Perhaps the wise wizards of Wall Street know something that the average citizen forgot on Tuesday because the Dow Jones Industrial Average tumbled yesterday by 2.5% following President Obama’s re-election. Similarly, the S&P and NASDAQ also saw approximately 2.5% drops yesterday. One might consider this a coincidence, but the reality is that Obama is bad for business. And, not in that “man against the world”, Erin Brockovich sort of way.
While Obama often repeated the claim that his agenda would not raise taxes on the middle class, that was a lie. A working family of a husband and a wife, each earning $50,000, for total gross income of $100,000 are taxed at a marginal rate of 25% under the current tax regime. Once the Bush tax cuts expire, as part of the fiscal cliff that Obama is headed for at full speed, their marginal tax rate will increase to 28%.
On top of that, in 2011 and 2012, the employee’s share of the social security tax was reduced by 2%, and that is set to expire at the end of the year. So as part of Obama’s “tax the rich” plan, this family of two earning $50,000 each are going to see their taxes go up by 5%. On top of that, gas prices have doubled during Obama’s presidency, and prices for numerous other staples from milk to education to daycare have increased at a rate much greater than inflation; thus, it will be tough for middle class families to keep up.
This is a big deal because about 70% of the U.S. economy is driven by consumer spending. With higher taxes, gas prices, and more expensive staples, consumers have less discretionary income to spend. This leads to the flaccid 2% growth seen for much of the past year – many months into this so-called recovery. And 2% growth will not get us out of this rut of low job growth and high unemployment. To give some context around the 2% growth number, three years into Reagan’s presidency, economic growth was about triple what it is under Obama this year.
Taking almost $5,000 more out of the pockets of middle class Americans each year is not the way to get this economy on track. And Wall Street knows that. It’s too bad our President doesn’t.