Economic Ignorance Will Kill America (Part 2 of 2)

Conclusion of yesterday’s column.

‘Give us cheap capital.’
— Chris Zane, bicycle shop owner in Branford, CT

We’re told that it’s the small businesses who will save us. First of all, it’s not any particular business — small or large — that will save us. The only thing that will save us is free market capitalism, grounded in the values and virtues of honesty, productivity and rationality that stem from self-interest.

If it were up to this bicycle shop owner to save us, we’d all be doomed. Saying ‘give us cheap capital’ is the same as saying,

‘Government, give us the benefits of capitalism without actually having capitalism itself.’ This is the same kind of error as assuming that government creates capital and money when, in fact, one hundred percent of wealth (taxed or not) comes from the private sector.

What’s this about ‘cheap’ capital? What does this mean? It’s like saying, ‘Give me money that’s cheap.’ If capital were that cheap, then it wouldn’t be worth having. Ironically, that’s what government is doing. By debasing the currency through inflationary policies and unprecedented government spending and borrowing, the Federal Reserve is bringing the dollar closer to worthlessness every day. As we speak, investors are fleeing to gold as an investment; the simplest indication that the U.S. dollar is coming to an end as the ‘world standard’ it was for so many decades.

So Mr. Zane might get his wish. As the dollar decreases in value through government inflation and irrational, politicized policies, his capital will continue to become cheaper and cheaper.

‘Cut health care costs.’
— John Kunkel, restaurant chain owner in Miami, FL

Once again, government cannot ‘cut’ anything that it doesn’t create. Government can only cut Medicare and Medicaid. Instead of cutting these programs, government has been expanding them.

President George W. Bush expanded Medicare by adding on prescription drugs as a benefit. President Obama wants Medicare and Medicaid to become the primary if not sole providers of medical care and insurance in the United States. Obama ‘Care’, as it takes effect, will likely achieve that, but at the cost of either sacrificing doctors by reducing their reimbursement rates, by bankrupting the government, or both.

I don’t doubt that John Kunkel would love to see all his employees covered by Medicaid, thus reducing the costs to his business. But is he willing to stand in line for a diminishing number of poorly paid doctors, as everyone, including his employees, end up on either Medicaid or Medicare? And is he willing to pay ten or twenty percent more in higher taxes to keep these programs (not to mention the entire U.S. government) solvent?

Won’t he be surprised when he sees just how expensive all that free health care will be. He might want to rethink his position.

‘Prevent a double-dip recession.’
— Ted Karkus, CEO of ProPhase Labs (Cold-EEZE), Doylestown PA

This comment’s even more stupid than, ‘Fix the economy.’ A double-dip recession is only one moment in time. He might as well be asking the president to ‘Please fix the economy for this year. I don’t really care much after that.’ Such a short-range perspective lacks rationality and any intelligent self-interest; something you might otherwise expect from a successful businessman.

The notion of a double-dip recession presumes that we got out of the first recession of 2007 and 2008. Many economists question that that ever ended, and some are even starting to suggest that we are not in a recession but a depression — and have been since 2007 or 2008. Just as the stock market crash of 1929 set off a Great Depression that didn’t end until about fifteen years later, history may record that the government-induced real estate crash of 2007 set off a depression as well.

Economic downturns are part of life and occur in any free market economy. Despite this fact, the risk of downturns in an otherwise generally growing economy is far, far superior
to the stagnation of socialism or other forms of economic and political despotism. Unfortunately, Americans cannot tolerate economic downturns, and because of this have placed their hope and faith in government to ensure that those downturns never occur. Government intervention in the economy began in earnest in the early twentieth century. Since that time, the nation has had about as many periods of depression/severe recession as periods of moderate or strong growth.

It leads one to wonder: How well is all this government intervention, ‘social security’, ‘free’ medical care and everything else working out for us? It’s not a question that anyone reputable is yet asking. But they soon will, because things are not getting any better. Obama may be reelected, but the problems he inherited and expanded are not going away. And Mitt Romney will not solve them either, not by telling people what they want to hear.

‘Lower Taxes.’
—Amy Matto, fashion designer in New York City.

Finally, a rational answer! Cutting taxes may not be sufficient, but it’s certainly necessary for any sustained economic recovery. Taxes must be cut across-the-board or eliminated as much as possible.

Tax cuts MUST be accompanied by spending cuts. This is the lesson we learned during the Reagan years. He cut taxes and the economy flourished for a time, at least relative to what it would have been under the administrations of people like Carter, Mondale and Dukakis (the Obamas of their day). At the same time, the Reagan legacy included an evasion of the fact that government spending is as much the problem as high taxes.

Governments who spend a lot are doing a lot, which includes things that hinder if not destroy the economy. Based on his eloquent speeches, Ronald Reagan understood this ideologically, but he never seriously attempted to cut spending and control government. Instead, he settled for cutting the rate of increase of government spending. The problem is that as the economy makes a comeback from some regulatory easing and major tax cuts, as it did in the 1980s, Congress (Republican or Democrat) spends like there’s no tomorrow. And, like now, when the bill comes due, there may be no tomorrow.

‘Don’t help us.’
— Drew Oliver, owner of GiantMicrobes, Stamford, CT


‘Don’t do anything.’
— David Levine, President of Wireless Environment, Chagrin Falls, OH


Remember the sage warning: ‘If somebody from the government offers to help you, run for your life.’ Unwarranted or unrequested ‘help’ — especially from a government — is always toxic.

The United States’ welfare state began because a bunch of do-gooders were sure they could provide for the people better than the system of freedom, free markets and individual rights. Fortunately for the rest of us, free markets and individual rights continued to exist, only in a much more hampered form. The result is that the economy is not what it might have been, but it’s not nearly as bad as it could have been.

For years we have lived in a mixed economy, with elements of freedom (in the private sector) and with heavy elements of government intervention (in health care, education, and banking). These and other regulated industries have suffered from mediocrity and boom-and-(especially in recent times) bust. The less regulated areas like technology, computers, telephones, and Internet have been robust where growing profits, entrepreneurship result in prices being lowered for all. A prime and very timely example is the late Steve Jobs.

You would think these successful business people would know better. Unfortunately, 7 of the 10 samples of business people suggestions were idiotic. When supposedly pro-business people — the ones with the most to lose personally from the policies of government interventionism and socialism — continue to prattle the socialist liberal mantra, then how in the world is the American economy ever going to improve?

We can only hope that the intelligent minority of business people in this sample are the ones who dominate government policy in the future. That’s the only way there’s going to be a future anything at all like we’ve known in America so far.