With less than 30 days until the 2008 Presidential Election, there’s something I really need to put out there. It’s a means of getting something off my chest, but also a means of educating those who seem to be caught up in a media frenzy and are unable to consider the consequences of their actions.
To borrow the words of the notorious President Bill Clinton, “It’s the economy, stupid.” (Yes, “notorious” – and I voted for him, so in saying that, I’m not trying to point fingers here.)
The United States of America is founded on certain principles of freedom, one of them being capitalism. Yes, we have a few socialist tendencies, but for the most part our economic cornerstone is Capitalism.
When our founding fathers came here it was to escape the oppression of their former governments. Everything was owned by the government, unless they leased, sold, or gave it to you. And they could always take it back arbitrarily. (Can you say Private Property? Can you say Eminent Domain?) And you couldn’t practice any religion that was different from the State Endorsed religion. (Can you say Separation of Church and State?)
Ok, I can really go off on a tangent here, but I won’t. The topic of this post is the economy and the upcoming presidential election.
For those of you who forgot your high school social studies lessons, here are the definitions of capitalism and socialism as found in Webster’s Dictionary.
Capitalism (n). the economic system in which the means of production and distribution are privately owned and operated for profit.
Socialism (n). 1. a theory of ownership and operation of the means of production and distribution by society, with all members sharing in the work and the products. 2. [often S-] a political movement for establishing such a system.
In capitalism, there is one main driving force: supply and demand. When there’s not enough of something and/or the demand is high, price go up. If there’s too much of something and/or the demand for it is low, the price goes down.
We see this all the time! In my college economics class, the professor used the examples of hotdogs and steaks. Low demand for hotdogs, so they’re pretty cheap. High demand for steak, so the price is high.
But you can see it in technology changes, too. Remember when you couldn’t live with out a record player? Then 8-tracks were the rage. Then along came cassettes and nobody wanted 8-tracks. Along came the CD and nobody wanted records nor cassettes! Remember 5 inch floppy discs? 3.5 floppies then zip drives? (Talk a bout a flash in the pan!) It’s only a matter of time when nobody uses CDs any more because we’ll all be using flash drives. (Ok, so I really aged myself in this paragraph! LOL)
With each technological advance, there was no longer a demand for the older items. Manufacturers either saw the changes coming and cut back (or stopped) production so there wouldn’t be all that supply sitting out there without any buyers. The once high prices of the new technology always drops once the “newness” is gone, and, along with it, those buyers who’ll pay any price for the latest and greatest – no matter how bad the technology might be! (Can you say Magic Jack?)
Which brings us to another basic driving force behind capitalism, which also is a driving force behind supply and demand: reward and punishment. If a manufacturer knows they’re going to get stuck with a bunch of obsolete product, they stop making it. If they don’t, there’s a steep price to pay – punishment – for that stupidity.
On the other hand, if a manufacturer has a product that will be a core component in a new technology, OR is facing a higher demand for that product due to a new market place for it, what’s he going to do? Increase production to meet that demand? Decrease production to artificially increase the price? (Can you say OPEC?)
On a more personal level, say someone has a job and is really good at it? Eventually he’ll get a raise – maybe even a promotion. Reward.
If this person’s productivity is poor, he gets nowhere, ends up stuck in a dead end job, and finally quits. If his work is REALLY bad, he gets fired! Punishment.
Let’s look at another example. Say there’s this business owner who works hard and is successful. First, let’s ask, “Why is he working so hard?”
He might say, “I’ve got a family and I want to provide a better quality of life for them, be able to send the kids to college, save enough so that one day I can retire with financial independence. Then when the time comes, my family won’t be burdened with the financial responsibility of caring for me. Then when I’m gone, they’re not burdened with any financial liabilities I might leave behind.”
Sound familiar? Isn’t that why we’re working so hard? Isn’t that why we invest in ourselves and our business? Along with personal growth we develop leadership. As we grow as leaders, we earn higher incomes. An income for which WE work hard. We own it. And we operate it for profit.
For whose profit?
Who worked for it?
You worked for yours, I worked for mine. The results we have are our reward for that hard work.
Now let’s look closer at the reward and punishment aspects of our economy.
As soon as we’re earning more money, what do we do? We look for ways to keep more of it in our pocket instead of giving it to the government. I’m not saying we’re unpatriotic. I’m saying it’s a natural instinct. And it’s not out of greed. If we can keep more of our own money, we can reinvest in ourselves and our businesses, and be rewarded with more revenue. Of which, we’re more than happy to pay our fair share in taxes.
That’s the same thing big companies do. To protect their bottom line, they don’t take any action whatsoever before knowing what effect it will have on their bottom line, including their tax burden. It figures into the decision of incorporation – what kind of corporation is appropriate for my business, yet decreases my taxes? It figures into where to incorporate – which state gives the best tax advantages? Hey – which COUNTRY offers the best tax advantages?
If their own state or their own country punishes them for being successful by taking more and more of the gross revenues, they’re going to find somewhere else to do business. That’s what’s been happening in the United States for decades! Owners/Stock Owners of companies want to be successful, they want to earn a profit, they want to invest some of that profit back into the business in order to achieve more success. The more success they have, the more jobs they create, the more people they hire, the more the government can earn in the form of taxes. Reward.
Ok, so what’s the purpose of the government collecting all those taxes?
It’s to pay for the operation of the government, without which we, as a country, would no longer exist. Nothing wrong with that.
So, what happens when those with socialistic tendencies get their hands on those purse strings?
A Socialist believes that all members of the society shares in the work and the products – or by-products. In other words, a socialist believes that any success created by individuals (or corporations) who work hard for that success, should be shared by all members of that society. It doesn’t matter what the owners and creators of that successful enterprise believe would help the company and the economy best. Under socialism, all products and revenues should be shared. It doesn’t matter that those who would share in it didn’t share in the work which created that success.
In order to force the sharing of the products (or by-products of success), the socialist raises taxes on EVERY thing. Sometimes they are even honest in their description of this process a the “redistribution of wealth.”
What happens then?
The individuals and corporations that created that success are now being punished for their success. They have a few choices here.
- Keep working as usual and let the government keep on redistributing their hard-earned wealth.
- Close shop and put their hard-earned wealth into investments that will continue to earn more wealth for them, but where the government can’t get their hands on it.
- Move their base of operations elsewhere – perhaps over seas – where the tax burden will not be so harsh.
What happens under these three scenarios?
Under the first scenario, every time more revenues are created from effective business practices, the government takes more and more away. As a matter of fact, the Socialist believes that the richer a person or corporation is, the higher percentage of that person’s or corporation’s revenue should be taxed. After all, they can afford it. Can’t they?
To meet that burden, the company raises prices, passing that burden on to the consumer. This leads to inflation – bad for the consumer, bad for the economy, spirals out of control under the wrong leadership.
Or the company finds ways to cut back on expenses – maybe an expense eligible for cutting could be the cost of labor. Cut back on benefits or cut back on staff? Hmmm… This leads to higher unemployment – bad for the consumer, bad for the economy, spirals out of control under the wrong leadership.
Ok, so what happens under the second scenario? The company closes. All those people are out of work and competing for jobs that are available elsewhere. The owner(s) don’t care. They’re sitting pretty with a financial independence that can’t be touched by the government. But are they really safe?
What if they’re not the only company to make this same decision?
In the first and second scenarios, let’s say other companies do the same thing. Now unemployment is at an all-time high. The government has less and less revenues to tax, because there are fewer and fewer working citizens to tax. The economy starts to slow down because consumer spending has dropped out of necessity. The stock market starts to reflect the decreased consumer confidence, banks start loosing money because their debtors can no longer pay on that debt, etc., etc., etc.
Even the owner(s) who closed shop are hurting now. Those investments and tax shelters are taking a big hit. He/they might actually have to start working to support themselves and their families again!
What happens in the third scenario? Same thing! The company leaves, takes all its jobs elsewhere, people have no income… If this isn’t the only company to do the same thing, it creates an even bigger problem on the local economy, and eventually the national economy. And, eventually, the international economy.
We’re seeing this in action already. But it’s only one little part of a BIG picture.
But let’s just follow this little bunny trail to the end, shall we?
Whoever wins the election next month will take the most powerful seat in the nation. Maybe even the world.
And he’ll do so with the economy as it is. Nothing we can do about that now.
What we can do is determine who will better handle the economy AS IT IS NOW in such a way as to improve it, instead of make it worse.
A Socialist will continue to take from those who have in order to force them to give to those who don’t. More and more of those who are punished for their success will do the natural thing and either revert from being successful to being another hand in the welfare line, be forced to do so because there’s nothing left (for themselves nor anyone else), or take their success elsewhere, helping other economies.
A Socialist will come up with more and more entitlement programs, which will require more and more taxes to fund them. There just is NOT enough capitol in our entire economy to help us handle our current economic crisis (that’s what has created it), especially if bigger burdens are placed on it in the form of higher and higher taxes.
And if you think taxes will not be increased, just HOW is he going to pay for them all?
And if those taxes are increased, what happens next?
More and more companies that create jobs go under (or leave if they can afford to). More and more people are out of work, so there’s less and less wages to tax. So taxes have to be increased even more to make up for the loss in tax revenues. Then more and more companies that create jobs go under… It’s a vicious cycle!!!
Want proof? Look at what’s happening in California RIGHT NOW! Revenue and job creating companies have left for better places to do business. Places that don’t punish them for their successes.
Under a Socialist, this country is headed into a Depression, not just a recession. With so much of our industries owned by foreign countries, it’s only a matter of time when the United States of America fails to exist.
Why is that?
As I’ve already stated, there’s not enough capitol in our entire economy to get us out of this mess as it stands now. Put a bigger burden on it (a bail out plan loaded with pork!!! GRRR! Don’t get me started!), then our children and grand children and even our great grand children will be paying for it instead of us.
And we know what happens when debt that gets out of control. We can barely pay the interest, so the amount never decreases – hey it might even increase over time. Then along comes this other country that holds that debt and says, “Hey, time is up, I’m foreclosing on you.” They now own what’s left of the USA.
Don’t call me a fear monger. I’m just saying that we need to look at the worse case scenario and understand that it COULD happen.
Is there a best-case scenario?
You tell me. Is it possible for a Socialist/Marxist to take any action other than increasing taxes?
Didn’t think so.
(Want proof that his Tax Cut for 95% of working families is really not a tax cut at all, but a new Welfare Plan backed by the power of the IRS? Go here: http://online.wsj.com/article/SB122385651698727257.html. Just one more reason to implement the Fair Tax and get rid of the IRS! This is exactly what the Fair Tax books has warned us about!)
So what happens if a Capitalist wins the highest seat in the country?
A Capitalist who understands how taxes, job creation, and the economy really works to help main street, will lower the taxes that punish people for being successful. More jobs are created, some companies that have left, just might come back if you make the pot sweet enough to justify the expense of moving. More people go back to work, so there’s more wages and salaries to tax. More revenues are brought in. IF this person is as fiscally responsible as we should be with our own households, those funds are used in ways that HELP main street, which improves the economy, which then helps wall street so the banks can recover, and we don’t spiral down into a Depression.
A Capitalist who understands supply and demand, and reward and punishment, will put that economic bail out plan to work in such a way that we use capitalistic tactics to EARN some of that money back in the long run. Decreasing that burden on the economy – for us and our descendants.
I’m not saying that we didn’t need the bail-out. Something desperately needed to be done quickly to keep this from spiraling out of control. But if I were in Congress, I could not have supported it with all that pork included. And the President should have vetoed it. NOTHING should be included in it that is not DIRECTLY related to the purpose of the bill: putting a tourniquet on the free-bleeding economy.
Now you ask, what about “change” that is needed to fund domestic programs? How does a Capitalist address the domestic issues which help the poor and indigent?
I’m not saying there shouldn’t be a certain amount of “sharing.” As I stated earlier, there are a few socialist tendencies in our economy. And they have their place. I’m just saying that if you want to share in the wealth, then you must also contribute to the work. Almost everyone has some talent or ability that they can use to contribute to society in a productive manner.
Yes, there are those who are truly unable. So, it’s our duty to care for them effectively AND efficiently.
I talk to people all the time who are on disability, and it’s a shame what our government thinks someone can live on! Without getting into what most of THEM can do to contribute to society, those who are truly unable to be productive in some way should be better cared for than this!
And we are a generous nation. But we’re more than willing to give where we actually see results. We’re more willing to voluntarily support programs that get the job done, independent of a bureaucratic agency that’s more concerned with lining its own pockets than helping those in need. It’s amazing that when you look at the statistics, you see that as incomes go up, so does our giving. Which is independent of the tax benefits of charitable giving, considering only about 60% of our giving is even claimed as itemized deductions. (Michael Parisi and Scott Hollenbeck, “Individual Tax Returns, 2003,” IRS Statistics of Income. Available at www.irs.gov/pub/irs-soi/03indtr.pdf.)
So what’s my point? My point is that if you’re in any kind of business, then you need to consider the consequences of your actions on your business before you put someone in the White House who is openly anti-capitalist. If you’re not running a business, then please consider these consequences on the future of our economy and our country.
I highly recommend that everyone read the two books on the Fair Tax. If you can’t read both of them, then either will do. It will serve as a refresher on your high school economics lessons.
Ok, I’m the first to admit that this was hastily put out here. It’s been brewing in my mind for months now. But with the election coming closer and closer, I just couldn’t put it off any longer.
God bless America.
Dannielle Wood Hixson
October 7, 2008
Edited October 13, 2008