A Tale of Two Philosophies

In Two days we will be going to the polls to choose a president. A few words about what we are facing this time around.

We are facing a choice in this country between two diametrically opposed political philosophies. One a proven failure, the other a proven success.

The current administration has tried to carry out a European style economic model for the past four years. It has made an already bad situation much worse. Big government is not the answer to our problems, it is in fact the cause of many of them. Now I’m not saying that all that is going wrong now is exclusively due to the current administration. It took many years to get to where we are and many administrations. However, throughout our history as a nation , we have faced similar down times and we have always recovered faster than we are now. The only exception, and a lesson for what is going on now would be The Great Depression.

The reasons behind this anemic recovery stem from the fact that government can not stimulate an economy, period. For the government to “invest” trillions of dollars in the economy to stimulate it, it has to first Take that amount of money out of the private sector. The government has no money of its own. The only money the government does have comes from us, the taxpayers of this nation. You can’t take a trillion dollars out of the private sector, then give it back and expect it to stimulate anything, that’s not how things work. If you take money out of the private sector, then give it back, it’s a wash, you haven’t added anything to the total. In fact, you’ve actually retarded growth by removing money that would have otherwise been spent improving businesses, giving people raises, companies investing in Research and Development and so on.

A perfect illustration of this in action is Europe and their big government model. These countries are facing a real fiscal cliff and some have already fallen off, Greece for instance. This is because , for them, the government has become king. They have excessively high taxation rates, onerous regulations, and overly generous benefits for their citizens. Well beyond what can realistically be given due to their economic output. The way to create more money in a country is for that country’s economy to expand. You can’t do it by constantly increasing taxes and fees, eventually you run out of people to tax. You increase the pool of money in a country by an expanding economic output. This leads to more products being made, more people working, and thus more taxpayers, paying taxes. If an ever-expanding government were the answer to economic success, then Europe should be the largest economic powerhouse on the planet, but they are not. They are an economic mess and it’s only getting worse as more and more people realize the gravy train has derailed. I direct you to the riots in Greece and a couple other European countries in the past year as proof.

All of this has a name, it is called a Keynesian Economy. Wherein the government controls economic output and provides for everyone’s needs. This is the failed political philosophy that the current administration is advocating and exactly the reason it needs to be rejected on November 6th. The core of our problem is not enough government, it is too much government in our lives. There are countless examples of this throughout our history. The New Deal from FDR actually prolonged The Great Depression, it did not shorten it. Massive government spending took money out of the private sector and re-tasked it to what the government thought would be a better way to spend it. It is telling to note that after WWII almost all of what FDR had put in place was removed and it led to a boom time in our country. Taxes were slashed, regulations were removed, government was reduced. When government gets out-of-the-way our country prospers, when it grows, our country declines.

Now , the other philosophy is the philosophy that has always worked throughout our history. Smaller government, lower taxes and less regulations. It worked in the 1920’s, it worked after WWII, it worked when Kennedy did it, when Reagan and GW did it. Doing these things did allow us to prosper as a nation. Tax revenue increased, business increased , jobs increased, our nation’s economic output increased. This is a proven method to recover from down times. This is not , helping the rich, or whatever other class warfare B.S. you hear about these days. Everyone prospered during these times not just the rich. The facts are undeniable, less government in our lives equals a more prosperous nation where everyone benefits. When more people are paying taxes you increase revenues to the government. When taxes are low and loopholes are reduced or in some cases eliminated , more people pay their taxes. There is a chart and explanation that explains how this all works. It is called the Laffer Curve. In short it shows that there is a decreasing return on revenue the higher the tax rate rises. This is due to human nature. The more taxes rise, the more people find legal ways to avoid paying them. Economists can make charts showing how if you increase taxes X amount revenue will thus increase.However, people aren’t charts, they are humans with desires and dreams and goals. The majority of people are willing to pay some tax , to “pay their fair share” as people like to say these days. The Laffer Curve explains how to achieve the optimum tax rate for the greatest gain on taxes. It is fact that the higher tax rates go, the less revenue the government receives.

The problem with increased revenue to the government is that people who ascribe to the Keynesian economic philosophy start spending the money on all sorts of programs to “help” everyone. Thus negating the benefits of increased revenues. As Reagan often said, we don’t have a tax problem we have a spending problem. Congress sees all this new money and goes on spending sprees which then burden our finances for generations to come. People come to expect these so-called entitlements and begin to demand that government do more for them. This began during The Great Depression and continues to recur periodically since then. It was stopped in the 1950s and we prospered. It happened again in the late 60’s under LBJ and we began to decline to how bad it was when Jimmy Carter was in office. Regan came along and put us back on the path to economic success and we once again prospered as a nation. His legacy lasted well into Clinton’s administration. For all his faults, Clinton knew a good thing when he saw it and co-opted this philosophy and joined with Republicans in continuing many of the programs originally put in place by Reagan. This all came to a screeching halt on Sept 11, 2001. Our economy was once again plunged into the abyss, except this time it was not due to overspending by Congress. However, the solution was the same as if it had been caused by an increase in government. Bush and the Republicans slashed taxes and regulations and viola , revenue skyrocketed to the federal government. But then Congress, this time both Republicans and then in 2006 Democrats went on a spending spree. It all came crashing down in 2007-2009. This is when the current administration took over. Instead of using tried and true methods to spur economic growth, this time the government decided to go all in on Keynesian economics. This is why we are still floundering as a nation economically. Why we have barely 1.5% GDP, why unemployment is stagnant. This is why we are not growing and prospering as a nation.

Four more years of this will not solve our problems , it will only make them worse, just as in The Great Depression 80 years ago. Increasing taxes on “the rich” will not solve our problems. If 100% of their money was taken in taxes it would only fund the government for barely a week. We can’t tax our way out of this. We can’t stimulate our way out of this because like I said earlier, in order for the government to inject money into the economy,it has to first take money Out of the economy to do so.

I’m not some rabid Romney fan. He was not my first choice to be president. But he is the one we have now. And it is time to give someone with his experience, a chance to fix things. I don’t believe everything any politician says, I’m long past that naivety. But one thing I do know is that without someone new in office things are not going to get better. With a new leader we have a chance that things might turn around. Ignore the class warfare B.S. you hear these days, it is a smokescreen to keep you from seeing how bad things really are. We Americans have always celebrated success and successful people. We have striven to be like them. We do not denigrate success or claim they aren’t paying their fair share. When the top 5% of income earners in this nation pay close to 50% of the taxes in this country, I would say that they are paying “their fair share” We don’t have a revenue problem in this nation, we have a spending problem. Obama advocates more and more government spending to solve the problem ( Keynesian) Romney advocates less government and to get out of our lives and let our natural talents help us succeed and prosper ( Free Market ). I’ve shown how each one has led to either failure or success. On Tuesday November 6th we have a choice to make. Do we become Europe? or do we once again lead the world as the economic superpower that we have been in the past. The choice is ours to make in two days. Think real hard before casting your ballots.

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1 Comment

Filed under Politics

One response to “A Tale of Two Philosophies

  1. Pretty impressive argument. Too bad it’s too little, too late. Obama’s going to win, the Dems will retain the Senate, and the GOP the House. Six Billion dollars, and we have exactly the same balance of power as before the election.

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