Although I feel this great political cartoon is very relevant to this post, don’t confuse the federal budget deficit (which I don’t discuss here) with the national debt (which I do), because most Americans think they are the same thing (which is sad).

The cartoon is by Steve Greenberg of the Ventura County Star, and I beg both him and the Star to not make me take it down!

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This election season, my favorite voter sentiment is:

“I’m voting with my pocketbook!”

(read: I’m voting Republican, because Republicans cut my federal income tax, so I’ll have more money)

This is probably the most common argument for Republican voting there is.

The fact is, there are other forces which affect your personal wealth to a much higher degree which deserve much more attention. In my lifetime as a voter, the negative impact of these factors have had a far more substantial effect on my employment and wealth than any tax cut, and have always come to bear during a Republican administration.

In observing whether Republican or Democratic Presidents improve your wealth, you really need to take a look at the delta of their administrations. That is, just as a river delta empties its silt into the ocean at the end of its run, what was the outcome of American financial wealth at the conclusion of each president’s tenure?

Let’s look at two of the most important of these factors - inflation and unemployment, and how they came to bear at the delta of the George H. W. Bush (R), William Jefferson Clinton (D), and George W. Bush (R) administrations.

INFLATION

For the average American household earning $48,000, the current Bush administration cut your income tax by about $1400 a year - great!

This is a very real and tangible benefit for anyone. You make the same salary, but bring home more money - its instant gratification. This is the simplicity which make tax cuts so immediately appealing to so many.

But wait - during the Bush administration, inflation has gone up 31.25%!

In other words, our same income buys 30% LESS - we LOST $15,000 a year in buying power - over 10X more than we saved with the $1400 federal income tax cut.

This is naturally very difficult for people to comprehend - it happens gradually over time - you don’t just look at your paycheck one day and the amount changes - its just that it buys less and less over time.

For comparison, Clinton saw inflation increase only 1.2% during his 8-year tenure. Median household income actually outpaced inflation - your buying power increased under Clinton.

G.H.W. Bush (Bush I) saw inflation rise over 10% - and he only served 4 years (plus he raised taxes)!

If we want to go back even farther, G.H.W. Bush blamed a lot of his economy’s problems on the delta of Reagan’s ‘Voodoo Economics’ (aka ‘Trickle-down Economics’), which proposed that by drastically eliminating taxes on corporations and wealthy Americans, U.S. market investment and corporations would grow, in turn creating American jobs, bring in more money from overseas, pay more taxes on revenue volume, etc.

In this case, corporations themselves would be more efficiently boosting the American standard of living and economy than the lost taxes could be efficiently spent by the government. It’s actually a very solid traditional Republican position on the efficiencies of privatization which makes some sense.

Reagan’s implementation had it’s backfire, but overall the idea of not overtaxing the rich as a means of economic stimulus has been generally accepted by administrations ever since - even Clinton’s.

Anyone who remembers the 1989 Presidential election run-up will remember that Bush’s re-election was considered a complete lock by virtually everyone (largely due to the unprecedented military success and (seemingly tidy) conclusion of Operation Desert Storm) - until the economic delta of his administration crushed him completely just before the election.

HYPERINFLATION

Some analysts suggest we may currently be entering a period of hyperinflation (some analysts argue we have technically been in hyperinflation since 2005).

Keep this in mind when McCain says that the fundamentals of our economy are still “strong”!

This is not the case.

We are in recession, teetering on depression, the dollar has been, and continues to be, collapsing relative to world currencies, unemployment is rising, major financial institutions are failing, and the housing and lending markets are a disaster. The economy is not firing on any cylinders.

Meanwhile, McCain insists our ‘economic fundamentals are strong’ and wants to cut taxes by $3.3 TRILLION.

Former Federal Reserve chief Alan Greenspan, a long-time friend of McCain and a Republican, responded on Bloomberg television by saying “I’m not in favor of financing tax cuts with borrowed money.”

McCain is buying votes and continuing the cycle of unfathomable debt and economic collapse.

And you know what?
I don’t blame him.
What else does his campaign have to run on?

Pro-lifers?
Gun enthusiasts?
Hockey Moms?

That ain’t going to cut it.
He HAS to promise tax cuts, or he isn’t getting elected.
And you know what?
I think its working as well as it ever has.

The Pied Piper

Republican tax cut baiting reminds me of my political science professor’s explanation for the electoral college system. A sample theoretical argument for the electoral college, he proposed, was for the situation where a Presidential candidates locked up the election by promising incredible benefit to the majority of voters, at the complete disenfranchisement of the minority.

(Ed. -in general, this is why we have a representational democracy, and do not generally vote on issues directly by popular referendum (see direct democracy and why it would have blocked such legislation as The Americans With Disabilities Act).

Let’s go back to our median household income of $48,000. Let’s say a Democratic Presidential candidate proposes a massive one-time tax on all incomes over $100,000 a year (the minority ‘wealthy’), which would be distributed as a tax-free $10,000 check to all households making *under* $100,000 a year (the majority). (For sake of argument let’s assume congressional approval was expected).

That would be a REALLY compelling platform, but in essence it is just buying votes and robbing the wealthy blind.

In this case, it was hoped that the learned and responsible representatives of the electoral college could step in to avoid this type of abuse of the system on an altruistic and nonpartisan basis (sorry I just spit some milk out my nose). In practice, deviant voting by the electoral college is considered gratuitous and anarchic and has fostered support for abolishment of the electoral college, as most people don’t understand its philosophical basis and perceive it as conspiratorial subterfuge.

The Republican platform is remarkably similar to this test case - but on their platform, pretty much everyone gets promised a tax cut, spending is expected to go down, but frequently goes up (current administration being the perfect example), and the missing tax coffers are subjected to the national debt pile.

More simply put, the Republicans use the national debt as their personal credit card to buy elections.

This has worked exceptionally well for them.

It isn’t robbing Peter to pay Paul. It’s promising to pay all Peters and Pauls for their votes by putting it on the nation’s credit card - a looming financial disaster which no American personally comprehends the meaning of financially - but is coming to bear right now.

Let me make the enormity of the $9.6 Trillion national debt abundantly clear.

If we were to STOP accumulating debt now, forever, and start repaying the existing national debt at a rate of $1 a minute, it would take over 17 Million years to pay it off.

UNEMPLOYMENT

This is obviously a VERY hot topic in the metro NYC area right now. I have a friend who was laid off from Lehman (which is now the largest bankruptcy in U.S. history) last week, and another who is holding his breath at Merrill Lynch. Its not just the financial sector either - HP announced that its cutting 25,000 jobs.

G.H.W. Bush saw unemployment skyrocket 37% during his term in office, peaking at 7.5% when he left (again, he only served ONE term!).

Clinton saw unemployment DROP over 37%! In 2000, Clinton saw unemployment reach a historic low of just 4%! (some considered this level ‘full employment’, as the remaining 4% are likely unemployable or not making a reasonable effort to become employed).

Bush II has seen unemployment rise 13.4%.

Does who the president is even really matter?

Just as there are other factors other than taxes which affect your personal wealth, there are other factors other than Presidential financial policy which affect it as well.

There are arguments that the President doesn’t really affect the economy much at all, that he interferes too much, that congress is more responsible for effects and that the free market is going to move of its own volition for the most part.

Despite the fact that a lot of Americans think the government has too much of a hand in the economy, there are other successful governments which, by design, *directly* guide their country’s economy (Japan and S. Korea, for example) to a degree we cannot even imagine.

By contrast, the US, Canada, and Australia lead the world in economic freedom from government interference.

That said, the US government absolutely has meaningful economic devices at its disposal which are used regularly (example: interest rates). However, marginal control is arguably worse than “none” or “total”.

My suggestion to voters is, if you want to vote with your pocketbook, then examine the candidate’s overall fiscal policy, and decide what impact that is likely to have on the overall condition of the economy. But for god’s sakes, don’t sell your vote for a lousy tax cut, because during my lifetime as a voter, a Republican president has resulted in my real personal wealth getting hammered.

For reality’s sake I would tell you that it is probably impossible for you to foretell the relative future of the US economy based on either candidate’s position - if you could reliably do this, you could probably make a fortune in the market off your expectations of either candidate’s effect.

Of course, if you prefer, you could just stick your head back in the sand and reinforce your belief that the democrats take all of your money in taxes and give it to lazy, unemployed, irresponsible, single-parent crack addict mothers via welfare, and if they would just quit it and give you some back your life would be peachy.

But in doing so, keep in mind that the federal welfare program was abolished by the Clinton administration in 1996.

Addendum…

While I was writing this post, I was called by a pollster and participated. At the end of the call, I begged the pollster to tell me the geographic area he was working and whether he was getting more votes for McCain or Obama.

He told me he was working Connecticut-wide and that the majority of his calls had said they were voting for McCain - ‘way more’, he said.