When you have a government that sees itself as the central institution of a society, or makes itself so, it’s not a good thing. When you have a government which believes it can tax and spend a nation to prosperity, it’s even worse. When you have a government with both these characteristics, it’s fair to say, things have become grim.
All through this last presidential campaign, President Obama has made it quite clear that, in his opinion, government is not only of central importance to American life, but also the sole reason for our success as a nation. “You didn’t build that,” uttered in a moment of honesty during one of the president’s many campaign rallies captures his thinking perfectly. In our president’s thinking, there is no individual success; rather, it all revolves around government. So, what the president was really saying that day, which, fortunately for him, he left out of his statement was simply this; “You didn’t build that! We did!”
At the same time, the president and other Democratic leaders continue to complain that taxation levels are at historic lows. But that is a misrepresentation of the facts. Actually, taxation levels in the US are the highest of any industrialized nation in the world, save perhaps for Japan. At the same time, the US leans more heavily on the wealthy for tax revenues than most other industrialized nations. The top 1% of income earners in this country pay 40% of all federal revenues. The bottom 50% of earners pay no income taxes at all.
What Democrats refer to is the fact that overall tax receipts have dropped because of the economic decline. When the economy booms, so does federal and state revenue. Economic growth means more spending and more spending increases tax revenues. And business has the ability to create whole new industries where none existed before. Google is a perfect example, as is Microsoft and Apple. These companies did not steal wealth from other companies when they were founded, they created new products and services, hired employees, built offices, and expanded into global corporations in such a way that they expanded the economy in new ways rather than siphoned portions of the economy to their own uses. But when businesses close, employees get laid off, or revenue gets siphoned away through government intervention, then you have both the economic “pie” growing smaller and government revenues shrinking.
But this year, thanks to the tax increases the president insisted upon instituting and revenues from new taxes related to Obamacare, federal revenues are set to exceed 2007 levels, when the economy was still going strong. In 2007, federal revenues added up to 18.6% of GDP. This year, they are expected to equal about 18.8% of GDP. Yet Democrats in general and the president In particular continue to complain about a lack of tax revenue and insist upon new “revenue” and “investments.” This is Democratic-speak for tax hikes and increased spending.
Somehow, Democrats seem to believe that government “investment” will turn the economy around. as if the federal spending spree of the past five years was not evidence to the contrary. Democrats truly seem to believe, as they have said several times, that “for every dollar of federal spending, there’s $1.50 in economic activity.”
Rather than laugh, let’s assume for one second that this might be true. The government spends a dollar for food stamps and a recipient takes that dollar and spends it, which means the store orders more food from a supplier and so on. There’s activity generated from each dollar. This makes sense.
But what if the government first had to take a dollar from the very same store in which it was going to return the dollar in the form of food stamps? But, really, it must take more than a dollar in order to equal a dollar of assistance because, as everyone knows, part of our taxes are used to support the federal infrastructure. Once that is siphoned off, a little more gets siphoned off at the state level to support the state government infrastructure. It actually means that, for every dollar of federal spending, there’s a net loss to the economy of some amount.
Government is an essential service, but it does not generate revenue. It can only siphon revenue off from the economy, and thus becomes a drag on the economic system. But it can get much worse; and does.
At the same time the federal government slows economic activity through taxation, it creates a massive additional drag with over-regulation. Certainly, the federal government has an important role as a regulator, making sure honest people remain honest and prosecuting those who are dishonest. But over-regulation makes it much harder to do business and to earn a profit. And we have both these factors currently weighing on the US economy, but with a president and a Democratic senate insisting that taxes are not high enough and that more regulation is needed.
It’s ironic that President Obama has refused to okay the Keystone XL Pipeline because of ecological concerns while completely missing the fact that economies too have a delicate balance. When taxes go up on any one segment of the population, they go up on everyone. If a business pays higher taxes, those costs are ultimately transferred to customers. If taxes go up on lower or middle income Americans, they spend less, and businesses see their revenues decline.
Furthermore, government does not simply raise and lower taxes. Rate changes often come with new rules and loopholes which favor one industry and create legal clutter for companies to identify and navigate.
Is it any wonder our economy continues to struggle and unemployment remain at historic highs? What we have in this country, at its most basic, is a government which is polluting our economy. Pollution in the form of increasing levels and types of taxation. Pollution from complicated loopholes and regulations in the tax code. And pollution from government over-regulation.
The result is an economy which grows weaker and whose inhabitants face increasing struggles to survive, much less thrive. Small companies fail, or are never started in the first place. Large companies stop growing or begin to shrink. Fragile companies close up with employees wondering how they’ll support their families in a job market where incomes are lower and jobs far fewer. What they see, and those in government fail to see, is a growing economic desert.
This is what Americans face today at the state and federal level. They seem completely unaware of the growing struggles of the American economic ecosystem and its inhabitants. Many of us, and I include myself among them, are growing increasingly desperate.
Perhaps we need an EPA. No, not an Environmental Protection Agency. We have one of those and they too have become part of the problem. What we need, perhaps, is an Economic Protection Agency. I thought that was supposed to be the job of our elected officials. But it seems they have abandoned this role.
Life in America is grim. But this time it’s not the Native American on the TV screen with a tear running down his cheek. This time, it’s the American people. Who will save us from a government which seems hell-bent on destroying our economic ecosystem?