Economic Realities

It is clearly time to educate people on economic realities, as we prepare to spend a trillion dollars on pork and another trillion helping the bank buddies get richer. No, don’t worry, the congressional outrage yesterday was just for YouTube. Business as usual will be restored today. Except of course, the government will have a whole new level of meddling to do.

How do recessions end? That is the question. The obvious answer, one that everyone is struggling to implement, is that they end when business/industry obtains capital, invests in growth, hires new workers, and the overall level of consumption rises again.

IN order to demonstrate how this works (and does not work), let us adopt, for the moment, the conceit that you are all now truckers. You have been working for a shipping company, and had the bright idea of going out on your own some day. You have been investing your money and you now have the downpayment available to buy yourself your own truck and make the leap (this is analogous to businesses who have been accumulating investment capital). For you to liquidate your investments to buy the truck subjects you to a massive capital gains tax. Obama wants it to be 39%! Therefore, your ability to make your investment is hampered and you have to subsidize the government before you can do it.

An intelligent approach would be to eliminate the capital gains tax. By allowing all the money to be invested, you might actually be able to buy a better truck – or heaven forbid – 2! And hire an employee yourself to drive the second one! The money would be immediately put into the economy, to serve its multiplier function, you would be in business, and the microeconomy is helped. This scenario can play itself out in the macroeconomy solely by setting constitutional tax policy.

Contrast this approach to the current administration’s. They want to remove your investment money from you, launder it through the feral bureaucracy, and then give it to someone who didn’t earn it – say – an experimental windmill maker. Without accountability or risk of failure, there is no guarantee that money builds a windmill. They just come back next year saying “we need more money”. And they will get it – other than welfare reform, when did any program ever get repealed?

So why should we participate in the money laundering? Especially when the answer to the recession is so simple?