Op-Ed: 5 Economic Tall Tales
And what you as a voter can do about them.
Editor's Note: Dean Simmons is a longtime Minyanville reader and a regular contributor on The Exchange. Dean has a Master's Degree in Computer Science, 27 years in the aerospace industry, 8 kids and 4 grandchildren.
In the interest of airing both sides of an ongoing debate, we're publishing this piece in response to a recent op-ed entitled An Anti-Capital Capitol.
Politics and finance are deeply intertwined. Bill Clinton famously said that his administration would "focus like a laser beam" on the economy. Of course, Bill's a politician, and politicians have been known to lie, on occasion.
In fact, I'd say there's more smoke than light produced by political discourse in this country. In no particular order, here are a few lies that I hear far too often.
(1) Tax cuts "pay for themselves" by stimulating the economy.
Cite 1 example where this has worked. Before you say "Kennedy in '61," let me point out that, while JFK cut the top rate dramatically, he also eliminated a lot of deductions that were predominantly used by higher tax bracket taxpayers.
You can have a tax cut which is revenue positive - but only if you match it by dramatically broadening the tax base to which the rate is applied.
Have you ever heard of the state balancing its budget simply by cutting taxes? Have you ever heard of the International Monetary Fund recommending tax cuts without spending cuts for a nation in trouble? There's no such thing as free lunch.
But this particular lie gets repeated over and over. This is because it enables corrupt politicians to give corrupt contributors and lobbyists corrupt benefits both coming and going - lower taxes for some, while still having plenty of money for yummy government spending on favored friends.
In fact, I suspect that the reason a number of right-wing commentators came out against Governor Huckabee and Senator McCain during the primaries is that those two Republicans didn't repeat this lie - and therefore weren't "true conservatives." Baloney.
(2) Deficits don't matter.
Like hell they don't. Deficits enable currency manipulation by trading partners, since they can lend us money rather than letting their currency appreciate against the dollar.
But deficits have to be paid off eventually - which means that you get less of whatever it is that the government's doing while paying just as mucthe same amount of taxes. Deficits do stimulate the economy, à la Keynes, but running them year after year is like trying to stay awake for a month by taking amphetamines.
(3) Free trade is a good thing.
Yes, it is! And I hope to someday see it.
Let's face it - every large company on earth is symbiotic with the government(s) they deal with. Governments educate workers, provide security, supply power and water and remove sewage and waste. Governments sometimes subsidize basic raw materials or products.
Given that there's no such thing as free trade, questioning NAFTA or the WTO isn't necessarily anti-free-trade; it's quite legitimate to ask if these treaties are working to the benefit of the United States. Since we have run a current account deficit for decades now, I'd say that no, they aren't.
We cannot continue to reduce the wealth of the United States with respect to the rest of the world by billions of dollars per week year after year with no consequences.
(4) It's possible to separate questions of morality from economics.
The late Bill Buckley once wrote that "The free market does not admit moral arguments." What Bill didn't admit is that it's the free market itself that's deficient, not the moral arguments.
We live in a democracy. If the majority of the population doesn't feel their lives are getting better under the current economic system then the current system WILL change. You can delay that change by lying to people. You can delay that change by convincing them some other cause is more important in the near term. You can delay that change through violent oppression - abandoning democracy in the process. But sooner or later the economic system has to work for the majority - in their opinion, not the opinion of the people who are doing well.
(5) The current system is fair.
There are at least 3 ways our current government transfers wealth from the people with no or few investments to the people with many. The first is the aforementioned pretense that we are engaged in free trade.
The second is our porous borders - who benefits from hiring illegals? Who competes with them for jobs and apartments?
The third is the Federal Reserve - would anyone care to argue that interest rates are set with the interests of the lower classes in mind? Watching recent events, would anyone care to argue that rates are set with the interests of anyone (outside a few banks) in mind?
The Federal Reserve is of, by, and for bankers, and any benefit the rest of us may derive from its actions is purely accidental.
So what would I recommend you do as a citizen?
(a) Have zero tolerance for corruption.
Corruption is the worst "tax" possible. Not only is money spent which should not be spent, but less efficient companies get contracts that should have gone elsewhere - and even honest companies wind up having to hire lobbyists just to stay in the game.
Right now, that means voting third party for Congress - unless your district is competitive, in which case you should probably hold your nose and vote Democratic. The Democrats are 10 on a 1 to 10 corruption scale - except as compared with Republicans.
Just one man's opinion, but I think the Republicans are the Mafia, while the Democrats are just a bunch of thieves - it's the organized, methodical way they go about being corrupt that really ticks me off.
(b) Never vote for anyone who tells you they'll cut taxes without also telling you they'll cut spending.
Not only are deficits destructive, but I believe this lie feeds stupid behavior by taxpayers. If the government can achieve prosperity by borrowing, why can't I?
(c) Never vote for anyone with grandiose plans for new spending who isn't upfront about the need for increased taxes to pay for it.
This is the simple converse of (b). Liberal liars are no better than conservative ones.
(d) Let your elected representatives hear from you on economic issues.
Let them know you care about corruption. Let them know you care about balanced budgets.
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