A question that hangs over this country is whether the policies out of Washington will help our economy grow.
Nobody really knows, of course. Students of economic history, I suspect, are not encouraged by what they see. A lot of them see the following cards stacked against the economy for the longer term.
1. Government stimulus packages have not worked well in the past. Our own Great Depression and Japanís recent years in the doldrums are good examples of stimulus failure. Lots of studies show that most government stimulants stimulate little.
We, of course, are plunging deep into debt in launching stimulus packages. It is like you taking out a massive loan for a faulty business. The loan does not help the business grow. Meanwhile you have burdened it with more debt.
2. Massive indebtedness hurts economies. Huge deficits hurt economies. They slow down growth. They cripple economies with repayments for years ahead. There are mountains of histories of economies that underscore this point. We are suffering immense deficits and a mountain of debt.
3. Raising taxes in recessions is a bad move. History confirms this. Logic alone should tell us this is so. If a business was suffering, do you think it would make sense to raise the taxes it must pay?† If a household is struggling, is it wise to raise taxes on it?† Of course not.
If the cap and trade (tax on energy) bill passes the Senate we will be taxing every household and business in this country. We are also about to raise various tax rates when the Bush tax cuts expire. The President also promises to raise capital gains taxes. And this week we heard a proposal to slap a 5.4% tax on high earners to pay for healthcare reform.†
Meanwhile the huge spending bills will require higher taxes to pay for them. Congress is talking about a national sales tax. It also talks about whacking the big earners with drastically higher Social Security taxes.
4. Mean-spirited attacks on business are like boomerangs. In various ways they come back to hurt us. Our government is abusing and attacking businesses. It is ramming laws and regulations down their throats. It is breaking laws in order to tame them. This may provide short-term satisfactions. In the long term, it will damage industries and our economy.
5. Governments do not run businesses well. The evidence is overwhelming that this is almost always so. Governments have tried to run power companies, phone companies, steel companies, car companies, railroads. Rarely have they run them well.
Our government is, of course, running banks and car companies now. It wants to increase its Amtrak operation. So that it can lose extra billions I guess. Congress and the President want to have government intrude further and further into the private sector. We have a hundred years of socialist and communist attempts at this. Collectively, they make a dismal picture.
6. Punishing the rich does not work. Punishing entrepreneurs is like eating the seeds you were going to plant next year.
Going after the money of the rich makes the less-rich feel good. It feeds envy. But it damages the economy that employs all of us.
We are going after our rich with a vengeance. With the taxes I cited above.†
There is a reason why the fables of The Goose Who Laid The Golden Eggs and The Little Red Hen have lasted so long. They are part of the fabric of human nature.
We can tell folks that punishing the rich, taxing them more, will bring us more golden eggs than ever. We can assure them the higher taxes are only fair. But we are kidding ourselves.
History tells us the rich always escape. They go underground. They go overseas. Or they stop taking the risks that lead to big incomes. Do you think the Ted Turners, Bill Gateses, Henry Fords, Steve Jobs would have thrived in countries that socked them with huge taxes? They and their ilk created millions of jobs for us.†
If you wonder how they would have done under higher taxes, just look at the countries that have traditionally levied such penalties on the rich. You will find far fewer such entrepreneurs. And in the last 50 years, far fewer new jobs. And far less innovation. And much slower-growing economies. We are working overtime to copy the measures that caused those economies to grow more slowly.
These are the cards that are stacked against the American economy these days. Not nice cards, history tells us.
From Tom ... as in Morgan.††††††††††††††††††
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