It was, of course, a decisive victory for President Obama. He certainly has a mandate to lead, and we hope he leads the country to a sound recovery in his second term. The President has an opportunity to address the nation’s problems in a manner that unifies the country or in a manner that further polarizes the country. The Republican leadership, of course, has the same opportunity. President Obama’s judgment is apt to be informed largely by how he interprets the results of the election. Each constituency he carried will insist upon a high degree of responsiveness from the President regarding the issues that concern them the most. Fair enough.
But the constituencies he didn’t carry are no less important, and his success will ultimately be determined by the extent to which he understands the priorities of each constituency and the role each plays in our society. The President likes to intone, “We aren’t just red states or blue states…we are The United States.” That’s really all he has to keep in mind moving forward.
We have all been inundated with observations by partisans on the left and on the right regarding their respective interpretations of the election results. They are a testament to the reality of what psychologists call confirmation bias; that is, they pretty much see what they want to see, and believe that which confirms what they pretty much already believe.
On the right, the election has been described by some as “…”a victory for the takers; the 47% who pay no federal income taxes.”…One of our readers commented, “The Republican base is essentially the old Confederacy with a slim majority of conservative white voters.”
On the left, some of our readers have commented, “It was a rejection of the party that got us into an illegal war and created the worst financial debacle in eighty years.” Or “ Romney represented a party out-of-touch with not only mainstream America but also a more diverse USA.” Fox liberal gasbag Alan Colmes opined that the Republican Party is a party of angry old white men (Yes, we think Fox conservative Sean Hannity is a gasbag too).
So, what have we really learned from the election. Thanks to data compiled by Edison Research for the National Election Pool, including ABC, CBS, NBC, The Associated Press, CNN and FOX and reported on in The New York Times we can drill down into the data to determine which constituencies favored each of the candidates.
President Obama, as everyone now knows, carried the electorate by a 2.0% plurality. While not a landslide, certainly very respectable. But let’s not jump to too many conclusions too quickly. If we look at the vote by education level we find that President Obama did best among non-high school graduates winning that group by 29%. His plurality dropped to 3% among high school graduates and to 1.0% among those who had some college. Romney, however, won a majority of voters who attained a college degree.
When the election results are cross-referenced by voter income the President scored very well in all income groups under $50,000. Romney, however, won the majority of voters in each income group earning over $50,000 ($50,000 to $99,000 by 6.0%, $100,000 to $199,000 by10% and $200,000 or more by 10%).
President Obama certainly won decisively among younger voters (age 18 to 44) while the majority of voters over age 44 gave Romney strong majorities.
A majority of suburban women voted for Obama, while a majority of suburban men voted for Romney. And Blacks, Asians and Hispanics voted overwhelmingly for Obama while Whites voted overwhelming for Romney.
We believe it would be wrong for Republicans to assume that the 47% consists of “takers” who are, and will remain, committed the liberal left. While there may be those who aspire to a government subsidized life, we believe most Americans, regardless of race or income, will choose opportunity over entitlement as long as they believe we are, or can be, a nation of upper mobility.
As we wrote at the top of this essay, President Obama won a clear and decisive victory, but Romney won the majority of college graduates, voters earning over $50,000 and those over 44 years old. These voters do not represent a constituency of angry, old, rich, white men, and if Obama governs with that assumption, we believe he will be making a major mistake.
We are not encouraged that the President has any intention of altering the course he set in his reelection campaign. He made the centerpiece of his campaign raising taxes on millionaires and billionaires (defined by Obama as those individuals earning over $200,000 or working families earning $250,000 or S-1 corporations (small businesses) with similar earnings. While he said at his press conference this week that he “won’t slam the door in the face of the Republicans”, he seemed to make it clear that he wasn’t backing off of his determination to raise tax rates on the so-called wealthy. He has, it seems, slammed the door on Simpson Bowles (his own Debt and Deficit Reduction Commission), which focused on economic growth (think job growth) through lower tax rates for all Americans, individual and corporate.
So why the insistence on increasing tax rates on anybody in this lackluster economy? It really makes no sense, beyond its value as a great campaign battering ram. Even the recently released liberal Tax Policy Center’s study winds up making a strong case for Romney’s proposal to cap itemized deductions as an alternative to Obama’s tax plan. For example, the Center found that capping all itemized deductions at $50,000 would yield $749 billion in extra revenue over the next decade. Capping deductions at $25,000 would raise $1,286 trillion during the same period, and setting the cap at $17,000, a trial balloon Romney once floated, would raise an astronomical $1.747 trillion in new revenue. Ironically, the liberal think tank found that the top 20% of taxpayers would pay 96.2% of the tax at the $50,000 cap and the top 1.0% would pay 79.9% of the tax. In fact, the top one tenth of one percent would pay nearly half of the increased taxes with the cap on deductions set at $50,000. Obama’s tax plan to raise rates on those making over $200,000 ($250,000 for families) only raises $823 billion over ten years and that includes eliminating the so-called PEP and Pease deductions for high earners. It seems rather clear to us that President Obama is simply so enamored with his deficient, but campaign-driven tax policy that he is determined to impose it on the country at any cost.
So while President Obama “won’t slam the door in the Republicans’ faces,” we suspect the President will be about as accommodating as he was when pushing through his Affordable Care Act (Obamacare), one of the most misnamed pieces of legislation ever. Obamacare will result in higher taxes, directly on some, and indirectly on all Americans, and substantial increases in health insurance premiums. Government actuaries know this, health-care actuaries know this, the non-partisan Congressional Budget Office knows this, most economists know this and, most certainly, the President knows this as well.
Most of the jobs in the country (an estimated 55%) are created by a relatively small number of small businesses. The President is correct when he says that only 3% of small businesses will be directly affected by his insistence on raising taxes on the so-call wealthy. “Ninety seven percent of small businesses”, he likes to tell the gullible, “won’t be affected by his plan to raise taxes.” This is quite true, but it is also quite deceitful because that 97% consists of 30 million small businesses (out of a total of 34.8 million small businesses) that have no employees other than the owner. The remaining 4.8 million small businesses are the nation’s actual small business employers, and 1.2 million of those businesses will be hit with the Obama tax. Now it gets interesting because those 1.2 million businesses account for 54% of all private sector jobs, nearly 78 million in total. This relatively small number of small businesses pays 44% of all business tax, and this is the sector President Obama dismisses as only 3% of small business. Ironically, the federal Small Business Administration estimates that since the 1970’s it is this 3% of small business, of which the President is so dismissive, that has accounted for 66% of all net new jobs in the United States.
The President’s focus-group-researched sales pitch that “it’s only fair to ask the rich to pay a little more,” may have been a campaign slogan winner, but it is apt to be an economic jobs loser. At least that’s what international, world-class consultant Ernst and Young warned in a study released several weeks ago. Specifically, Ernst and Young found that the proposed Obama tax would amount to a devastating tax hike on the small-business sector. They concluded that it would:
• Cut 1.3%, or $200 billion, from the nation’s GDP.
• Cost 710,000 jobs in the short term, with a projected 0.5% cut in long-run employment.
• Shrink capital stock by 1.4% and capital investment by 2.4% over the long run.
• Slash real after-tax income by 1.8%, further reducing Americans’ standard of living.
Exactly what is “the little more” Obama wants to extract from these individuals and working families? How about a 17% increase in the top tax rate on income — to 40.9% from the current 35% (on top of state and local taxes); and a 65% boost in the rate on capital gains to 24.7% from 15%; and a 198% jump in the top rate on dividends — to 44.7% from 15%.
And pity that family that has finally retired on the returns from a lifetime of wise and conservative investment in dividend-paying stocks as they contemplate a tripling of their tax rate.
So the President has cobbled together a majority from those voters (among others) who never got through college, and who earn less than $50,000 a year. The time is long past for people to ask just how those constituents will fare as the President socks it to those other constituencies, the majority of which voted for the other guy.