on capital.

Federal Funds Rate. A variable in the GI model was set to allow actions by the monetary authority, as simulated in the model, to adjust the federal funds rate. With these settings, the federal funds rate tends to increase or decline when the unem­ployment rate declines or increases, the Consumer Price Index increases or declines, or the Consumer Price Index accelerates or decelerates.

Employment Effects by State. State estimates for employment changes attributable to the two tax plans were calculated by adjusting the national employment estimates reported in this paper according to the state's share of national employ­ment. For example, the population of employed people in California accounts for almost 12 per­cent of employment nationwide. In order to cal­culate the percentage of jobs California would potentially gain as a result of the candidates' tax plans, this percentage was multiplied by the national estimates of job changes from the macro model. State employment data for July 2008 were collected from the Bureau of Labor Statistics.[19]

Click here to view Table 1
Click here to view Table 2

[1] Heritage Foundation calculations are from Bureau of Economic Analysis data.

[2] Analysts in the Center for Data Analysis used a version of the Global Insight (GI) baseline forecast and the U.S. Macroeco­nomic Model to simulate the economic effects of adopting the McCain and Obama tax proposals. This version of the baseline forecast is based on the economic and fiscal assumption of the Congressional Budget Office's January 2007 Bud­get and Economic Outlook: Fiscal Years 2008 to 2017 and Budget and Economic Outlook: Fiscal Years 2008 to 2018. The meth­odologies, assumptions, conclusions, and opinions in this CDA Report are entirely the work of CDA analysts. They have not been endorsed by and do not necessarily reflect the views of the owners of the GI model. The GI model is used by leading government agencies and Fortune 500 companies to provide indications to policymakers of the probable effects of economic events and public policy changes on hundreds of major economic indicators.
[3] This paper uses a baseline that mirrors the Congres­sional Budget Office's official baseline. This baseline assumes that the tax cuts enacted by President Bush will expire on schedule. While the campaigns of Senator McCain and Senator Obama prefer a differ­ent baseline, where President Bush's tax cuts are made permanent, this analysis uses the CBO baseline to ensure an analysis similar to one that would be performed by the Joint Tax Committee or the CBO.
[4] "Supporting Small Businesses," Official John McCain campaign Web site, at (October 6, 2008).
[5] David Clarke and Richard Rubin, "Obama Tax Plan Veers From Pay-as-You-Go," Congressional Quarterly, September 15, 2008.
[6] Jason Furman and Austan Goolsbee, "The Obama Tax Plan," The Wall Street Journal, August 14, 2008, at (October 7, 2008).
[7] Andrew Biggs, "Would Obama Apply Social Security Tax to Non-Wage Income?" Notes on Social Security Reform, August 21, 2008, at (October 7, 2008). In 2001, Andrew Biggs served on the President's Commission to Strengthen Social Security.
[8] The U.S. has one of the highest corporate tax rates. See Robert Carroll, "Comparing International Corporate Tax Rates: U.S. Corporate Tax Rate Increasingly Out of Line by Various Measures," The Tax Foundation Fiscal Fact No. 143, August 28, 2008, at (October 7, 2008).
[9] The annual average composition of inflation-adjusted GDP under the McCain plan is as follows: Consumption equals $267.9 billion, gross private domestic investment equals $82.4 billion, government consumption equals $14.1 billion, and net exports equals $76.7 billion.
[10] "Dueling Tax Plans: What Would McCain and Obama Do?" transcript from event at The Urban Institute, Washington, D.C., July 23, 2008, at
[11] This version of the baseline forecast is based on the economic and fiscal assumptions in Congressional Budget Office, The Budget and Economic Outlook: Fiscal Years 2007 to 2017, January 2007, and The Budget and Economic Outlook: Fiscal Years 2008 to 2018, January 2008. The methodologies, assumptions, conclusions, and opinions in this CDA Report are entirely the work of CDA analysts. They have not been endorsed by and do not necessarily reflect the views of the owners of the Global Insight model. The model is used by leading government agencies and Fortune 500 companies to provide indications to decision makers of the probable effects of economic events and public policy changes on hundreds of major economic indicators.
[12] Congressional Budget Office, The Budget and Economic Outlook: Fiscal Years 2008 to 2017, January 2007, at (October 7, 2008), and The Budget and Economic Outlook: Fiscal Years 2008 to 2018, January 2008, at (October 7, 2008).
[13] Congressional Budget Office, "Labor Supply and Taxes," Memo, January 1996, p. 11, at (October 7, 2008).
[14] In these calculations, CDA analysts used Brookings Institution economist William G. Gale's estimates of the share of corpo­rate dividends taxed as personal income, as well as generally accepted methods of calculating the effective capital gains tax rate. See William G. Gale, "About Half of Dividend Payments Do Not Face Double Taxation," Tax Notes, November 11, 2002, and Leonard E. Burman, The Labyrinth of Capital Gains Tax Policy: A Guide for the Perplexed (Washington, D.C.: Brookings Institution Press, 1999), pp. 51–52.
[15] For example, Kevin Hassett of the American Enterprise Institute, James B. Mackie of the Office of Tax Analysis, and Robert Carroll, formerly with the U.S. Treasury, write that "current law ‘double-taxes' corporate profits, [taxing them] once under the corporation income tax rate…and again under the individual income tax when distributed as a dividend or realized as a capi­tal gain upon sales of shares.... [T]he double tax adds to the overall tax burden on a typical investment in the U.S. economy and so may discourage saving and investing in the aggregate, [potentially reducing] capital formation and saving and slow[ing] economic growth." See Hassett, Mackie, and Carroll, "The Effect of Dividend Tax Relief on Investment Incentives," American Enterprise Institute, September 1, 2003, at (October 7, 2008). A number of studies indicate that a reduction in taxation of corporate dividends would spur non-residential invest­ment by reducing the cost of capital. See Ervin L. Black, Joseph Legoria, and Keith F. Sellers, "Capital Investment Effects of Dividend Imputation," Journal of the American Taxation Association, Vol. 22, No. 2 (2000), pp. 40–59; James M. Poterba, "Tax Policy and Corporate Saving," Brookings Papers on Economic Activity, No. 2 (1987), pp. 455–515; Peter Birch Sorensen, "Changing Views of the Corporate Income Tax," National Tax Journal, Vol. 48, No. 2 (June 1995), pp. 279–294; and James M. Poterba and Lawrence H. Summers, "New Evidence that Taxes Affect the Valuation of Dividends," Journal of Finance, Vol. 39, No. 5 (December 1984), pp. 1397–1415. The Joint Economic Committee published an overview of studies finding that a reduction in taxation of capital gains would reduce the cost of capital and spur capital spending. See Shahira ElBogdady Knight, "The Economic Effects of Capital Gains Taxation," Joint Economic Committee, U.S. Congress, June 1997.
[16] This forward-looking aspect of estate-tax avoidance is the reason why the current-law phase-out of the estate tax and repeal for only one year is unlikely to significantly reduce spending on estate-tax-avoidance activities by estate owners expecting to live past 2010.
[17] This adjustment follows the method used in Richard Fullenbaum and Marianna McNeill, "The Effects of the Federal Estate and Gift Tax on the Aggregate Economy," Research Institute for Small and Emerging Business Working Paper Series No. 98-01, 1998, pp. A1–A2.
[18] For example, see William W. Beach, "The Case for Repealing the Estate Tax," Heritage Foundation Backgrounder No. 1091, August 21, 1996, at
[19] U.S. Department of Labor, Bureau of Labor Statistics, "Civilian Labor Force and Unemployment by State and Selected Area, Seasonally Adjusted," Table 3, at (September 29, 2008).

Thursday, October 9, 2008

Chew on this for a while...

There is an mp3 file included in the link that is really the damning evidence! Make certain you listen to it!

The unanimous Declaration of the thirteen united States of America

In Congress, July 4, 1776

When in the Course of human events, it becomes necessary for one people to dissolve the political bands which have connected them with another, and to assume among the powers of the earth, the separate and equal station to which the Laws of Nature and of Nature's God entitle them, a decent respect to the opinions of mankind requires that they should declare the causes which impel them to the separation.
We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness. That to secure these rights, Governments are instituted among Men, deriving their just Powers from the consent of the governed, — That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness. Prudence, indeed, will dictate that Governments long established should not be changed for light and transient causes; and accordingly all experience hath shewn, that mankind are more disposed to suffer, while evils are sufferable, than to right themselves by abolishing the forms to which they are accustomed. But when a long train of abuses and usurpations, pursuing invariably the same Object evinces a design to reduce them under absolute Despotism, it is their right, it is their duty, to throw off such Government, and to provide new guards for their future security...

Prominent Scientists Debunk Global Warming

Here is the link for this article:

By: Guest Authors
By: John Bender

The 2008 International Conference on Climate Change, which was held at the Marriott Marquise Hotel in New York City, concluded Tuesday. It got very little coverage in the dinosaur press, even though it was a gathering of some of the most prestigious and most learned experts on climatology from around the world.

The conference didn’t attract much attention from the dieing dinosaur media because it didn’t have any of the falderal that attracts the “journalists” and management of faltering old media. Plus, the scientists presented facts and scientific research that debunks the global warming hoax the dinosaur media helped create and is invested in perpetuating.

Rather than speeches and fear mongering propaganda films from a hack politician turned huckster, or outlandish suggestions from a geneticist turned broadcaster, the conference presented science from some of world’s leading climatologists and scientists in related fields, along with world renowned economists, and policy analysts.

Instead of David Suzuki, who isn’t a climatologist, he’s a geneticist turned broadcaster, and one of the leaders in spreading the global warming hoax, calling for jailing politicians who don’t participate in the hysteria or fall for the hoax, (Last month at a conference in Canada, Suzuki said: “What I would challenge you to do is to put a lot of effort into trying to see whether there’s a legal way of throwing our so-called leaders into jail because what they’re doing is a criminal act.”), the conference heard from people like Patrick J. Michaels, PhD, Research Professor of Environmental Science, University of Virginia, Robert Balling, PhD, Professor of Climatology, Arizona State University, James J. O’Brien, PhD, Professor Emeritus of Meteorology and Oceanography, Florida State University, and Dr. Yuri Izrael, Science Advisor, President Vladimir Putin, Russia, to name just a few.

Instead of Al Gore, failed journalist turned political hack turned con-man, the conference featured such academic heavyweights as J. Scott Armstrong, Ph.D., a professor at the Wharton School at the University of Pennsylvania, an expert on mathematical forecasting. Dr. Armstrong challenged the Gore to a $10,000.00 wager to see who could more accurately predict the Earth’s temperature over the next 10 years. Gore refused saying he was too busy.

But the biggest news coming out of the conference is the release of a report by the Nongovernmental International Panel on Climate Change, “Nature, Not Human Activity, Rules the Climate”. This report is the most complete, up-to-date, authoritative summary of peer-reviewed critical positions with respect to “Anthropogenic Global Warming” issued to date, and debunks most of the junk science used to spread the global warming hoax.

This scholarly work comes with an introduction from Frederick Seitz, a physicist and past president of the National Academy of Sciences and of Rockefeller University who passed away on Monday March 3. In the introduction Dr. Seitz stated; “we do not currently have any convincing evidence or observations of significant climate change from other than natural causes.”
“Nature, Not Human Activity, Rules the Climate” should convince all but the most gullible alarmists the hysteria over global warming is not warranted by science. At the very least it exposes Al Gore’s outright lie that “the debate in the scientific community is over.”

However, the challenge will be to get wide circulation of this scientific report. The dinosaur media and charlatans like Al Gore have a vested interest in spreading misleading, fear-mongering, propaganda, and generating fear among gullible. They exploit that fear for personal gain. They don’t want the truth to get widespread circulation.

The good news is that as fewer people turn to the old dieing media outlets for their news, turning instead to the new media for news, the new media outlets are in a position to inform the public of the real science and the findings of the climate realists.

John Bender is a freelance writer living in Dallas. He is a past staff writer for EtherZone and his columns have appeared in various publications both print and online.

Tuesday, October 7, 2008

Great Article by Stanley Kurtz, NRO Contributing Editor

Planting Seeds of Disaster
ACORN, Barack Obama, and the Democratic party.
By Stanley Kurtz

‘You’ve got only a couple thousand bucks in the bank. Your job pays you dog-food wages. Your credit history has been bent, stapled, and mutilated. You declared bankruptcy in 1989. Don’t despair: You can still buy a house.” So began an April 1995 article in the Chicago Sun-Times that went on to direct prospective home-buyers fitting this profile to a group of far-left “community organizers” called ACORN, for assistance.
In retrospect, of course, encouraging customers like this to buy homes seems little short of madness.

Militant ACORN

At the time, however, that 1995 Chicago newspaper article represented something of a triumph for Barack Obama. That same year, as a director at Chicago’s Woods Fund, Obama was successfully pushing for a major expansion of assistance to ACORN, and sending still more money ACORN’s way from his post as board chair of the Chicago Annenberg Challenge. Through both funding and personal-leadership training, Obama supported ACORN. And ACORN, far more than we’ve recognized up to now, had a major role in precipitating the subprime crisis.

I’ve already told the story of Obama’s close ties to ACORN leader Madeline Talbott, who personally led Chicago ACORN’s campaign to intimidate banks into making high-risk loans to low-credit customers. Using provisions of a 1977 law called the Community Reinvestment Act (CRA), Chicago ACORN was able to delay and halt the efforts of banks to merge or expand until they had agreed to lower their credit standards — and to fill ACORN’s coffers to finance “counseling” operations like the one touted in that Sun-Times article. This much we’ve known. Yet these local, CRA-based pressure-campaigns fit into a broader, more disturbing, and still under-appreciated national picture. Far more than we’ve recognized, ACORN’s local, CRA-enabled pressure tactics served to entangle the financial system as a whole in the subprime mess. ACORN was no side-show. On the contrary, using CRA and ties to sympathetic congressional Democrats, ACORN succeeded in drawing Fannie Mae and Freddie Mac into the very policies that led to the current disaster.

In one of the first book-length scholarly studies of ACORN, Organizing Urban America, Rutgers University political scientist Heidi Swarts describes this group, so dear to Barack Obama, as “oppositional outlaws.” Swarts, a strong supporter of ACORN, has no qualms about stating that its members think of themselves as “militants unafraid to confront the powers that be.” “This identity as a uniquely militant organization,” says Swarts, “is reinforced by contentious action.”
ACORN protesters will break into private offices, show up at a banker’s home to intimidate his family, or pour protesters into bank lobbies to scare away customers, all in an effort to force a lowering of credit standards for poor and minority customers. According to Swarts, long-term ACORN organizers “tend to see the organization as a solitary vanguard of principled leftists...the only truly radical community organization.”

ACORN’s Inside Strategy

Yet ACORN’s entirely deserved reputation for militance is balanced by its less-well-known “inside strategy.” ACORN has long employed Washington-based lobbyists who understand very well how the legislative game is played. ACORN’s national lobbyists may encourage and benefit from the militant tactics of their base, but in the halls of congress they play the game with smooth sophistication. The untold story of ACORN’s central role in the financial meltdown is about the one-two punch to the banking system administered by this outside/inside strategy.Critics of the notion that CRA had a major impact on the subprime crisis ask how a law passed in 1977 could have caused a crisis in 2008? The answer has a lot to do with ACORN — and the critical years of 1990-1995. While the 1977 Community Reinvestment Act did call on banks to increase lending in poor and minority neighborhoods, its exact requirements were vague, and therefore open to a good deal of regulatory interpretation. Banks merger or expansion plans were rarely held up under CRA until the late 1980s, when ACORN perfected its technique of filing CRA complaints in tandem with the sort of intimidation tactics perfected by that original “community organizer” (and Obama idol), Saul Alinsky.

At first, ACORN’s anti-bank actions were relatively few in number. However, under a provision of the 1989 savings and loan bailout pushed by liberal Democratic legislators, like Massachusetts Congressman Joseph P. Kennedy, lenders were required to compile public records of mortgage applicants by race, gender, and income. Although the statistics produced by these studies were presented in highly misleading ways, groups like ACORN were able to use them to embarrass banks into lowering credit standards. At the same time, a wave of banking mergers in the early 1990's provided an opening for ACORN to use CRA to force lending changes. Any merger could be blocked under CRA, and once ACORN began systematically filing protests over minority lending, a formerly toothless set of regulations began to bite.

ACORN’s efforts to undermine credit standards in the late 1980s taught it a valuable lesson. However much pressure ACORN put on banks to lower credit standards, tough requirements in the “secondary market” run by Fannie Mae and Freddie Mac served as a barrier to change. Fannie Mae and Freddie Mac buy up mortgages en masse, bundle them, and sell them to investors on the world market. Back then, Fannie and Freddie refused to buy loans that failed to meet high credit standards. If, for example, a local bank buckled to ACORN pressure and agreed to offer poor or minority applicants a 5-percent down-payment rate, instead of the normal 10-20 percent, Fannie and Freddie would refuse to buy up those mortgages. That would leave all the risk of these shaky loans with the local bank. So again and again, local banks would tell ACORN that, because of standards imposed by Fannie and Freddie, they could lower their credit standards by only a little.

So the eighties taught ACORN that a high-pressure, Alinskyite outside strategy wouldn’t be enough. Their Washington lobbyists would have to bring inside pressure on the government to undercut credit standards at Fannie Mae and Freddie Mac. Only then would local banks consider making loans available to customers with bad credit histories, low wages, virtually nothing in the bank, and even bankruptcies on record.

Democrats and ACORNAs early as 1987, ACORN began pressuring Fannie and Freddie to review their standards, with modest results. By 1989, ACORN had lured Fannie Mae into the first of many “pilot projects” designed to help local banks lower credit standards. But it was all small potatoes until the serious pressure began in early 1991. At that point, Democratic Senator Allan Dixon convened a Senate subcommittee hearing at which an ACORN representative gave key testimony. It’s probably not a coincidence that Dixon, like Obama, was an Illinois Democrat, since Chicago has long been a stronghold of ACORN influence. Dixon gave credibility to ACORN’s accusations of loan bias, although these claims of racism were disputed by Missouri Republican, Christopher Bond. ACORN’s spokesman strenuously complained that his organization’s efforts to relax local credit standards were being blocked by requirements set by the secondary market.

Dixon responded by pressing Fannie and Freddie to do more to relax those standards — and by promising to introduce legislation that would ensure it. At this early stage, Fannie and Freddie walked a fine line between promising to do more, while protesting any wholesale reduction of credit requirements.By July of 1991, ACORN’s legislative campaign began to bear fruit. As the Chicago Tribune put it, “Housing activists have been pushing hard to improve housing for the poor by extracting greater financial support from the country’s two highly profitable secondary mortgage-market companies. Thanks to the help of sympathetic lawmakers, it appeared...that they may succeed.” The Tribune went on to explain that House Democrat Henry Gonzales had announced that Fannie and Freddie had agreed to commit $3.5 billion to low-income housing in 1992 and 1993, in addition to a just-announced $10 billion “affordable housing loan program” by Fannie Mae. The article emphasizes ACORN pressure and notes that Fannie and Freddie had been fighting against the plan as recently as a week before agreement was reached. Fannie and Freddie gave in only to stave off even more restrictive legislation floated by congressional Democrats.A mere month later, ACORN Housing Corporation president, George Butts made news by complaining to a House Banking subcommittee that ACORN’s efforts to pressure banks using CRA were still being hamstrung by Fannie and Freddie. Butts also demanded still more data on the race, gender, and income of loan applicants. Many news reports over the ensuing months point to ACORN as the key source of pressure on congress for a further reduction of credit standards at Fannie Mae and Freddie Mac. As a result of this pressure, ACORN was eventually permitted to redraft many of Fannie Mae and Freddie Mac’s loan guideline.

Clinton and ACORN

ACORN’s progress through 1992 depended on its Democratic allies. Whatever ACORN managed to squeeze out of the George H. W. Bush administration came under congressional pressure. With the advent of the Clinton administration, however, ACORN’s fortunes took a positive turn. Clinton Housing Secretary Henry Cisnersos pledged to meet monthly with ACORN representatives. For ACORN, those meetings bore fruit.

Another factor working in ACORN’s favor was that its increasing success with local banks turned those banks into allies in the battle with Fannie and Freddie. Precisely because ACORN’s local pressure tactics were working, banks themselves now wanted Fannie and Freddie to loosen their standards still further, so as to buy up still more of the high-risk loans they’d made at ACORN’s insistence. So by the 1993, a grand alliance of ACORN, national Democrats, and local bankers looking for someone to lessen the risks imposed on them by CRA and ACORN were uniting to pressure Fannie and Freddie to loosen credit standards still further.

At this point, both ACORN and the Clinton administration were working together to impose large numerical targets or “set asides” (really a sort of poor and minority loan quota system) on Fannie and Freddie. ACORN called for at least half of Fannie and Freddie loans to go to low-income customers. At first the Clinton administration offered a set-aside of 30 percent. But eventually ACORN got what it wanted. In early 1994, the Clinton administration floated plans for committing $1 trillion in loans to low- and moderate-income home-buyers, which would amount to about half of Fannie Mae’s business by the end of the decade. Wall Street Analysts attributed Fannie Mae’s willingness to go along with the change to the need to protect itself against still more severe “congressional attack.” News reports also highlighted praise for the change from ACORN’s head lobbyist, Deepak Bhargava. This sweeping debasement of credit standards was touted by Fannie Mae’s chairman, chief executive officer, and now prominent Obama adviser James A. Johnson. This is also the period when Fannie Mae ramped up its pilot programs and local partnerships with ACORN, all of which became precedents and models for the pattern of risky subprime mortgages at the root of today’s crisis. During these years, Obama’s Chicago ACORN ally, Madeline Talbott, was at the forefront of participation in those pilot programs, and her activities were consistently supported by Obama through both foundation funding and personal leadership training for her top organizers.

Finally, in June of 1995, President Clinton, Vice President Gore, and Secretary Cisneros announced the administration’s comprehensive new strategy for raising home-ownership in America to an all-time high. Representatives from ACORN were guests of honor at the ceremony. In his remarks, Clinton emphasized that: “Out homeownership strategy will not cost the taxpayers one extra cent. It will not require legislation.” Clinton meant that informal partnerships between Fannie and Freddie and groups like ACORN would make mortgages available to customers “who have historically been excluded from homeownership.”


In the end of course, Clinton’s plan cost taxpayers an almost unimaginable amount of money. And it was just around the time of his 1995 announcement that the Chicago papers started encouraging bad-credit customers with “dog-food” wages, little money in the bank, and even histories of bankruptcy to apply for home loans with the help of ACORN. At both the local and national levels, then, ACORN served as the critical catalyst, levering pressure created by the Community Reinvestment Act and pull with Democratic politicians to force Fannie Mae and Freddie Mac into a pattern of high-risk loans. Up to now, conventional wisdom on the financial meltdown has relegated ACORN and the CRA to bit parts. The real problem, we’ve been told, lay with Fannie Mae and Freddie Mac. In fact, however, ACORN is at the base of the whole mess. ACORN used CRA and Democratic sympathizers to entangle Fannie and Freddie and the entire financial system in a disastrous disregard of the most basic financial standards. And Barack Obama cut his teeth as an organizer and politician backing up ACORN’s economic madness every step of the way.

— Stanley Kurtz is a senior fellow at the Ethics and Public Policy Institute.
— Stanley Kurtz is a senior fellow at the Ethics and Public Policy Center.