Monday, July 9, 2012

Not Winning

The President's decision to push tax increase rhetoric is puzzling to me. Team O may believe they are firing up the base, but after several years of dismal economic results, it's hard to believe that the public is going to think that increasing taxes is a good plan. I think that the public has come to understand that increasing taxes on the wealthy, is only laying the groundwork to increase taxes on the middle class. From the LA Times:

Polls generally show voters are happy to tax the rich, with majorities agreeing with the president that those with the highest incomes should pay more taxes.

At the same time, polls also show that Republicans do better when they frame upper-income tax increases as a threat to small businesses, a group that voters tend to like. "No one should see an income tax hike next year — not families, not small businesses and other job creators," Senate Minority Leader Mitch McConnell (R-Ky.) said Monday.

The article doesn't say which polls, so I question their veracity. Further, and more importantly, Obama is certainly not serious about his proposal on two counts. The increases are not going to be passed in the House this year. But even if Obama squeaks through to re-election, passing his proposal would signal the death knell for the Democratic party. Why? Because the increase in top capital gains taxes and dividend taxes from 15% to 30% and 43.4% respectively. This will cause a big sell off in the stock market, as investments become much less productive. A stock market sell off will in turn harm the economy. The fallout in 2014 elections after 6 straight years of abysmal economic performance by Obama would be a catastrophe for the Democrats. This is why I don't think he is really serious.

This news comes as Romney and the Republicans outpaced the Democrats and Obama in June fund raising $105 million to $71 million. Polling is very close, with the WaPo reporting a 47-47 tie among registered voters. However, I keep thinking that gives Romney the advantage, because I expect two things to happen. First, undecideds tend to break for the challenger. Second, I think likely voter energy is still with the Republicans; the Supreme Court ruling and Obama outrages over attacking the Catholics are sure to fire up the Republican base.

However, it remains to be seen if Romney can put together an effective positive message for himself that also attacks the President. I was impressed with the speed of his counterattacks earlier in the campaign. Perhaps his team is strategically planning where to release their prodigious funding to best advantage. For the moment, no one is winning this race; but I believe that Romney has some fundamental advantages.

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