‘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”?
