02 October 2010


There are literally trillions of dollars sitting on the sidelines in corporate treasuries and private accounts because of continuing uncertainty about taxes and the economy. The congress adjourned without passing any tax legislation in lieu of the expiring Bush tax cuts, leaving everything up in the air. As a result new investment in the U.S. is suffering. New investment is the only way jobs are created and without it the economy is going to continue to stumble along with little growth and unemployment near 10%. As a result the U.S. has actually fallen behind Brazil, China, and India as the best place to invest.

This is a “no confidence” vote on the part of people in a position to invest in the current government if ever there was one as a result of its anti-business policies. I have no great love for the wealthy. A majority of them voted for Obama, and in one sense should get what they deserve in terms of taxes. Unfortunately there is no way to tax the liberals without hurting everyone else. I also don’t understand their obsession with money above everything else in life, because you can’t take it with you. However, in simple terms it is a question of who gets control of the money. The left views money as something that is theirs to redistribute rather than the property of its owners, but then the left has never understood economics. The issue is simply who gets to allocate the money- those who own it, or the government. As Margaret Thatcher once said, “the trouble with socialism is that sooner or later you run out of other people’s money.”

Those who possess wealth can do one of three things with it- spend it, invest it, or keep it on the sidelines or in some nonproductive asset like gold. Suppose they spend it on luxuries like yachts. Some might disapprove of conspicuous consumption but the reality is that someone has to build that yacht and workers get paid for doing so. Someone has to supply the company building the yacht, which helps small business. Spending money then is actually a transfer to other people directly or indirectly. If instead they invest it, they take some risk for reward, but in the process create jobs, new business, and economic growth.

The alternative is for the government to tax and spend it through punitive taxes. But the government is notoriously inefficient and incompetent at most things it attempts to do. It is the grand conceit of the elites of the left that they somehow “know better” than other people how to run things, and therefore should be given control of their resources in order to achieve “social justice.” As we are seeing now, what they don’t achieve is economic growth and full employment. We have a clear example of this ideology in the government’s “stimulus,” which has stimulated nothing but more government.

Unless people know that there is a stable, predictable environment friendly to business they will sit on their hands, as it doesn’t pay to invest or even to work that hard if the government is going to tax away most of what they earn. The United States always had a reputation for being a free, stable, and welcoming environment providing opportunity for anyone willing to work, save and invest. That has been seriously damaged by this administration, and as long is its policies persist there will be continued high unemployment and low growth as the capital strike continues.

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