With this presidential election next tuesday, America will pass the point of no return - or tipping point. Given Barack Obama's tax plan and the near certainty it will be supported by his cheerleaders in congress, more people will be the beneficiaries of government spending than there will be paying taxes to fund it. The only way that can work to maintain a viable economy is if the providers of support have incentives to continue to do so. Under this plan, they won't.
Consequently, the American economy is in for a prolonged period of stagnation and decline. There is no way out of the situation given the current system of taxation and the implementation of a philosophy of redistribution of income. Those who will get a free ride will not vote to re-impose taxes on themselves. And the Democrats who created the situation are unlikely to re-impose the taxes since it would cost them votes. This is not rocket science or advanced graduate economics. It is common sense.
The only non-violent solution to escape from a future of economic regression is to trash and eliminate the income tax. The only method of taxation going forward that is fair and equitable and that will allow for the regeneration of sustainable economic growth is the consumption tax. Whether it is a sales tax or a value-added tax, it would give the innovators and industrious the incentives of profiting from their efforts as they would be allowed to keep what they earned rather than having a significant portion of their earnings confiscated by the government.
A return to prosperity would also require that congress restrain its spending habits, an event that has to occur at some point as tax revenues under the current system dwindle and the cost of borrowing becomes prohibitive. Of course, the only way to keep government spending under control on a sustainable basis is to deny incumbents the ability to buy votes by imposing term limits on every elected official. That is a subject for another day.
Wednesday, October 29, 2008
We Can Only "Hope" To Survive Obama's "Change"
Next week Americans will make the biggest mistake in the relatively brief history of the United States.
When Americans go to the polls to vote for our next president, they basically have two choices. They have the opportunity to vote for an experienced man of demonstrated character and integrity who has spent his whole life in courageous and honorable duty to his country. This man's service in defense of his country went beyond the capacity of human limits, as everyone should by now know. And his career in public service has focused on the fight against corruption in government and efforts to restrain the out of control growth of government spending, both of which are the primary domestic enemies of the American citizens the federal government is supposed to represent. It appears this man has no chance of winning the election.
The other choice is a man with great rhetorical skills but little to no record of accomplishing anything of substance. He has an opaque personal background, is the product of the most corrupt political machine in America (Chicago), associates with known subversive domestic terrorists (William Ayers), and whose personal mentors over the years have been radical agitators who promote hatred of American ideals, culture and principles (Jeremiah Wright). Whenever he has won public office he has spent very little time doing the job he was elected to do but spent considerable amounts of time campaigning for his next higher political office. Unfortunately, this time there is no higher office, and he may actually spend some time doing what he says he is going to do. And that will be disastrous.
His stated goals are to expand government programs across the board, programs that are already on a path of self-destruction that will make the mortgage meltdown, caused by the government passing legislation requiring lenders to loan money to people they knew could not pay it back, look like a pimple on an elephant's butt. He has promised labor unions he will enact the Orwellian named "Employee Free Choice Act", which denies workers the right to secret ballots in voting for union representation, ensuring workplace intimidation and punishment for workers who favor the right to work laws. We are again seeing leaders of the Democratic Party promoting the anything but fair "Fairness Doctrine", designed to stifle dissenting opinion and deny free speech. And this candidate's tax plan is nothing more than pure, socialist income redistribution through the raising of tax rates on the higher income earners while promising those on the lower end of the income scale increased credits, deductions and exemptions to not only reduce their taxes to zero, but give them money confiscated from those who do pay taxes.
These spending and tax plans will have two consequences. One, they will kill the engine of economic progress in America by increasing the inefficient government directed allocation of capital resources to politically favored social programs and politically correct agenda's, and reduce productivity generating incentives, innovation and entrepreneurship as the government mandates a retreat from the proven prosperity producing power of capitalism, free markets and global trade. Two, they will ensure that Democrats remain in control of government until the American economy has totally collapsed with no prospect of recovery, or some outside force imposes its will. Why is that? Because this tax plan buys the votes of more than half the voting public.
In 2006, according to the US Census, 220 million Americans were eligible to vote. 89 million of those people, or 40.5%, paid no income tax. Under the Obama plan, 18 million more folks, or 8.2%, will not pay any taxes (in fact, many of these 107 million people will receive money from the government). 2.7 million people, or 1.2%, are employed by the federal government. Add that up and you have 49.9% of the voting public either paying no taxes or being dependent on the federal government. Another 24 million people, or 10.9%, will pay less than $1,000 and less than 5% of their income in taxes. Combined, that means 60.8% of eligible voters pay next to nothing to fund the profligacy of the US government, and really don't care how congress spends it other than to hope they send more freebies their way. Why should they vote for Republicans when the Democrats are giving them a free lunch - or more accurately, a free big screen tv, new car, rent money or extra cash for whiskey, cigarettes and drugs.
As any sane human being should be able to figure out, that can't last. Sooner, rather than later, the productive will tire of seeing the fruits of their efforts confiscated from them to be given to the non-productive. Before long, the whole country becomes non-productive and the game is over. It is interesting that some of Barack Obama's most passionate supporters are the 20 to 30 year olds who are the ones that are going to be most royally screwed under his new direction. Income redistribution might sound good to them now, but in 20 to 30 years there will be no income to redistribute. The government programs for social security, health care and other social entitlements that sound so great will not be there when it is time for the younger generation to use them, even though they will be the ones paying for the older generations to deplete.
Over the last century, capitalism and free markets produced the most rapid advance in standards of living the world has ever seen. Obama's "change" will put global economic progress in reverse, at least here in the United States. Perhaps his supporters have not noticed what the world's stock markets are telling them. Global stock markets peaked one year ago before beginning a normal consolidation following the five year bull market run that began in late 2002. At the end of August this year the US market was 17% below the October 2007 high, well within the bounds of a traditional cyclical contraction. But when it started to become clear that Barack Obama was going to be our next president, the stock market plunged 35% in less than two months. Nationalization of the financial industry, a fatal first step down the wrong road, was certainly the initial catalyst. But the realization that a new president and a like-minded congress would thrust the American economy recklessly towards socialism and income redistribution has arguably caused this financial disaster to be worse than it needed to be.
Obama's campaign slogans have been "change we can believe in" and "hope". The global stock markets are telling us that western civilization may not survive his type of "change." And the only "hope" we have is that he doesn't do what he says he will do.
When Americans go to the polls to vote for our next president, they basically have two choices. They have the opportunity to vote for an experienced man of demonstrated character and integrity who has spent his whole life in courageous and honorable duty to his country. This man's service in defense of his country went beyond the capacity of human limits, as everyone should by now know. And his career in public service has focused on the fight against corruption in government and efforts to restrain the out of control growth of government spending, both of which are the primary domestic enemies of the American citizens the federal government is supposed to represent. It appears this man has no chance of winning the election.
The other choice is a man with great rhetorical skills but little to no record of accomplishing anything of substance. He has an opaque personal background, is the product of the most corrupt political machine in America (Chicago), associates with known subversive domestic terrorists (William Ayers), and whose personal mentors over the years have been radical agitators who promote hatred of American ideals, culture and principles (Jeremiah Wright). Whenever he has won public office he has spent very little time doing the job he was elected to do but spent considerable amounts of time campaigning for his next higher political office. Unfortunately, this time there is no higher office, and he may actually spend some time doing what he says he is going to do. And that will be disastrous.
His stated goals are to expand government programs across the board, programs that are already on a path of self-destruction that will make the mortgage meltdown, caused by the government passing legislation requiring lenders to loan money to people they knew could not pay it back, look like a pimple on an elephant's butt. He has promised labor unions he will enact the Orwellian named "Employee Free Choice Act", which denies workers the right to secret ballots in voting for union representation, ensuring workplace intimidation and punishment for workers who favor the right to work laws. We are again seeing leaders of the Democratic Party promoting the anything but fair "Fairness Doctrine", designed to stifle dissenting opinion and deny free speech. And this candidate's tax plan is nothing more than pure, socialist income redistribution through the raising of tax rates on the higher income earners while promising those on the lower end of the income scale increased credits, deductions and exemptions to not only reduce their taxes to zero, but give them money confiscated from those who do pay taxes.
These spending and tax plans will have two consequences. One, they will kill the engine of economic progress in America by increasing the inefficient government directed allocation of capital resources to politically favored social programs and politically correct agenda's, and reduce productivity generating incentives, innovation and entrepreneurship as the government mandates a retreat from the proven prosperity producing power of capitalism, free markets and global trade. Two, they will ensure that Democrats remain in control of government until the American economy has totally collapsed with no prospect of recovery, or some outside force imposes its will. Why is that? Because this tax plan buys the votes of more than half the voting public.
In 2006, according to the US Census, 220 million Americans were eligible to vote. 89 million of those people, or 40.5%, paid no income tax. Under the Obama plan, 18 million more folks, or 8.2%, will not pay any taxes (in fact, many of these 107 million people will receive money from the government). 2.7 million people, or 1.2%, are employed by the federal government. Add that up and you have 49.9% of the voting public either paying no taxes or being dependent on the federal government. Another 24 million people, or 10.9%, will pay less than $1,000 and less than 5% of their income in taxes. Combined, that means 60.8% of eligible voters pay next to nothing to fund the profligacy of the US government, and really don't care how congress spends it other than to hope they send more freebies their way. Why should they vote for Republicans when the Democrats are giving them a free lunch - or more accurately, a free big screen tv, new car, rent money or extra cash for whiskey, cigarettes and drugs.
As any sane human being should be able to figure out, that can't last. Sooner, rather than later, the productive will tire of seeing the fruits of their efforts confiscated from them to be given to the non-productive. Before long, the whole country becomes non-productive and the game is over. It is interesting that some of Barack Obama's most passionate supporters are the 20 to 30 year olds who are the ones that are going to be most royally screwed under his new direction. Income redistribution might sound good to them now, but in 20 to 30 years there will be no income to redistribute. The government programs for social security, health care and other social entitlements that sound so great will not be there when it is time for the younger generation to use them, even though they will be the ones paying for the older generations to deplete.
Over the last century, capitalism and free markets produced the most rapid advance in standards of living the world has ever seen. Obama's "change" will put global economic progress in reverse, at least here in the United States. Perhaps his supporters have not noticed what the world's stock markets are telling them. Global stock markets peaked one year ago before beginning a normal consolidation following the five year bull market run that began in late 2002. At the end of August this year the US market was 17% below the October 2007 high, well within the bounds of a traditional cyclical contraction. But when it started to become clear that Barack Obama was going to be our next president, the stock market plunged 35% in less than two months. Nationalization of the financial industry, a fatal first step down the wrong road, was certainly the initial catalyst. But the realization that a new president and a like-minded congress would thrust the American economy recklessly towards socialism and income redistribution has arguably caused this financial disaster to be worse than it needed to be.
Obama's campaign slogans have been "change we can believe in" and "hope". The global stock markets are telling us that western civilization may not survive his type of "change." And the only "hope" we have is that he doesn't do what he says he will do.
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