It was therefore with great surprise that I read her post  We Have to Give to Get, in which she espouses the theory that what we really need to fix the economy is higher tax rates!  No kidding, that’s what she says.  Her basic theory is that a large divide between the wealth of the rich and the wealth of the poor leads to revolution, so the government should get more money from the well to do, and use that money for massive infrastructure spending, and that would create jobs, and everything would be fine.

I disagree, so I posted this comment on her blog; I’m not sure if my comments will be posted, so if not, here they are:

Attention Ms. Park: someone has stolen your identity and is posting under your name on your blog!  This doesn’t sound like you.

I agree that an oppressively huge gap between the rich and the poor can lead to revolution.  The real question is what to do about it.  Your solution is “higher tax rates, smaller governments.”  You are half right.  Smaller governments means less government spending, so that consumers can decide where to spend their money.

Cite the case where higher tax rates have led to smaller governments?  I can’t think of one.  Governments are an entity unto themselves.  They want to grow bigger to increase their power, and to grow bigger they need more tax revenue (or more deficit spending, or money printing).

You assume a benevolent government, that will take my money and spend it on what’s best for me.  You assume the government knows better than me where to spend my money.  That’s absurd.

You suggest higher tax revenues be used for more infrastructure spending.  Great, let’s build a highway to no-where, and then we will all be rich!  Let’s build huge government buildings to house government workers to deliver services we don’t need; then we will all be rich!  That’s what governments do; they take from the rich (or middle class) and give to the lower middle class.

Here’s a better idea: let’s put the wealth in the hands of people who can make decisions based on what the people want.  If I invest $1,000 in a business and the business invests in something silly, the business goes bankrupt.  If the business makes wise decisions, it creates jobs, and real wealth, which is the best way to “re-distribute” wealth.

I would argue that successful business people, who created true wealth, have done more to help the poor than every government program ever conceived.  Let’s leave it to the people to decide where the people spend their money, not to some unaccountable, faceless bureaucrat.

Sense of Urgency

Valerie Jarrett, a senior White House adviser, said the president “feels a sense of urgency” about unemployment and the summit is part of an “ongoing effort to jumpstart the economy and create jobs.” She said other forums would be organized around the country.

At the same time, Jarrett said the administration is constrained by a budget deficit that reached a record $1.4 trillion in the fiscal year that ended Sept. 30 and is projected to be $1.4 trillion again this year.

“There are definite limitations to what the federal government can do,” she said in an interview.

Ya think? Ya think there are definite limitations to what the federal government can do? Here’s the problem, Valerie: the President is trying to “jumpstart the economy and create jobs.” That’s the problem. A President cannot create jobs. All a President can do is take money from someone, and give it to someone else. That doesn’t create jobs.

What creates jobs is a business man or woman who takes a risk, invests some time and money, and creates a product or service of value that people are willing to pay for. If the business is successful, the owner hires people to serve their customers. That’s how jobs, and wealth, are created. If the owner makes a bad product, or performs a bad service, the business fails, and the owner loses their investment. That’s capitalism. There are winners, and losers.

Here’s a trivia question for you: in the entire range of human history, how many jobs has government created? Answer: none. Zero. Zilch.

But wait, you say: what about all of those construction workers employed to build roads; are they not jobs created by the government? No, the government taxed me, to get the money to hire the people to build the roads. If they hadn’t taxed me, I would have more money, which I would have spent, or invested, and I would have created jobs.

And what about President Obama, who got elected on a promise to withdraw troops from Iraq and Afghanistan, and is now doing the opposite, with a “surge” of 30,000 more troops on the way. A surge? Who is this guy; George W. Bush? Here’s a quote, from Der Speigel’s report on his speech announcing the increased war effort:

Extremists kill in the name of Islam, he said, before adding that it is one of the “world’s great religions.” He promised that responsibility for the country’s security would soon be transferred to the government of President Hamid Karzai — a government which he said was “corrupt.” The Taliban is dangerous and growing stronger. But “America will have to show our strength in the way that we end wars,” he added.

Unfortunately for Mr. Obama, the average person is now gradually realizing that rhetoric is empty, and only actions matter. The average person on the street understands that the “war” in Afganistan is an un-winnable war. The Russians occupied for many years, and left in defeat. The Americans (and Canadians, and others) have been there since 2001, and despite the most sophisticated weaponry in the world, and billions of dollars, and thousands of lives lost, nothing has changed. A fancy airplane is no match for a local who knows which cave to hide in. We haven’t found Bin Laden, and we won’t win this war (which really isn’t a war; I don’t recall Afganistan ever attacking us).

The sad truth is that the words “Bush” and “Obama” are interchangeable. Both have engaged in un-winnable wars for political reasons, and both will continue to spend money to stay in power. Obama’s plan is exactly the same as W’s: big surge now, that can be drawn down to declare victory just before the next election. It didn’t work for W, and it won’t work for O.

Sorry to be such a downer, but government’s don’t create jobs.

They tax, and they fight wars.

So spare me the job summits, and spare me the “surges”, and, Mr. Government, stand aside so that real people can take risks and create real jobs.

The central problem, I believe, is that Americans actually believe the government can do something. They believe governments can actually create wealth and make things better. For the most part, that’s not true.

The only real power that government have is the ability to take money from one person (through taxation) and give it to someone else (through spending). That’s it. That’s all government can do. Unfortunately, when government does that, it messes up the economy, and makes things worse for everybody. Here’s why:

Someone wants to get elected, so they promise to make things better for the voters. Perhaps they promise to give everybody $1,000 to buy a new, energy efficient, environmentally friendly, solar powered lawn mower. Everyone thinks it’s a great idea. It will help the environment, and create jobs.
Sure enough, when everyone gets their $1,000 lawn mower cheque from the government, demand for solar powered lawn mowers goes up. Lawn mower companies hire more staff, which creates jobs. Banks lend more to lawn mower companies, because it’s a great business. Everybody is happy. Companies continue to expand. Life is great. The boom times are here.
But then, at some point, the demand for solar powered lawn mowers starts decreasing. Lawn mower sales decline. Employees are laid off. Banks have trouble collecting loans. Unemployment rises. The economy goes into a recession. The people are not happy. They call for more help from the government.
In order to get re-elected, the politicians realize that the simplest answer is to spend more money. So they create another new program. Perhaps this time it’s tax credits for wind powered snowblowers. The cycle repeats. Demand increases, jobs are created, demand peaks, jobs are lost, and more government intervention is needed to pump the economy back up.

Over and over it goes. Boom and bust. It’s as simple as that. Government intervention causes booms and busts. If it wasn’t for the government meddling in the economy, there would be no recessions.

Yes, you read that correctly. Prices would rise and fall in a free market based on supply and demand, but recessions only exist because the government caused them.

I fear that until people realize that the government is not the solution to all of their problems, this cycle will continue.
Here’s a video of an American who appears to honestly be live that Barack Obama as President will "pay for my gas and my mortgage."

I hate to be the bearer of bad news, but Mr. Obama does not have any money of his own. The government does not have any money of their own. All they have is the money they have either borrowed or raised through taxation.

If the government gives you money to pay for "gas" and your "mortgage", they have to take that money from someone else. It’s that simple. Taxes mean they took the money from someone else today; borrowing means they are taking it from a future generation.

Now please, don’t misunderstand me. I’m not saying we shouldn’t help people less fortunate than ourselves. We should. If your family member or neigbour can’t afford to buy gas, by all means help them out. Give them some money, or even better help them find a job so they can support themselves. I also have no objection to giving money to charities to help people either. Charities are run, for the most part, by volunteers, so their cost to provide a service is much lower than the overhead cost when government gets involved.

It would be great if…..

It would be great if a politician stood up and said "I can’t take care of you. Only you can take care of you. So starting today I am going to gradually wind down this massive, unproductive government we have built. I won’t do it all at once, but I will do it. At the same time I will drastically reduce your taxes, so you will have more money to support yourself and your family. The government will still control law enforcement, and the military to protect our country from outside aggressors, but for the most part the government will no longer control your lives."

Yes, that would be great, but it won’t happen. There are estimates that more than half of the population receives more from the government in subsidies than they pay in taxes, so it is highly unlikely that there will be any will to change.

And that’s sad.

Americans are faced in this election with the same choice we Canadians were faced with in October: a bunch of people running for office that I would never hire to run my own company. In Canadian we had a wacky professor, a wacky socialist, and a "conservative" who has spent more than any socialist before him. (The "conservative" won). At least in Canada we are still running surpluses, although that will probably end this year.

In the U.S. you get to choose between a 72 year old former soldier, who actually thinks it’s in America’s best interests to be fighting wars in foreign countries, and a lawyer who believes in redistributing the wealth. The lawyer is very good with a teleprompter, and he will probably win.

Regardless, taxes will increase in America to pay for universal health care, more bailouts, and more redistribution. I have no idea whether or not it’s true, but many commentators estimate that 50% of the American public receives direct financial support from the government. In other words, half the people work to support the other half. I don’t see how a society can survive long term under those conditions.

Good luck, America. I don’t envy your choice.

Google, the owner of perhaps the biggest computer server “farm” in the world, is looking at ways to put their computer servers on barges 7 miles out to sea. Because they would be in international waters, they would not have to pay taxes. Here’s the Google story.

The point, of course, is that if taxes get to high, we will find ingenious ways to avoid them.

I work very hard for every dollar I earn, and I believe that gives me the right to decide where I should spend each dollar.  I object to handing over a large number of dollars to the government in taxes, because I don’t believe the government is as smart as I am.

To be clear, I don’t object to taxes.  I realize that the only way for the government to be able to pay for essential services, like the judicial system, is by collecting taxes from me.  I just don’t want it done to excess.

But how, you say, can we help the unfortunate in our society?

Here’s a quote, taken from dooce.com:

But what about the family who cannot afford [medical] insurance for their child? The family who can barely make rent, and if they stretch the budget they can eat three meals a day all week, let’s hope nothing bad happens to their kids because then they’re screwed. Kids, go hug your father, he’s off to one of his three jobs, none of which provide him insurance. And it’s not because he’s lazy or unwilling to work, it’s that his family couldn’t afford to send him to college, or he came from a family that didn’t know they should encourage him to go to college because they were busy trying to survive. If giving up more of my paycheck could help get this family adequate healthcare, then PLEASE. TAKE MY MONEY.

And there’s the rub.  The tough guy in me says that the problem is lazy people, not the people who are working three jobs.  But what about it?  What about the person who works very hard, and still can’t make ends meet?

I’m afraid there are no easy answers.  I suppose if taxes were really low, we wouldn’t need to work three jobs to earn enough money to pay for things like insurance.

Here in Canada, where I live, health care is “free”.  But of course it isn’t really.  We pay for it with our taxes, and because health care is provided primarily by the government, there aren’t enough doctors.  There is no point in free health care if you can’t actually get health care.

The answer, I believe, is to have the government pay for health care, but have it provided by the private sector.  More on that in future posts.