In the Red

 

by Lance Thompson

For centuries, conventional medical wisdom held that ailments ranging from diabetes and gout to epilepsy and insanity could be successfully treated using the scientific technique known as phlebotomy. This is commonly known as bloodletting, or drawing blood from a patient to release the sickness. The technique is as old as ancient Greece, and was commonly used in Europe and North America well into the 19^th Century. Though this treatment has largely been discredited, and common sense tells us that a sick person can ill afford to lose multiple pints of blood, phlebotomy still has a few adherents today. Likewise, liberals still view taxation of the private sector as a cure-all for economic ills, stubbornly clinging to a demonstrably false and dangerous practice of draining the economy of its live-giving essence.

The Obama economy is clearly in critical condition. Our national debt and deficit are several times as large as those of any previous administration (and more than all previous administrations combined). Unemployment is in double digits, home values have plummeted, gas prices are soaring, and various sectors of the economy have been taken over by the government to prevent their total collapse. The United States is in danger of losing its AAA credit rating, a significant portion of our debt is owed to Communist China, and the dollar is no longer the undisputed king of world currency. The Obama economy is very sick indeed–weakened, staggering, dependent on borrowed life support. What does the Obama administration prescribe as a cure? The fiscal equivalent of bloodletting–higher taxes on those sectors of the economy that are still functioning.

Liberals like to distinguish between the private (business) and public (government) sectors of the economy, and certainly favor the latter. The private sector is competitive, open and responsive to free market forces. The public sector is non-competitive, closed, and is insulated from free market forces. But the most important difference is that the public sector is paid for entirely by the private sector, through taxes. The more robust and successful the private sector, the greater is its capacity to support and fund the public sector.

Obama wants millionaires and corporations to "pay their fair share of taxes." No one pays a fair share of taxes. The top 10% of income earners pay 70% of all taxes. The top 25% pay 86% of all taxes. The bottom 50% pay less than 3% of all taxes. Obviously, the highest earners cannot be accused of paying less than their share. The majority of the top earners, the ones Obama has targeted for increased taxes, are those who own companies large and small, employ Americans at all income levels, and contribute to the strength of the American economy. Corporations, similarly targeted by Obama, are also employers, providing precious jobs and injecting value into the economy by goods and services offered, payrolls distributed, and taxes paid. It is from these groups that Obama wishes to draw more blood.

These targeted groups are also the most able to respond to punitive tax policy by voting with their feet. High income earners and corporations can migrate to more tax-friendly environments. We can see this already in the flight of companies from high tax states like New York, California and Illinois to low- or no-tax states. However, these individuals and corporations are not bound to remain in the United States with its increasingly burdensome tax policy. Services and manufacturing plants can be moved overseas, corporations can shift their headquarters to lower-tax nations, and individuals can relocate to tax havens around the world. As these individuals and companies are drained of an increasing percentage of their worth, they will escape to avoid being bled to death.

The result will be ever more rapid decline of our ailing economy as its life blood is drained away by ever higher taxes. The higher taxes go, the fewer individuals and companies will remain to pay them, and revenues will decline. The private sector will no longer be able to sustain the public sector. The government will go into cardiac arrest.

The only way to stop the outflow of our most prosperous citizens and corporations is to lower income and personal taxes. When this happened under Presidents Kennedy, Reagan, and Bush, revenues increased, the economy gained strength, and the nation prospered. Higher taxes, as prescribed by President Obama, can only weaken our economy and our nation. Higher taxes may wound our economy, or they may kill it. Either way, the Obama administration will have blood on its hands.

What If They Gave a Recession and Nobody Came?

By Lance Thompson

Recently I overheard a neighbor proudly showing his new truck to the guy next door. In response to appropriate appreciation, the new truck owner made this statement: I refuse to participate in the recession.

Slowly, the wisdom of this profound statement sank in. A recession, like any other manifestation of mass hysteria, requires participation to continue. People must have faith in a recession, must contribute to it, must convert others to believe in it. Otherwise, the recession would collapse for lack of support.

How do we know there is a recession in the first place? The media, bearer of all dire tidings, tell us so. It is clear to most Americans, based on a recent poll that rates the media among the least trustworthy of institutions, that those who bring us the news have an agenda. Part of that agenda is to elect Barack Obama. To achieve that end, the media must convince Americans that the economy is in a nosedive, so that we will seek relief from the junior varsity Senator from Illinois.

The media keep the news about rising gas prices, falling home prices, massive layoffs and the weakening dollar in the headlines and on the tops of the newscasts. There is no pessimistic economic indicator that doesn’t rate its own computer graphic, economic victim interview, and concerned look from the news reader.

Falling home prices certainly affect all homeowners. Journalists and commentators point to the phenomenon as proof of a worsening economy. However, when home values were rising just a few years ago, the exact opposite situation, the media were characterizing that as bad news as well. Even though rising home values added billions to the net worth of American homeowners, the media concentrated instead on the diminishing percentage of Americans who could afford the average home–the negative side of rising home values. Likewise, as home values fall, you will not hear reports in the media about the increasing affordability of homes. As prices come down, a larger percentage of the population can afford to buy homes, but this aspect is ignored by recession cheerleaders.

Economists gain access to the media and notoriety by volunteering their views on the coming recession. If you’re an economist with a doom and gloom forecast, you can be booked on a network show faster than an Olympic gold medalist. But The Wall Street Journal recently featured a story about foreign investors from Abu Dhubai buying the Chrysler building. This is a structure whose value is inextricably tied to the value of American commercial real estate. It is not an asset that can be purchased and shipped to the Middle East like some other token of wealth. Buying the Chrysler building is an $800 million bet on the future health of the United States economy. The views of economists are interesting, but none of them are playing with their own money.

High fuel prices impact everyone, but there are benefits to four dollar gas as well. Chrysler is spending almost $2 billion to retool a Detroit plant to build fuel-efficient, car-based SUV’s. It is a major investment in Michigan, which has been losing manufacturing jobs to other states for a generation. Boeing’s fuel-efficient 787 is the best-selling new airliner in history, with airlines around the world clamoring for the gas-sipping jet. High fuel costs have made Americans trade in gas guzzlers for fuel-efficient hybrids, and made American corporations increase their energy efficiency. Those habits will continue.

It’s not all good news, of course. Some people are doing well and some are having a tough time, which is pretty much the way things have always been. Most people’s relationship to the economy is intimate rather than general. The recession is a generalization, and certainly a subjective assessment. Not everybody is out of work, not every home is in foreclosure, not every business is going under–although that’s the way it looks on the news.

From personal observation, I see signs of a very healthy economy. My mother’s real estate office in Sacramento, a city with one of the highest foreclosure rates in the country, has seen business increase dramatically in the last two months. We have friends in Colorado who have added a premium zip-line attraction to their resort, and their business has doubled since last year. My wife, who recruits animators and visual effects artists for movies, has never been busier helping studios hire talented individuals.

There’s no such thing as a recession that affects everyone equally. There are challenges and opportunities in every economic situation. No matter what the media are talking about, people everywhere are starting or running businesses, looking for employment or employees, making investments in their homes, families or businesses. The principles that govern these activities don’t change just because the media says the economic sky is falling.

So I will gladly join my neighbor and refuse to participate in what the media wants us to believe is a recession. I’ll continue to do my job, pay the mortgage, buy groceries and gas, and put something away for a rainy day, as most people do most of the time. And I look forward to the day when the purveyors of gloomy economic forecasts will learn firsthand about economic reality by looking for work themselves.