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The Problem with Obama’s Tax Policy

July 9, 2012

So Obama once again voiced his support for increased taxes on the upper class, telling us, “I’m not proposing anything radical here” (link). Of course that makes sense, being that he’s already shattered all records for radicalism. Yes, he supports punishing peaceful individuals for NOT engaging in what should be a voluntary purchase of health insurance. And yes, he’s established the precedent for murdering US citizens, as we witnessed with Anwar al-Awlaki. Need I go on? The point is, radicalism is the new sanity when it comes to this administration. And this proposed tax policy only furthers my conviction.

Let’s talk about the economy. Typically, the story goes like this: people go out and spend money, businesses see increased profits, and the extra money is used to hire more people. Simple, right? Once people start spending, unemployment plummets. The problem lies in those greedy rich capitalists, who hoard their billions at a time when the money could be used so much more efficiently. Through further spending, of course.

This is how I would approach a brain dead Keynesian zombie who believes in this nonsense.

Me: How do you grow an economy?

Zombie: Well, consumer spending of course. Then, businesses subsequently hire more workers as the profit flow increases.

Me: And where does the capital come from to finance business projects?

Zombie: It usually comes from investment banking.

Me: Well, where do banks get the money they need to lend out?

Zombie: Er, uh, give me a second.

Me: Savings. From the same wealthy, supposedly greedy individuals you seem to detest. So tell me again how taxing the hell out of the people that save jump starts the economy?

Zombie: Well, to grow the economy, you need consumer spending of course. Then, businesses subsequently hire more workers as the profit flow increases.

It usually progresses to a never ending cycle of nonsense, so I won’t type out this hypothetical discussion in full. But the point remains the same: if you want growth, you need savings that can finance the brilliant, innovative ideas of entrepreneurs. Otherwise, you’ve got virtually no growth, almost no capital, and very little investment. The trick to jolting an economy out of it’s misery is encouraging saving, not killing it.

America now faces a massive global trade deficit and an economy centered on the prospect of spending, spending, and more spending. The worst thing we could do for ourselves would be to put our head in the sand and embrace the exorbitant taxation of those that have made society wealthy. Those that have filled our world with fabulous products and incredible ingenuity. And those that provide the capital our economy so desperately needs. People just need to be left alone, really. As Mises so candidly stated, “The metamorphosis of taxes into weapons of destruction is the mark of present-day public finance.”

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