A Huge Regressive Tax for Americans

We had hoped to report on further FDIC closures, but there were none.

The "Waxman-Markey" bill winding through Congress has an ostensible purpose of capping carbon dioxide emissions. According to US News and World Report, if passed, it will cost the average household as much as $1600 per year, "with low-income households carrying a heavier burden."

A puny, $160 per person tax credit is being proposed to offset the cost, but that will do little to help the average citizen.

Whatever the merits or demerits of a 'carbon tax', it should be presented in a revenue-neutral fashion. The current proposal will have a decided, depressive effect on the economy at a time when such effects are most definitely not needed.

The share of the US economy managed by government is at an all-time high, and still growing fast. This ill-conceived 'energy plan' along with similarly ill-conceived mandatory health insurance programs may push the Nation, already burdened with bailouts and nationalisations, too far down the road of a command economy.

Central planning does not necessarily wreck an economy, of course. Many European nations have a fairly high level of government involvement with the economy and still enjoy a high standard of living. But there, better social welfare results have been and can be expected from the taxes and regulation. We believe that is because socialism, whatever its demerits, is a proactive and coherent movement to distribute public benefits. In the USA, socialism is ideologically extinct, and government intrusion is reactive and self-serving.

A European level of government economic control in the USA will not yield European-style benefits, but an economic catastrophe. Mark our words.

End of the Workers' Paradise

During the 20th Century, the world stage was dominated by a contest between two great economic and political ideologies. One the hand was Communism, state ownership of large-scale capital, and central planning, on the other was Liberal Democracy. In the non-Communist developed nations, some concessions towards central planning and income redistribution were made. The legacy of these concessions include the Income Tax, Minimum Wage, and the Welfare State.

As everyone knows, Communism failed and Liberal Democracy in its modified form survived. Unfortunately, in its efforts to win the people over, Liberal Democracy encouraged the notion that economic security was an entitlement. People imagined that making lots of money was as simple as following a formula: getting a college degree and a career-for-life would fall in their laps; buying a house and watching its value ascend skyward; or investing in the stock market and get reliable dividends and capital gains.

We opine this desire for stable and predictable economic returns is a vestige of agricultural civilisation. Note that the most important and durable Communist Powers, Russia and China, were still agricultural when they went Red. Industrial civilisation works on a less steady basis. If humanity is to embrace the full benefit of industrialisation, it must acknowledge that it not an especially stable system.

The current Depression is partly a result of attempting to force the industrial system to do something it cannot: supply steady, generous paychecks to the entire population. The Depression will be prolonged by governmental efforts to sustain the unstainable with bailouts, and expansions of both the public payroll and the dole. In a bizarre effort to "save capitalism," a grotesque is being created. This state will not last long, and eventually be seen as a tragic waste of resources.

The Sovietisation of America

A recent article in Bloomberg discusses galloping statism around the world. All theoretical concerns aside as to subpar growth, and suboptimal investment decisions - we see the core problem being this: Beyond the domain of rudimentary public services, central planning creates bogus livelihoods in bogus industries. Take airline luggage inspectors. In the USA, the TSA employs about 45,000 screeners, slightly more people than the number of people killed each and every year on USA highways. We wonder how many lives the screeners have saved. Is this truly a good use of scarce economic resources in a contracting economy?

How will real needs be met if jobs are only created within or by the hands of government bureaucracies, and lost elsewhere? If the proposed make-work programs were along the lines of say, public transportation, truly affordable housing, or even beautification for heavens sake, we would not grumble so much. There is, after all, much to be done to make a smooth transition to a less affluent society. But why the largess for roads, auto makers, and ethanol? Soon enough all the highways will be to nowhere, as private motorised transportation becomes impossibly expensive for all but the wealthy.

In the waning days of the Soviet Union "people pretended to work, and the government pretended to pay them." Meeting real needs was largely left to the informal economy. Why do the government of the USA and its imitators want to recreate this tragedy?