What Do Tea Parties Mean?

I heard reports of several of those Tax Day Tea Parties. It sounds like even smaller locations had thousands in attendance. There were certainly hundreds of thousands nationwide who attended. Just one tally of locations had over 134,000 people attending rallies across the country. And just think, ACORN didn't even have to bribe any of the protesters to show up.

Due to work, I was unable to attend the closest tea party, but I was there in spirit. If I was there I might have seen something like this: I have to feel sorry for the reporter. She is likely to become one of the most ridiculed people in the nation.

I think Obama has reawakened an American ideal from the Greatest Generation: hatred of debt. My grandparents were children of the Depression and saved and lived modestly their whole lives. They were not going to take any big trips like Hawaii until "their ship came in." By the time they were both near 80 they had a great retirement fund, but were too old to travel extensively. When my sister and I were both off to college, they moved to Houston to be near more of their grandkids. They paid off their new house in less than 5 years. They were not slaves to debt like most of America seems to be today.

People like the reporter above don't get that taxes are not necessarily the problem with the government today. Taxes are still relatively low because of the Bush tax cuts. But they expire soon. And everyone knows that debt must be repaid. The size of government is the problem. If government expands freedom is curtailed. (Some freedom should be curtailed, like the freedom to do dog fighting or steal identities.)

If government grows now, taxes MUST increase in the future. That is the problem. And that is why so many families were at those protests with their children. Parents want to leave America better than they found it, and profligate debt will make that impossible.

The best protest sign in the pictures says:

OBAMA: CHAINS YOU CAN BELIEVE IN

UPDATE: Apparently CNN has taken down the vidoe that makes them look so bad. Here is another version with that same "reporter" discussing things with another protester: That lady is correct, Republicans and Democrats are dirty, and both are to blame for excessive spending.

Tax the Rich?

Just as a matter of practicality, not raising taxes for someone making under $250,000 isn't really fair. In the places I am willing to live, that kind of money makes for an amazing lifestyle. In parts of California, New York, and Massachusetts, $250,000 is as bad as living below the poverty line. Cost of living determines everything.

Those who are rich as Obama defines it will flee states with high taxes. California, the state we are all supposed to emulate because of its progressive environmental standards and high government regulations, leads the nation in tax paying households leaving for other states. Same thing for Europe. I look at their economy for the past decade and can't understand why we want to copy them.

I have lost half of my IRA. Luckily I was in school and haven't put much in yet, but that is staggering. I have met people who have had to un-retire because they don't have enough savings anymore. And yet, with all this need out there, Obama only cares to advance his agenda - the same things he would have done if the economy were rip-roaring.

The thing about this recession is that it has people clamoring for something to be done. And something should be done, but this bailout stuff is the opposite of help.

Lower Corporate Taxes!

It's pretty funny. When designing employee incentive packages, you need to reward those things that are good for your business so the employee will want the same things as you. But sometimes, there are unintended consequences.

A software company wanted its programmers to find and fix bugs in the program and they gave them a bonus for each bug they fixed. Sounds good, right? Except the programmers fixing the bugs were the same ones who wrote the software. They purposefully wrote bugs into the software to increase their bonuses on the back end. The result was buggy software and lots of bonuses for the programmers.

The same thing is true in government and taxes. If the government wants to decrease a particular activity, they tax it. Tobacco and alcohol are an example of this. (Except they don't really want these to go away because they are cash cows for the government. They tax enough to maximize revenue without making them go away.)

Companies that make products that have a good substitute and high taxes will go out of business. Just look at when Congress wanted to tax the rich and placed a massive tax on yachts. Over 7000 jobs were lost in New England ship building areas.

The US has the second highest corporate tax rate in the industrialized world. The only logical conclusion is that Congress doesn't want new startup businesses, job growth, business expansion, higher wages, or stronger imports and exports. The only thing higher taxes does is increase the size of government. Oh, wait, that is what government wants: bigger government.


(h/t NRO)

High Taxes and Inflation

From the Texas A&M University Real Estate Center, I found this interesting presentation.

Slide 31 asks when the last time we had high taxes and inflation. From 1966 to 1982 the US had higher taxes, inflation, and regulation with a lower level of globalization an lower profit growth. The presentation then reports the Dow as almost unchanged for 16 years: in January 1966, the Dow was 924; in July 1974, the Dow was 607; in July 1982, the Dow was 896. Now the political pendulum is swinging back that way (sadly, both parties are guilty).

Populism of the sort advocated by Naomi Klein and Thom Hartman would increase regulations and taxes and increase trade barriers. Some of the things they say make sense on the surface, but they only highlight the part of arguments that they agree with. Prosperity and quality of life come from free trade. Of course, free trade should be fair trade. Currency manipulation and inadequate quality inspection (China is guilty of both) should not be tolerated.

That is what has me worried about the upcoming election. McObama both have bought into some of the populist message on trade and taxes. Sure, McCain says some good things on taxes, but then he promotes cap 'n trade - a massive tax on businesses. Obama is running for Jimmy Carter's second term. He wants to do all the stuff that created a stagnant economy from 1966 to 1982.

Robin Hood - Conservative

I seem to remember Democrats several years ago idealizing Robin Hood as a justification for redistributing wealth and taxing the rich. There is a problem with that analogy. Robin Hood didn't rob the rich to feed the poor. Some of the rich were already working hard to feed the poor. Robin Hood stole from the government to return the money back to the people who had been taxed into poverty and starvation.

I Laughed At This

More details here. I know this is a little late, but happy tax freedom day.

(H/t NRO)

Bring Back King Dollar

Another friend has entered the blogosphere. I had a long and thorough answer to this post and it never showed up. Instead I will try to recreate my thoughts here.

He is absolutely right that the weakness of the dollar is related to the increase in the price of oil. Whichever came first, the weak dollar and high commodity prices (don't forget the more critical prices of wheat, corn, and rice) are related. All these other commodities are priced in dollars, so as the dollar weakens, all the prices increase.

I will have to disagree about the cause of the fall of the dollar. Iraq has nothing to do with it. Congress has been spending like drunken idiots, but the largest growth of spending is entitlement spending. There is no excuse for that, especially under a Republican Congress. There is no home for conservatives in either party right now. (As a side note, several Democrats have won special House elections by running CONSERVATIVE candidates. Guess what? Conservatism wins.) The Republicans probably deserve the trouncing they will receive in November for diluting their brand of fiscal responsibility.

Another cause of the fall of the dollar is the household debt. (Surprise, the prophets are right about something else. We should live within our means.) The household debt is mirrored by the trade deficit. If we want to improve the trade deficit, we should encourage more savings and investment. Sorry to break it to the liberal-left, but that means lower capital gains taxes. Improving the trade deficit will strengthen the dollar. Otherwise, the dollar will continue to weaken to approach a trade equilibrium.

Here's how that works: dollar decreases, American goods become cheaper internationally. Cheaper American goods sell more. Exports increase. Weak dollar buys less imports. Imports decrease. Trade deficit balances. I like the other solution more. We need high investment to increase US productivity so we increase output for higher salaries. Thus, household income increases and so do exports.

The key to all of this is an economy that is not too hot and not too cold. When the economy is just right, it is called Goldilocks. Too much growth will result in inflation. Too little growth, on the other hand, yields unemployment. Other than after Gulf War I and the dot-com bust and 9/11, the US economy has been growing at the perfect rate. Those two recessions lasted about 9 months each. The recent slow down has resulted in media stories of soup-line-America.

Much to their chagrin, the recent quarter showed positive growth. It was about 0.6%, but it was still growth. Shouldn't the economy actually shrink in a recession? All the economic indicators seem to say that the economy is about to get back to Goldilocks status. Of course Congress could wreck this by hiking taxes. (Especially if they double the price of fuel. The "solutions" to global warming are the same as tax increases; they just hit the poor most. Global warming nuts love high fuel prices.)

Another threat to the current economy is high tariffs. Despite what Lou Dobbs says, outsourcing is good for the economy. No one talks much about the amount of insourcing that happens. Ever noticed how many Toyota plants are in North America? The purpose of the free market is to put the factors of production (land, labor, capital, and entrepreneurial skill) where they are most economical. One of the reasons for the strength of the Euro is that those factors of production move across Europe more efficiently that when they all had separate currencies.

Before someone gets in a tizzy about my "outsourcing is good" statement, let me elaborate. I want the high skill, high paying jobs to stay here. If we raise all these artificial trade barriers, that won't happen. It is good when simple jobs are sent overseas. That frees us up to do the more lucrative stuff. But it also has the benefit of increasing the standard of living overseas.

We need the innovation and capital to stay here. That increases productivity. Increased productivity makes foreign investors want to invest here. That increases demand for the dollar, increases its value, and solves the international price inflation of oil and food. Again, that requires low taxes.

Obama Economics

I watched the North Carolina victory speech from Barack Obama tonight and it was rather interesting. Obama is making the move away from primary mode into general election mode. He spent more time going after McCain (admittedly easy to do, but I would go after McCain on different things) than Hillary.

His "bring America together" portions of his speech are very good. He even had a paragraph or two about the nobility of hard work and the vast opportunity that lies within this country. Anyone can lift themselves up if they will put forth the effort. Those are the types of things that need to be said from the political stage.

The problem is that his policies go against the things he claims to promote. He talks about taxing the very people who have lifted themselves out of humble beginnings. He wants to take money from the oil companies and force them to invest in clean energy. He blames destroying the planet on big oil. His health care proposals will cause prices to skyrocket even more. Every item the federal government starts paying for gets more expensive.

It is as if he wants the US to follow the European economies into oblivion. Don't get me wrong, I am all for clean energy. I would love not to send my $3.45 a gallon to the Middle East. The only way to lower energy usage in the near term is to shrink the size of the US economy. That will cost jobs, force more outsourcing, further weaken the dollar, and result in economic disaster.

I don't really want to vote for McCain. He is not all that much better on energy or immigration or health care, but Obama is intent on policies that will make the American economy weak.

One Smart Thing To Say About Global Warming

If the US has draconian pollution laws, companies will leave for countries with fewer restrictions. The same has happened with taxes and labor markets.

And if polluting industries set up shop in lax countries they will be even dirtier that they would have been in the US. So to whatever degree emissions do affect the environment, manufacturers leaving the US will have a net negative affect on the globe even if it improves emissions here.

Not Yours To Give

Here is an article from David Crockett about why government should not be in the business of charity (link).

The short version of the article is that to give money to some, the government must take it from others who may be worse off. I wish that an attitude like that would become acceptable again. Instead, even the best political candidates still plan on some form of taxation and redistribution of wealth.

Such is the state of the country that charity is mandated from Washington and taxes determine almost all business decisions and purchases and even life decisions.

Crockett closes with these lines about congressmen:

Money with them is nothing but trash when it is to come out of the people. But it is the one great thing for which most of them are striving, and many of them sacrifice honor, integrity, and justice to obtain it.