That Fair Dinkum Bloke Barack Obama

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Yesterday we solved a mystery. US President Barack Obama is an Australian! Yes, you’ve probably heard all the internet rumours and innuendo that suggest Obama was born in Kenya and not in Hawaii. But all you have to do is listen to the man and you’ll realise he’s a fair dinkum Aussie.

Obama unveiled his 2013 budget yesterday. In it, he proposed raising the tax on dividend income from 15% to 39.6%, or the top marginal tax rate. In Australia, dividends are already taxed at the same rate as ordinary income. Obama is busy making America more like Australia.

He also repeated his support for the “Buffett Rule”. That’s the rule, named after an octogenarian billionaire, that anyone who makes more than $1 million should pay no less than 30% in tax. Channelling his inner Aussie, Obama said, “We don’t begrudge success in America…but we do expect everyone to pay their fair share.”

There it is, “fair share”. The idea of “fairness” is Australian as it gets. This is the land of the “fair go”. And “fair dinkum” is part of the everyday language. Australians have a strong sense of fairness.
But what is fair when it comes to how much money you should earn? Should someone, the majority in government for example, be able to tell you how much you can “fairly” earn? Fairness is a subjective term. We all have a sense of what’s fair when it comes to some things. But we sense that “fairness” is now being used as a code word to justify taking what you want for ideological reasons.

To be fair, this wouldn’t be an issue if people sensed the world was a fair place where hard work is rewarded. That doesn’t seem to be the case anymore. People look around and see CEOs and politicians and public sector workers and unions making big, guaranteed salaries all out of proportion to the work they do. This doesn’t seem fair.

People sense the system they live in his corrupt and that if you play by the rules, you’re a sucker. The only people that seem to get ahead are the people that cheat or have connections or are already rich. That doesn’t seem fair either. And when people sense that playing by the rules doesn’t pay anymore, they’re more tempted to even things up by taking what’s not theirs.

Of course we don’t really know what people think or what they’re sensing. We’re just guessing at the social mood based on what we see, hear, and read. But what we sense is that confidence in a system is a fragile thing. When it’s lost, the language of fairness gains value as political currency.

Obama’s appeal to fairness is a complete fraud, of course. Raising taxes on dividend income won’t plug the gaping holes in America’s Federal Budget. The chart below shows that 65% of the President’s $3.55 trillion budget is locked in as mandatory, non-discretionary spending. These “entitlements” were promises made to the American people out of a sense of fairness; benefits of citizenship they were entitled to by birth. But someone has to pay for them, right? From each according to his ability to each according to his needs, as Marx said…

The Price of a Fair Social Democracy…about $3.55 trillion

The Price of a Fair Social Democracy...about $3.55 trillion
Click here to enlarge

If Obama were fair dinkum about fairness, he’d ask the Congress to quit spending money it doesn’t have and leaving the bill to the future. And if Congress were fair dinkum, it would fulfil its Constitutional obligation to guard the nation’s purse strings.

There is also the little matter of $693 billion in spending on “defence”, which presumably includes two foreign wars. If Congress were fair dinkum, it would declare war properly before funding the American military. Or, better still, it would accept the fact that defence spending in America is way too high and must come down as part of the nation learning to live within it means.

But no one in America is fair dinkum about the nation’s fiscal reality. We’ll be addressing this idea in our general session in Sydney next month. What is the future of American exceptionalism when the country is actually broke? And is a powerful military really what makes the idea of America great? Stay tuned.

Regards,

Dan Denning
for The Daily Reckoning Australia

Dan Denning
Dan Denning examines the geopolitical and economic events that can affect your investments domestically. He raises the questions you need to answer, in order to survive financially in these turbulent times.
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6 Comments on "That Fair Dinkum Bloke Barack Obama"

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Greg
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Not quite right Dan. Dividends are not taxed as ordinary income, as dividend imputation can apply.

But taxes still have to be paid even if the dividends are re-invested and no income is received.

As for Buffet, he doesn’t have a lot of income tax, as most of his wealth has come from capital gains. I wonder why he doesn’t support the retrospective application of higher capital gains taxes?

Maybe he is not as altruistic as he is promoted to be?

Mick
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They have to spend big on military because all America exports these days is war.

The only thing the Roman Empire exported in it’s last 20 years before it’s collapse was war as well.

See any similarities?

Garry
Guest
A few things have been neglected here Dan. Not least the role of defense spending. All things said, it is great employer for Americans, indeed, a “made in the USA” logo is writ large on a huge range of products. And best of all, they are export items. Albeit, with varying methods of delivery to the recipients. Added to this, the defense industry is at the cutting edge of tech and innovation, thus keeping the grey cells of Americans in a healthy state – Whereas we here in Oz have no such incentive. – Rather, we dig and sell rocks… Read more »
LBS
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And watch Obama get his dumba$$ voted out. He is ruining the US.

Justin
Guest
I love these people like Garry who think mining and resources is a low tech, bottom of the barrel industry. Andrew Forrest and people like him are the closest thing Australia will have to a Steve Jobs i.e. true game changing value creation, the same with Sam Walsh and Rio’s WA Iron operations with the high level of automation they have achieved. It would have to be the most sophisticated mining operation in the world. Ahhh news flash – we NEVER made the shovels in the first place !! (the older draglines and shovels in the bowen basin were built… Read more »
Ray Gregg
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I’m not sure I fully understand the “fair dinkum” principle; however, I do understand the flaws of trickle-down economics. You’ll note that corporate America is making record profits and that unemployment remains high. I’m guessing that “fair dinkum” extends to the social contract to spread the wealth . . . even in a capitalist model there is an expectation of reinvestment into the corporation. However, reinvestment has fallen far behind the enrichment of administration. Hence, there is justification to tax the wealth which is frittered away on greed. Hence, Obama’s call to fairness is not the complete fraud you suggest.… Read more »
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