Posts Tagged ‘targeted tax cut’

What Government Can “Do For” The American People.

Sunday, February 21st, 2010

Dear Friends,

It seems to me, the absolute best thing the US government could do “for” the American people, would be to all go on an extended luxury vacation. Spending the rest of their term on it at the American tax payer’s expense. Maybe at Herod’s or Hedonism II. As soon as they announced their plans to do so the markets would rebound like we haven’t seen in our lifetimes. The economy would start generating jobs… in the private sector.

All government seems to do lately is to undermine any economic rebound. As we said in our last blog, their energy policies are a poison pill for any recovery. Moreover government’s policies on healthcare is another source of economic destruction.

The argument that other countries provide “corporate welfare” in the form of “free” healthcare is simple sophistry. To believe this one has to also believe that the money that provides the “free” healthcare is generated out of thin air. We all know this is not true. The money to provide free healthcare is taken from some producer to provide that producer healthcare. In the process efficiency is lost or quality goes down.

The “Stimulus’s” elephant in the room is that, as soon as the stimulus money runs out, the jobs will evaporate. Like the ether they are made of. All the jobs saved or created are government jobs. Jobs that will require tax increases to keep. Tax increases that will, again, undermine any economic recovery. Tax increases that will necessarily require the layoffs of these new or saved government workers.

Now government wants to have “targeted” tax cuts. The problem with targeted tax cuts is that they are less efficient than general tax cuts. Part of the reason is that no one knows where an economic rebound will take place. It may be in some overlooked sector of the economy. Or it may be in a sector of the economy that was thought to be dead. Government’s track record of picking winners is very poor. When government target’s a sector or action, that they feel is good for the economy, other sectors or actions that may have greater benefits are undermined. Simply because money and resources are diverted to the sector or action that has been chosen by government. The market is warped by this type of tax cuts.

Constantly threatening greater and greater regulation and interference with the markets forces business to focus on government instead of profit and job creation. When government is in the mood to gore some oxen… everyone wants to be on the side of government. (To protect their ox from being gored).

Simply threatening regulation has a negative effect on job creation. The threat means business must also horde money and resources as well as focus on government instead of their markets. Both to have in case of a new opportunity opening from the new regulation. Also to protect from opening a new branch, product or service, being regulated out of business by the regulatory innovation. Business necessarily slows when regulation is in the works. When it is perpetually in the works…

Politicians always want to tout that they got “something Done for the American people.” Every time they get something done however they make things worse. Most of what they need to get done are problems of government’s making. Unintended consequences of poorly thought out regulation. Government official’s know, the unintended consequences of their new, poorly thought out regulation to mitigate the consequences of their last, poorly thought out regulation, will be the side of the bread the butter will be on… next legislative season.

So… Send the president and his staff, the congress and their staffs all on a luxury vacation. After a few years they will be more rested and relaxed. The economy will have recovered. And they will be able to swoop in and do something for the American people… Break it again.