Economic literacy is often in short supply among politicians and media personalities. And – especially – among economists. Paul Krugman, for instance, may know quite a bit about comparative economic advantage, and, therefore, warrant the Nobel Prize. But his socialism trumps his intellect when it comes to policy. Since economics is, at base, the study of human nature, and since liberals deny that human nature exists, they make poor economists.
Or, put another way, their policy proposals NEVER work.
Consider this simple question: if massive governmental spending, high taxes, huge infrastructure expenditures, and heavy borrowing produced prosperity, why is not New Jersey charging ahead of the nation? State spending is up 40% in eight short years, on top of an already astonishingly bloated base. More than 100 tax increases; borrowing, through the ceiling. Spending on infrastructure like schools and highways, billions each year.
And our economy wallows in the crapper. Not a single private sector job created in eight years. Productive people leaving the state in droves. If the left is right, how can this possibly be?
Obama proposes to take these failed policies national. Spending hundreds of billions, if not trillions, in borrowed money, on massive public works projects, increased welfare spending, etc. It’s never worked before; quite the contrary. Increased governmental spending, and the taxes and borrowing necessary to support it, inevitably devastates the economy.
A recent Ledger editorial on the benefits of higher tolls on the highways demonstrates the utter inanity of the left’s arguments. Higher tolls, they aver, will "create jobs": building new roads or repairing those we have. But if people spend more money on tolls, that’s less money they’ll have for (say) cars, lawnmowers, jewelry, toys, Hallmark cards, etc. The level of spending will remain the same, as those tolls, and the resulting construction, add nothing to the economy. Instead of the tollpayer spending his money as he sees fit, it will now be spent as the government sees fit.
If we need new roads (I would submit that we do not), taking money from taxpayers/tollpayers makes sense. But to assert that it "creates jobs" is silly.
Similarly, for the feds to borrow ungodly amounts of money to create make-work jobs makes zero economic sense. If a particular project were necessary for health, welfare or safety, great. But building things for the heck of building them does not contribute to economic growth.
The fatal defect in relying upon the wisdom of governmental officials to direct spending in an economically efficient manner is that no one possesses sufficient knowledge to focus spending where it will do the most good. The Japanese learned that lesson in spades. Remember Japan, Inc., which, the left informed us, was going to eat our free-market-produced lunches with its public-private, industrial policy economy? How’d that turn out?
So. We want to get the economy moving again and, apparently, we’re willing to tolerate absolutely stratospheric deficits to achieve that result. How best to do that?
Simple. Abolish the corporate income tax entirely. Problem (mostly) solved. Throw in abolition of the Alternative Minimum Tax and we have the makings of a truly historic economic achievement.
Eliminating corporate income taxes "costs" only about 1/4 of what Obama promises to dump into make-work governmental projects. And, as has been repeatedly demonstrated around the world, from Ireland to Singapore, the result would be an economic boom. (It would, likely, tend to unemploy a great number of lobbyists, who exist to protect particular tax breaks or prevent governmental damage, but they might find honest work elsewhere).
Tax collections would likely remain stable and, over time, increase. Anything corporations distribute would, of course, be taxed, either as income to their employees or capital gains to their investors. Or in price cuts to their customers, producing greater sales and better competitiveness. And, of course, more tax revenue.
Liberals, interestingly, backhandedly acknowledge this. Governor Corzine recently said, "if there’s any economic lesson of history, it’s raising taxes during a recession is a poor idea". Even Krugman blamed the depth of the Great Depression upon tax increases by Hoover and FDR. Obama now suggests that repealing the Bush tax cuts "for the wealthy" might not be high on his to-do list during a downturn.
So, class: if everyone admits that taxes hurt the economy, does it not make sense, in down times, to cut taxes so as to help the economy? (Indeed, one might ask a liberal: "given that you admit that taxes hurt the economy, what possesses you to raise them in good times? Do you WANT the economy to falter?") If we want businesses to prosper, hire lots of new employees, etc., would it not make sense to stop treating them as piggy banks for socialist undertakings?
Conservatives, of course, freely acknowledge that taxation – at some level – is an unfortunate necessity of life. We need a military, courts, police, etc. But we understand that ALL taxation hurts the economy and, therefore, can only be justified when the benefits of the tax clearly outweigh the economic harms.
Government cannot prevent occasional economic downturns any more than it can prevent bubbles. But a government which provides economic freedom – read low taxes – ensures the greatest prosperity.