Friday, March 19, 2010

My View

Random thoughts from a warped and fevered mind...

Amity Shlaes, Senior Fellow in Economic History at the Council on Foreign Relations, wrote an article for Forbes Magazine looking back at the Great Depression and some of the factors that prolonged this grim economic period. Her observations are very interesting and serve as both warning and instruction to us in today's economy. She states that there were three factors that deepened and prolonged the economic crisis of the 1930's. They were: Taxation- President Hoover raised the top income tax rate from 25% to more than 60%. Franklin Roosevelt continued this trend by eventually raising the top rate to more than 90%. Labor costs- Part of Roosevelt's New Deal was to raise wages under the premise that it meant more purchasing power for workers. While good for those that were employed, job creation slowed to a halt. Executive discretion- Roosevelt seized the power to make the rules away from a weak Congress under the guise of needing "bold initiative" to revive the economy. Because the rules of taxation and regulation were constantly shifting, businesses stopped spending capital to grow and hire new employees. Take a close look at our economic and regulatory landscape today and see if these same circumstances are in place. I think they are. And that means our economic recovery is going to be weak.

I saw a red breasted bird sitting in the warm sun today. It was a Basking Robbin.

As Congress considers nationalizing our healthcare system, we have heard this week that they, our elected representatives, may not actually vote on the bill in the House of Representatives. The House is considering using a parliamentary procedure called "deem and pass" which would allow the House to strip out controversial provisions of the bill but "deem" that the entire bill had passed without requiring a second vote. Follow that? It is Nancy Pelosi's cowardly way of letting the House vote but not vote on socializing our healthcare system. It is an out for those representative's that don't have the courage to face their constituents and say that they voted for this package. We elect our representatives to do that, to represent our wishes in the Legislature. The American public overwhelming opposes socializing our healthcare system. Our representatives should have the courage to put your actual vote on record.

If the House of Representatives can "deem" to have voted without really voting, I wonder if I can "deem" to have paid my taxes this year?

I had an opportunity to have lunch with Arthur Laffer several weeks ago. If that name doesn't ring a bell, let me refresh your memory. As an economist in the 1970's, he proposed that the best way to boost tax receipts for the government was to first boost growth in the economy. He said the best way to do this was to cut all taxes- capital gains, corporate tax rates, income taxes, estate taxes- to a level that didn't impede growth. Although many economists tried to dismiss his theories, he was resoundingly proven right in the 1980's when President Ronald Reagan cut taxes substantially, which started a twenty year cycle of economic expansion.  Today, many economists attempt to discredit the work of Laffer and the interrelationship of taxes and growth in the economy. Be sure of this: we are in a period of economic contraction. Tax receipts to local, state, and federal governments have fallen significantly because of that. Raising taxes will not bring in more revenue to the government and will further slow growth, compounding the problems we face in this country.

I am over 50, and proud to say I still have my looks. Problem is, I can't find them.

And that, my friends, is my view.

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