Tuesday, January 6, 2015

My Plan For Hope and Change

Karl Marx


  Fortunately the economy is finally picking up steam. We are experiencing a growth rate of about 5%, which is pretty good. Of course more people have dropped out of the work force and are on food stamps that at any time in history. Normally I am of the opinion that presidents receive too much credit when the economy is good and too much blame when it is bad. There are exceptions to that rule. The Kennedy's tax cuts of the early 1960's spurred economic growth for the rest of the 1960's and into the early 1970's. Reagan's tax cuts, management of the money supply, and deregulation was responsible for the longest sustained period of economic growth in American history from the early 1980's until the beginning of George W. Bush's first term.as president. Bush forty-three's tax cuts spurred economic growth until the housing bubble burst in 2008. I have a layman's understanding of how the economy works and I am also a student of history. In no way however do I claim to be an economic expert. You know the old saying, opinions are like a_ _ holes, everybodies got one.

  My study of history has taught me that it shouldn't take six years to recover from a recession or a depression as it has taken the Obama administration. The New Deal provided relief for the poor but it's down side was that it prolonged the depression. World War Two brought us out of it. If it had not been for the war there is no telling how long the depression could have lasted. Obama's salvation, like the war for Roosevelt, has been the drop in oil prices. Like the New Deal Obama is supporting a lot of people on relief but these programs are a drag on the economy. Ronald Reagan faced the worst recession since the great depression. Even worse than the recession after the 2008 housing collapse. The real estate market was virtually dead when the prime interest rate rose to 21.5% by July 1982. The inflation rate soared to 13.5% by 1980. Some states reached unemployment rates of nearly 17%. Reagan's recession began in July 1981 and was over by November 1982.This was because Reagan had a four point plan to combat the recession. Cut the marginal tax rate and reduce spending. Business deregulation and management of the money supply.

 Reagan was successful in three of the four goals. He would have been successful in cutting the deficit but for the social spending of the Democratic Congress and the rise in military spending. The primary foreign policy goal of his administration was to defeat the Soviet Union in the Cold War. He knew as well as Gorbachev that the Soviet Union could not keep up with the military might of the United States and continue to feed it's people. He would see America finally win the Cold War but he would receive the lions share of the blame by the Democrats and their media for the rise in the deficit. Which was tiny compared to the rise in the deficit under Obama, which is now at eighteen trillion dollars and virtually ignored by the Democratic media. In addition I believe that every dollar spent on defense during those years was money well spent. It was an honor for me to serve in the military during those years under Reagan.

  For many years I have been an advocate of free market capitalism and the theories of Adam Smith. Smith was a teacher of moral philosophy besides being an economist. He believed that everyone great and small should be able to benefit from the capitalist system. For example a capitalist who establishes a monopoly could not call themselves a true capitalist because it would not be a moral act. This would also apply to a businessman who cheats his customers or is unfair to their workers. Not everyone has the talent to be a John D. Rockefeller, Cornelius Vanderbilt, Andrew Carnegie, Bill Gates or a Steve Jobs. All of us have a talent of some kind. Smith talked about the butcher, baker and brewer. How each had a need of the others products, which in turn was the "invisible hand" that drives an economy. Government does have a legitimate role. It is there to provide only enough regulation to prevent such things as monopolies. insider trading, illegal labor and business practices. Another role is the regulation of interstate commerce. Government should provide relief for people during legitimate emergencies like natural and man-made disasters or during times of economic recession or depression. Government is not there to provide perpetual relief to able-bodied people who are capable of working. It is not there to impede free market capitalism.

  Karl Marx believed that capitalism would implode on it's own. Marx believed that there were things that could be done to speed up the process. The most damaging thing would be a graduated income tax. This is arguably the worst thing to ever happen to this country. It was introduced in the Civil War as a means to pay for the war which targeted only 3% of the wealthiest Americans. The tax ended with the end of the war. The Income Tax Act of 1894 re-instituted the income tax and was correctly declared unconstitutional by the Supreme Court in 1895.This tax was overturned by the court case Pollock vs. Farmer's Loan and Trust Co. The income tax was considered a direct tax which was then prohibited by the US Constitution.

 Finally in 1913 the progressives were able to pass the Sixteenth Amendment which gave us a graduated income tax.doesn't it. They were able to sell it to the American people by telling them that it would only affect the wealthiest six percent of the American people. Sounds a little like Obama's promise,"You will get to keep your doctor's" doesn't it? World War Two spread the misery. The government taxed a larger portion of the American people in order to pay for the war. The very worst thing that ever happened was payroll deduction. Before the war people payed taxes in quarterly installments. Because of the demands of the war the government began payroll deduction and it now affected the middle class. It was no longer the rich being taxed. Because of payroll deduction Americans do not feel the pain of taxation. There would be a revolt if Americans had to write a check for the amount that they are being taxed each week. With payroll deduction they don't miss it quite as much. After the war the income tax was used to pay for the Cold War and entitlements. Now entitlements take up two thirds or more of government expenditures.. The bad thing about a graduated income tax is that both parties can punish who they want to and they can reward who they want to. This is why there will probably never be real tax reform. Both political parties do not want to relinquish their control of the taxpayer.

  The left is constantly talking about the greed of the wealthy and the capitalists. However the left never talks about the greed of big government. Government is responsible for poverty and always has been world wide. Try to imagine the U.S. economy as a 747 jumbo jet. When I flew to England in 1970, on my way to Turkey, the flight took about nine hours from New York to London. One year later when I returned to the U.S. it took only seven hours to fly from London to New York. On the way to London the plane was flying into a headwind on the way back it benefited from a tailwind.Things like high taxes, regulation, out of control spending, inflation and high oil prices are some of the things that slow an economy down. They are the headwinds. Low taxes, low inflation, deregulation, low oil prices, and low spending are the tailwinds that push the plane along. The impact of just the drop in oil prices on this economy should be proof to anyone, with half a brain, that tax cuts are good for the economy.

  Here is my plan for hope and change, Yes it is a pipe dream but here goes. Eliminate all capital gains taxes, inheritance taxes. and corporation taxes. You can't tax corporations. They either pass them on to the consumer as higher prices or they move to another country where they are cheaper. Remember Burger King? Get rid of our graduated income tax and replace it with a consumption tax or a flat tax. A sales tax is much more durable. When times are bad there are less people paying income tax because fewer people are working. With a sales tax people will continue to pay taxes even if they are out of work because they will continue buying everyday necessities. A flat tax is fairer. Nobody can be punished or rewarded. If the tax is twenty percent, rich and poor alike pay twenty percent of their income. Deregulate and remove bureaucracies that impede true free market capitalism and entrepreneurship. Cut out all unearned entitlements that enable and encourage a lifestyle of idleness and unproductive behavior that is passed on to generation after generation. Eliminate or diminish those programs that encourage single parent families. Two adults in a family and a male presence are the ingredients for less need of government assistance and a more stable family.. The bottom line to all this is that an empty refrigerator is the greatest motivator in the world. My plan would give that big old economic 747 a tailwind like it hasn't had in a long time.

The following are from the mind of Karl Marx. See if any of this stuff looks familiar.

  Marx believed that capitalism contained the seeds of its own destruction. He described how the wealth of the bourgeoisie depended on the work of the proletariat. Therefore, capitalism requires an underclass. But Marx predicted that the continued exploitation of this underclass would create great resentment. Eventually the proletariat would lead a revolution against the bourgeoisie. The final struggle would lead to the overthrow of capitalism and its supporters. Marx wrote that modern bourgeois society 'is like the sorcerer, who is no longer able to control the powers of the nether world whom he has called up by his spells.'

  Following the proletariats' defeat of capitalism, a new classless society would emerge based on the idea: 'from each according to his abilities, to each according to his needs'. In such a society, land, industry, labour and wealth would be shared between all people. All people would have the right to an education, and class structures would disappear. Harmony would reign, and the state would simply 'wither away'.

1. Abolition of private property in land and application of all rents of land to public purpose.

2. A heavy progressive or graduated income tax.

3. Abolition of all rights of inheritance. 4. Confiscation of the property of all immigrants and rebels.

4. Confiscation of the property of all immigrants and rebels.

5. Centralization of credit in the hands of the state, by means of a national bank with state capital and an exclusive monopoly.

6. Centralization of the means of communication and transportation in the hands of the state.

7. Extension of factories and instruments of production owned by the state; the bringing into cultivation of waste lands, and the improvement of the soil generally in accordance with a common plan.

8. Equal obligation of all to work. Establishment of Industrial armies, especially for agriculture.

9. Combination of agriculture with manufacturing industries; gradual abolition of the distinction between town and country by a more equable distribution of the population over the country.

10. Free education for all children in government schools. Abolition of children's factory labor in its present form. Combination of education with industrial production, etc. etc.

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