The Coming Austerity?

I am gravely concerned about the effect that future tax and energy policies are going to have on the country under an Obama administration, especially since he will have a Democrat-party majority who will go along with him in Congress.  When you combine his ‘spread the wealth around’ tax policy (and the definition of ‘wealth’ seems to keep being defined down) with his belief in the myth of AGW and his desire to bankrupt the coal industry (which provides a significant portion of our energy), we could be facing a perfect storm of economic circumstances that would lead to tremendous economic losses and the loss of many more jobs.

In particular, I will be watching to see what kind of tax policy that he and the Congress eventually come up with, because I’m fairly certain that I’m going to be one of the people they target to pay for their new programs.  I’ve already calculated the effect that each 1% increase in taxes will have on my net income, and I’m starting to plan out what I will do at certain clip levels.  For instance, I currently have a house-cleaning service that comes in every two weeks and I also have a lawn service that comes each week during the spring, summer, and fall (pretty much up until Thanksgiving, given our usual weather patterns).  If my taxes increase by 2% I will probably drop the house-cleaning service.  At 3 or 4% I will drop the lawn service.  And I expect that I won’t be the only one.  So the pain will spread.  The house-cleaning service will probably have to lay off people.  So will the lawn service. 

The above scenario doesn’t even take into account the spike in energy prices that would be caused if he manages to impose his desire for a ‘cap and trade’ system of carbon credits.  If I were faced with a combination of a loss in net income due to higher taxes as well as higher energy prices, then additional cuts would have to be made.  I will cut down on dining out and other discretionary purchases.  Every one of those cuts will have a ripple effect through the economy, as the reduced spending causes business to have to refactor their costs structures, which usually entails laying off employees, as labor is usually the most significant cost in a company.

What I find most ironic about the effects of the job cuts is that it usually will hit the people in the lowest paying service jobs first, which I think are precisely the people who Obama is promising to help. 

Anyhow, I suppose it’s easy to fall into the trap of class envy and look at someone who is making $100K or $200K and think that they are rich and that you could use that money more than them (no, I don’t make anywhere near $200K).  But that’s a fool’s game, since those people are paying for the goods and services that keep a lot of people employed.  Cut their net income, and you will see immediate and painful effects.  We only need look to the past couple of months and the effects of high gas prices to see how people react to a situation where they are facing what is effectively a decrease in their net incomes.

The future is going to suck and it’s going to suck hard.

1 Comment

  1. Mike5906 says:

    Very insightful.  I also plan to drop my yard guy and house cleaners.  I simply won’t be able to afford them in the economy that is coming.