NO SIDES JUST EYES WIDE OPEN
It was neither the Best nor Worst of times; the People were confident, Leadership floundered
Despite legions of evidence and experience to the contrary, many in Washington believe higher taxes drive economic efficiency more so than good old-fashioned best in class American productivity. These seeing-eye economists presume two points; higher taxes will inspire investment and productivity, and higher taxes can actually be collected. In reality the genuinely rich remain the least likely to be affected by higher taxes.
Numerous studies, to include one published by the Hoover Institute, chronicle what happens when governments attempt to levy higher taxes on the rich. The article revealed that on one hand US tax rates were increased, but the rich still got their way. More than eighty percent of the income earned by those eligible to pay at the new higher tax rates vanished into thin air, as did the revenues the government had hoped to collect. Not surprisingly, vast amounts of money that might have been invested in the economy were instead invested in tax-exempt securities.
Corporations and individuals behave similarly with regard to taxes on their profits and incomes; no matter, the US Corporate tax rate remains the highest in the industrialized world. Today corporations and the rich have many legal options to shelter their earnings beyond the reach of carnivorous tax collectors, and individual tax exiles are younger than ever before.
The Wall Street Journal, citing a study which analyzed the public filings of the top 100 U.S. publicly trade companies, reported these firms have parked nearly 1.2 trillion dollars of profits in low tax jurisdictions abroad. Many G20 nations back a plan to overhaul international tax rules that today allow companies to shift their profits to lower-tax jurisdictions, regardless of where those profits were earned. The French having recently considered markedly raising taxes saw hundreds simply relocate into the welcoming arms of Belgium, even when required to pay an exit tax.
Washington remains committed to higher tax rates that don’t assure higher revenues, and a lack of clarity regarding fiscal policy, particularly spending. While both weigh heavily on business confidence and planning, spending controls are unlikely to prove potent absent meaningful economic expansion. Certain legislatively mandated spending increases have merely been delayed until a time when they might be less visible. No significant bankable spending reductions are in process other than dramatic reductions in overall military budgets – announced on the eve of Russia’s second armed invasion of an independent former Soviet state.
Fact Check projects U.S. total debt to double between 2009 and 2016, debt substantially driven by entitlement spending and interest payments on prior debt. Washington is addicted to printing and borrowing trillions to meet needs current productivity hasn’t. While the challenges are substantial, printing and borrowing in conjunction with phantom spending reductions can’t be described as leadership. Coupled with self-inflicted forfeitures of global influence and collaterally diminished national security, a radically altered vision of American greatness is emerging.
Leadership that embraced a cogent vision of historical American resilience and resolve would advance a plan that supports: reductions in debt, comprehensive entitlement reform, private sector managed initiatives to expand GDP, long term capital investment, increased fundamental R&D, incentives to promote study of science, technology, engineering and mathematics, and maintenance of a preeminent but restrained military.
In a season where the challenges are many, serious, and varied, the American people are increasingly uninformed about domestic and global politics and events. This predilection for not knowing, dependence on entitlements, and addiction to conjecture about government-controlled redistribution of wealth, greatly expands the power of oracle Washington. Americans no longer have a shared faith, nor is acknowledgement or embrace of faith welcome in the public space.
A leaderless, uninformed, dependent, addicted, and faithless America, can still find it’s way anew, but this will require an immediate and urgent change of course consistent with past coordinates of greatness.