Obama versus the Plumbers

Apparently some journalists have now gone out and vetted Joe the Plumber the way they have vetted Sarah Palin. (Definition of vetting: find anything to tear down the character or credibility of a person who dares to oppose to the Democratic Presidential candidate).

One of the things that they found was that Joe makes less than $250,000 per year, therefore rendering his argument meaningless because he would get the benefit of an Obama tax cut. Unfortunately, Mr. Obama must have either flunked economics at Harvard or perhaps he forgot to take that class. Joe knows the subject better than Obama does.

I can’t speak for Joe, but I can speak for Jeff the Plumber. Jeff has been in business in the Central Washington for about 4 years. His business, Paragon Plumbing grosses well over $250,000 a year but after expenses it nets well under that. So, I guess he would get a tax cut. He has 3 employees. They would also get tax cuts. None of them are thrilled.

What Obama doesn’t get is that businesses like Jeff’s do well when the businesses that he deals with do well. Jeff buys a very large amount of plumbing supplies from a national plumbing supply dealer. It definitely nets over $250,000 a year. It is one of those companies on Obama’s hit list. Closing loopholes, Obama claims he will tax them more and give that money to more deserving people. But here is the rub. Faced with increased costs of doing business, the supply company will do the only thing it can do to recover its necessary profit margin: increase its prices. They will simply pass the tax increase on to their customers. Jeff will pay more for his plumbing supplies.

But we are not done. Jeff’s best customer is a contractor who builds many homes a year. He also nets well over $250,000 a year. Obama’s plan will include increasing his taxes, too. The builder needs to maintain his profit margin. It is his duty as a business owner to keep it at a certain level. His ability to obtain construction financing is predicated on the businesses health. What does he do to offset the higher cost of doing business? He cannot raise prices like the plumbing supplier because he sells his homes at prices determined by the market. He must lower his costs. He does that by negotiating down the cost of his subcontractors – like the plumber.

So Jeff and his employees get their little one-time annual tax break. And although his company’s taxes are not increased, his costs of plumbing supplies are. At the same time his income per job is shaved because he has to trim his prices to keep the same work. His income is squeezed, all because Obama wants to give him a tax break.

But we are not done. The most efficient job training, job creation entity in the United States is the small business man. Jeff, with his small plumbing company has personally trained all three of his employees. Prior to his hiring them they were unskilled and unemployed. They now are experienced apprentices and one is even a very skilled journeyman plumber. While Jeff was training them, he was paying them. He paid their medical. The federal and state governments did not pay for job training; they got paid for these 3 young plumbers. They were trained, worked hard and Jeff dutifully sent their federal tax money in so Senator Obama could get his paycheck.

With increased expenses and decreased income, Jeff will undoubtedly have to cut his own expenses. He might have to lay off one of his apprentices. Will it be the one who bought his first house last year? A man will likely have to be transferred from the employment rolls to the unemployment rolls. All the costs associated with that will be directly caused by a misguided President, a one-trick pony who lacks understanding of how the economy really works.

I truly believe the real tragedy is that after inauguration, Obama will huddle with his economic advisors and will announce yet a new plan based on “new developments” in the economy. Some blaringly plain numbers will reveal that the tax cut for 95% of the population will have to be postponed. Because Bush has been such a good scapegoat, in the first year of his Presidency, Obama will be free to change his mind on anything and lay the blame at Bush’s feet. Will we remember Joe the Plumber then? He insisted his taxes were going to be raised. Joe knows.