What Another 4 Years of Obama Means

[Note: Before you read this, I want you to know that I did not vote for Obama or Romney. This is not a partisan message, only observations about what has happened and speculation about what might happen in the months ahead.]

The day after Obama was reelected, the stock market fell 313 points.

The second day after, the market fell 121 points.

That’s a 434-point drop in two-days’ time. And it reflects the market’s anticipation that things are going to get worse during Obama’s second term.

During a president’s second term, he can pursue whatever policies he wants because he no longer fears losing reelection. So during Obama’s second term, we ought to expect more extreme versions of the policies he’s already put in place.

For example, we might expect that Obama’s kill list will get longer and that unmanned drone strikes will happen with greater frequency.

We might expect the expansion of expensive social programs and the creation of new ones.

We might also expect higher taxes for just about everybody.

Some readers may take issue with that last statement, believing that Obama will only raise taxes on people making more than $250,000 a year. But consider that if Obama and Congress do nothing, millions of Americans are going to be paying much higher taxes next year.

Bob Bauman, writing for The Sovereign Investor, says:

The first major test will come on the looming issue of what the president and Congress will do about the infamous “fiscal cliff.” On January 1, 2013, this inane law — the irrational result of a congressional compromise with Obama last summer — imposes a series of huge, automatic tax increases and drastic spending cuts.

These tax increases and spending cuts could knock as much as 4% off the U.S. GDP and lead to millions of lost jobs. Investors and retirees will suffer a major blow when dividends are taxed as ordinary income at a rate that could reach 39.6% and capital gains taxes rise to 20% from 15%.

My sources on Capitol Hill say the likelihood is that the fiscal cliff problem will not be resolved soon. Given the election results, it seems unlikely that anyone will be in a mood to compromise, and the American people will be left to suffer.

More disturbing than the expiration of Bush-era tax cuts and the imposition of new taxes (like those described above) is the dramatic impact the Alternative Minimum Tax (AMT) will have next year. The Washington Post reports:

Forget about the much-publicized tax hikes set to take effect for 2013 — if you have a couple of children and annual income over $75,000, chances are good that your taxes are on track to go up substantially for 2012.

Unless Congress acts by the end of the year, more than 26 million households will for the first time face the AMT, which threatens to tack $3,700, on average, onto taxpayers’ bills for the current tax year. Because those people have never paid the AMT, they have no idea they are in its crosshairs — put there by a broader stalemate over tax policy that has kept Congress from limiting the AMT’s reach.

Congress has less than two months to revise the AMT rules, and I’m doubtful they’ll be proactive about it. Barring a miracle, tens of millions of hard-working Americans will face higher taxes in 2013.

Remember, the $75,000 figure mentioned above is household income, not individual income. So if you and your spouse each make $37,500 per year ($75,000 total), and you have a couple children, it’s practically a certainty you’ll be hit by the AMT and will see your tax bill climb in 2013.

I could go on, but I’ve probably shared enough for today.

The bottom line is most Americans are going to have less disposable income in 2013 than they did in 2012.

Batten down the hatches. The storm is coming.
-Survival Joe

P.S. I still believe silver is a great way to preserve a portion of your wealth. It’s easy to do when you get a Silver Saver account and make small silver purchases each month.