'Tax rates have no effect on the behavior of the taxed.' - deeply held liberal tenet
George Rebane
This week President Obama made another extremely important statement that reveals his understanding of how the world works. At a campaign stop he took Romney's credentials to task, doubting that anyone who has focused on business ventures like reorganizing companies for the purpose of making a profit is suited to be President of the United States. The better recommendation for such a candidate would be to have focused on creating jobs. On hearing this I could not help but go slack-jawed.
To be sure, it is a tragedy to have such ignorance (or perfidy?) resident in the chief executive of a putatively capitalistic country, but the portents of making such a statement to the electorate should be our real concern. Obama spoke those words knowing that a large fraction of voters would agree with him simply because of his position, abetted by their inability to understand the basics of economics beyond their own spending habits. In other words, the man knowingly pandered to the complacantly ignorant.
The correct message should have been that in free markets all businesses are created to make a profit, and when successful, such enterprises also create jobs. No business is started for the purpose of creating jobs. You have to be successfully shielded from reality or just plain dumb not to know that labor – i.e. a job – is an element of cost that makes any product or service more expensive to the customer, makes the business less competitive, reduces profits and the ability to grow, and jeopardizes the survival of the company. In short, a successful business does its best when it minimizes the jobs needed to function profitably, and thereby best guarantees that the jobs it does provide will be the most secure.
It is only the collectivist state with its twisted ideology that sets up organizations, which employ cadres of inept and inefficient workers to impede the increase of wealth and the quality of life for the most people. And the collectivist state does this without regard to the unsustainability of the entire scheme, counting on increasing the wholesale level of equally applied misery to mask any alternative approach to creating and distributing wealth. This is what our President has been successfully selling, and through his cadres, successfully imposing on the country.
Part and parcel of such a downward spiral is the notion of a nation, up to its eyeballs in debt, spending its way to economic recovery and wealth. The Greeks are now demanding to spend more, instead of tightening their belts from profligate borrowing and spending. The French just voted in a socialist who promises to put their country on the same road. Spain and Portugal are ready to sign on.
This entire approach was recently given a mind-boggling justification by Hannes Swoboda, a member of the European Parliament and president of the Progressive Alliance of Socialists and Democrats in that ‘august body’. In his ‘Europe Can Spend Its Way to Growth’ (21may12 WSJ) he advances some economic prescriptions for the EU that have yet to work on this third planet from the sun – nevertheless, member countries are exhorted to throw themselves into the breech one more time.
First and foremost, he recommends compelled borrowing by states and businesses for the purpose of job creation. This, of course, requires some mysterious compelling of lenders, since prospects for profits that assure a payback are neither apparent nor a necessity. He then appeals to la-la-land accounting to dictate that such debts “should not be integrated in calculations of structural deficits and hence be punished because (somehow) investment in growth generates income and taxes, and therefore revenues for the state.”
To achieve this new level of unsustainable indebtedness, Swoboda argues that “European institutions should enact legislation that requires all members to make public investments in growth and employement.” A staple of economic activity in this direction is to re-ignite the efforts that “would finally lead us onto the path toward a seriously environment-friendly economy.” This in the face of the disastrous recent history that EU countries have experienced in their pell-mell charge into green industries, an experience which subsequently caused everyone to beat a hasty retreat in order to save their national fiscs.
How will all this be accomplished? Swoboda’s sure-fire approach spells out that “these additional investments need to be financed, one way or another.” (No kidding, you can’t make this stuff up.) And just to make sure that capital has every impediment to moving into its most productive use, he prescribes a new “financial transaction tax". On top of that, the EU would establish additional regulations to “fight against tax evasion” which then would “channel additional funds into national treasuries.”
To put a nice bow on it, we can now all do a little anticipatory happy dance because “once growth takes off, tax revenues will start flowing. Tax policy that favors lower-income classes and better regulation of financital markets would (then) already be fostering growth.” Now, do you see how easy all that would be? And do you finally understand why Team Obama wants to take us down that same road once “after (his) re-election (he) will have more flexibility”?
Ruminations - 8may12
George Rebane
Happy VE Day! On 8 May 1945 the Rebanes were in Liederberg - a small German farming village that just a few days ago was firmly brought under the control of Patton’s Third Army (more here) - and ready to be carted off to Augsburg and four years of internment in post-war displaced persons camps. Meanwhile, on the other side of the world the battle for Okinawa was raging with Marine and Army divisions locked in a no-quarter-given combat with Japanese forces that had only one mission, die as slowly as possible while killing as many Americans as possible. Okinawa was bigger than D-Day, but in America people were too busy celebrating Hitler’s downfall to notice. That August the world would again change.
Newly elected Hollande promised to tax France to growth and balanced budgets. And the French believed him. Now nothing like that will happen, but what the hell, the French could frolic in the streets for a couple of days before they double down on their loudly proclaimed misery. The French government's spending already accounts for more than 50% of the country’s GDP and it doesn’t generate any wealth. All it is capable of doing is buying votes with tribute exacted from its private sector whose top marginal tax rates are now going to go above 70%. The same silly people there as here believe that someone will actually risk their euros to build/expand businesses from which, if successful, the government will leave them 30 cents of every euro they earn.
Some writers view this latest installment of socialist failure in Europe as a golden opportunity for America (here). They argue that America will be the only place left in the world for entrepreneurial and investment opportunity. To me it seems that not everyone is paying attention to what Team Obama has accomplished, and what more they have in store for us should they win in November. America’s crosshairs are focused squarely on being able to replicate the European toilet economy. And some independents on this side of the Pond still ask, ‘why would we do that?’
The answer is that the socialist on both shores see none of this going on in Europe. The EU and its subsequent eurozone are instead seen as triumphs in governance. Happy dancing in the streets as national healthcare systems go broke, retirement ages are lowered (Hollande will return France to 60 from 62), endless vacations at every turn, can’t-get-fired jobs, minimum wages pushed above $20/hr, austerity measures reversed (no more spending cuts), … what’s there not to like?
No one there or here remembers nor has been taught that when governments have taken over the means of creating the country’s wealth, they have created the sorriest places for human existence on earth. It has always started with taxing the bejeesus out of ‘the rich’, until everyone who earned a private paycheck found themselves suddenly designated as ‘the rich’.
This is also graduation season and our colleges are in the process of disgorging another million or so of young people (the entire US education system releases 4.3M onto the economy each year). They are of the 'Me Generation', and the great part of them will land in the job market without marketable skills, and dumber than the proverbial 2x4 with a face painted on it. Bret Stephens in the 8may12 WSJ writes the Class of 2012 a sobering letter; it begins –
Allow me to be the first one not to congratulate you. Through exertions that—let's be honest—were probably less than heroic, most of you have spent the last few years getting inflated grades in useless subjects in order to obtain a debased degree. Now you're entering a lousy economy, courtesy of the very president whom you, as freshmen, voted for with such enthusiasm. Please spare us the self-pity about how tough it is to look for a job while living with your parents. They're the ones who spent a fortune on your education only to get you back— return-to-sender, forwarding address unknown.
Posted at 11:12 AM in Culture Comments, Our Country, Our World, The Liberal Mind, The Rear View | Permalink | Comments (47) | TrackBack (0)