Taxes, Tourists, Kias, Socialism and Stuff

For a large society to function properly, long-term, people must be able to earn an income to live on which is independent of the government. Or, conversely, a government must be able to get an income from outside sources other than it's own people.

Government cannot really solve unemployment by simply hiring everyone to work for the government. To avoid stagnation and the eventual gridlock that is pure socialism, there must be an influx of actual "new" capital into the system.

There are two groups of people who are working for the government. First, there are actual workers who go to work each day doing the business of the government. Second are the people who are receiving monthly checks from the government as benefits or help of some kind.

Mostly, a government gets the money to meet these various "payrolls" by (1) making some of it's citizens pay certain taxes, and ALL of it's citizens pay other types of taxes; and (2) by taxing everyone indirectly through the back door by making their money worth less.

We certainly have socialism, to a degree, a large degree, in the United States. That is as it should be, I believe (except I think the proportion is too large right now.) Certainly, some things can only be done by government, and, just as certainly, our more unfortunate brothers and sisters need us to help them get by. We help these fellow citizens by each of us giving some money to the government, and then having the government pass out that money in proportion to need. (Like Karl Marx said.) That's socialism pure and simple, and there is nothing wrong with it unless and until it gets totally out of hand.

Where the danger comes in is when the government tries to take too much upon itself and forgets that "fresh" capital - that which is not simply being recirculated by the government - is necessary for the survival of the system. The second thing that must happen in order for the system to survive is for the government to keep the money supply reasonably finite and not expand it until it is worthless.

What is "fresh" capital? Fresh capital is "outside" capital. It is money a person earns or receives from sources other than the government. And it is money received by governments that they get from sources other than their own citizens - for example by selling natural resources it owns. Examples? When tourists from Japan and Germany visit the U.S. and spend money to eat and sleep and travel and to get into our national parks, that's fresh capital. When Saudi Arabia sells oil to the world that it gets from under it's ground, that's fresh capital for Saudi Arabia. Saudi Arabia doesn't have to tax its citizens highly (or even at all, probably) because it has this fresh source of income. Saudi Arabia also, one assumes, does not have to make it's money worth less and less every day by "creating" more and more of it on the printing presses. [Incidentally, pure socialism would probably work in Saudi Arabia since the government is making enough money - now, at least - from the outside. Unfortunately a "royal" few are keeping most of it.] When a Canadian farmer sells wheat to some country elsewhere in the world, that's fresh capital for Canada. When China sells plastic toys to the world, that's fresh capital for China. When South Korea sells Kias in the U.S. (as President Obama noted in his recent jobs speech) that's fresh capital for South Korea. I might add that when a country agrees to protect South Korea or Canada so they don't have to pay for the size of army they would normally have to pay for, that is also fresh income for South Korea and Canada (or whatever countries do that.) North Korea could probably cut the size of its military by about 80% and use that money to buy food for its people, and all it would take is for North Korea to start being nice to the rest of the world. There are all kinds of possibilities for "fresh" capital generation. Don't buy U.S. Savings bonds - that's silly to lend yourself money and then pay yourself interest. Invest in British municipal bonds and make Londoners pay you interest instead. See? Fresh, non-governmental, capital for you and me.

Any money you get from sources outside your government is fresh capital. Any money your government gets from sources besides its own citizens is fresh capital. Fresh capital is an object of desire. Fresh capital creates "real" jobs and makes you pay less taxes and makes your money worth something.

In my opinion, one major goal of a government should be to facilitate the influx of fresh (non-tax) income. In my opinion, when the government "borrows" more money and uses that money to hire people (even through private companies) to build bridges and roads, those are fake jobs. They are fake because the workers are getting paid by the government (by proxy) and because the contractors are getting paid by the government (directly.) Good has happened but nothing fresh has really been produced. All this is just another example of the government "churning" tax money.

In order for socialism to work (we have already agreed - at least I've said it - we need some socialism) there must also be some capitalism, some incoming of NEW money. How do we do this? Well, tourism was a good example. Work it more. The government should facilitate tourism more, and it should also encourage private travel companies to aggressively seek out tourists from overseas. Each state has unique attractions. Each state should be working hard to get foreign tourists to come there, not only American tourists. Some already are, of course, but all could probably do more. And food. We need to go back to selling food to the world. We need to stop paving over farmland and start growing crops that other people in other countries want to buy.

And we need to start manufacturing goods for sale again. Somehow we (and most of the rest of the Western World) have got this complex in our heads that cheap is the answer and only China can do that. Well, cheap is NOT the only thing! Innovative quality products are the thing. We can sell farm tractors to the world even if they may be more expensive than China's tractors, if they last longer or if they can do things China's tractors can't do. Inventive countries can always stay ahead of, and beat, copycat countries.

The other night, President Obama made a speech to the nation about how to create jobs. One of the good points he made is that our goal should not be to see who can get to the bottom by making things cheaper than everyone else, but by aspiring to get to the top by making things that are better and and more innovative and thus more valuable to buyers around the world.

Good times

I guess I don't really know that much about formal economic systems, such as capitalism. I know vaguely how it works, though pure capitalism has never been tried in any history book I've ever read. That's just as well, I suppose.

I do know, however, the difference between good times and bad times. When I look back on the good times, it has always been a time in our history (of the United States, I mean) when people were working at good jobs and making good money and buying things for their families.

The bad times were when lots of people were out of work and a lot more were worried they might lose their jobs any day.

So, that's how I judge our economy rather than whether we are in a socialistic or capitalistic period in our history.

Right now, a lot of people are not happy. A lot of people are out of work. People don't have money to buy things for their families.

Now, a lot of you reading this are a lot smarter than I am with regards to economic theories, but it seems to me the top priority of our government right now should be concentrated on fostering an atmosphere that was conducive to creating jobs and putting people back to work so they could buy things (like food and clothing and maybe new cars) and be happy again.

Something else I know is that jobs are produced by small businesses and factories and contractors. Jobs created by the government for people to go to work for the government are top-heavy in the sense they are an expense, for the most part, which must be paid for by taxes.

Government jobs are necessary of course, but we should be mindful that it is not really productive for the government to simply "make work" for people and put them on the government payroll, taking the money to pay them out of the pockets of all workers. Better, it seems, to let private businesses hire people and pay the workers out of profits.

Again, where do private jobs come from? They come from private business owners who are willing to risk their savings, or risk borrowing money, to expand their businesses, or start new businesses.

Why would a government who should be wanting to increase employment ("good times") in our country instead try to stifle and cripple the very people who hire other people?

Right now, our government is about to (January 1st) raise taxes on the wealthy in this country - the people who have business and hire people to work in them. This tax increase is not going to make the wealthy go hungry, but it IS going to stop them from expanding their businesses and hiring people.

Capitalism is what creates wealth for everyone from the top on down in this country. It helps the wealthy buy another yacht and it helps Joe Plumber buy a new car and Christmas presents for his kids. Socialism, (social programs, I mean) on the other hand, is a necessary government expense to care for our needy citizens. Over-regulation stunts capitalism and can actually kill it. It is pretty sick in this country right now.

When you heavily tax the entities which alone are capable of creating "real" jobs (not tax jobs) then I say you are shooting yourself in the foot. When you create an atmosphere of uncertainty, no one is going to go out and borrow big money to open a new factory, especially if they are pretty sure the government is going to tax all the profits out of such an enterprise. So money sits on the sidelines, like it is right now, and waits for the return of certainty.

It seems to me our present government and crew have created that atmosphere of uncertainty. They are not dependable. No one knows what they are going to do next.

For a long time, I didn't understand how cutting taxes brought in more actual money into the government treasury. I think there are a lot of people in this country right now - Democrats AND Republicans - who still don't understand the magic of this paradox that capitalism produces. Otherwise they wouldn't be so quick to raise taxes on people who hire people, and would not be so sure that it was time to kill the goose who lays our golden eggs.

The magic is really quite simple: cut taxes and allow people to keep more of the money they earn, and that extra money will be spent and reinvested. People will make more money, and because they make more money, they will pay more in taxes, even though the tax rate is lower. With more actual money coming in, the government then has money to fund it's needed social programs.

The whole point of capitalism is to get a lot of money into circulation, through profits, and keep it there, and keep everyone spending it. Let people who want to create jobs, who are good at creating jobs, start hiring Americans again. Don't make them sit on the sidelines or, worse, take their money offshore and employ people in other countries. Let's build some factories HERE for a change. Insist that our government make it EASY for businesses to start up, expand, increase their incomes.

The current pervading atmosphere is one of spending, debt, government takeovers, and the stifling of free enterprise. Government is NOT the answer to our troubles.

The government is, or should be, good at making people play by the rules. Let's let them stick to that job, and otherwise get the hell out of the way.

Wrapping up loose ends before I move on (I needed one more)

Note: this post started out as simply a comment to a new friend who made a comment to a previous post, but the answer turned out to be too long (as usual for me!) so I turned the answer into this post instead. I started out speaking to my friend, but now I will just speak generally to all who read this, and let you rebut my thoughts, if you choose.

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I think the key difference between you and me (and between me and most Europeans and all "Progressive Liberals" in the U.S.) is very simple - you said it yourself in your comment when you said that you think the function of government is to "take care" of people. You think the purpose of government is "to do good" for the maximum amount of people. I suppose (you didn't say) that the government will decide on what is "good" for you.

On the other hand, my own view is very different. I think the purpose of government is to protect its citizens from enemies (both foreign and domestic) and to work to foster an atmosphere of individual liberty and opportunity for advancement. I don't want the government to take care of me; I want the government to protect me from robber barons and make it possible for me to rise to the top (even go from poor to rich) if I am smart enough and willing to work hard enough to make that happen. I don't want to fail or become mediocre because the government takes most of my personal rewards and gives them to others to "take care of them."

I want an opportunity for a quality education. I want the opportunity to compete on a level playing field. I want LOTS of things. But I do NOT want the government to provide those things for me or to take money out of my neighbor's pocket to buy these things for me.

So we approach life, you and me, (and "Progressives" and me), from a very different point of view. I want a government who protects me from those who would prey on me, a government that makes sure I don't get taken advantage of, and then gets the hell out of the way.

If a bank tries to screw me, I want the government to make them go by the rules. If there is curtailment of free competition in the marketplace because a corporation gets too big for small guys to compete with, such as from Walmart in the retail field, I want the government to break them up and not just look the other way. We have anti-trust laws and I would like to see them enforced so small businesses can start up and compete and hire people at decent wages again.

If an insurance company tries to weasel out of it's obligations or stick it to me on prices, fixing prices with other insurance companies under the table, I expect my government to enforce the law and not look the other way. I want my government to protect ME from these people. I don't want my government to protect their graft at my expense, or throw my tax money at them because they are "too big to fail". No company should be allowed to get too big to fail; it is not in the citizens' interest, nor does it foster the competition which is the mother of excellence.

My country did not become great and powerful and wealthy because it had a dream of someday having many heartless multinational corporations. It became great because it had a dream of unleashing the power of the individual citizen's creativity, drive, and inventiveness. We were not born in this country to be sheep. People eat sheep. Neither were we born to bow to some government's notion of what is "good" for us.

Having said that, I am not so naive to believe we don't need a dose of socialism, as you say. I don't think pure socialism works because it takes away personal initiative and it will eventually run out of money. As my idol Maggie Thatcher once said, "The trouble with socialism is eventually they run out of other people's money." Kidding about the "idol" bit.

Neither do I think "pure" capitalism will work - although it has never truly been tried in it's pure and unrestricted state - because capitalism is cold and heartless. I believe there are unfortunate people in every society that cannot just be left beside the road to die. So there must be a percentage of socialism in the form of safety nets and survival programs for those who are in trouble. The thing is, as I have blogged in the past, I think the recipe for a good workable government calls for a teaspoon of socialism, not a gallon.

Yes - tax the workers at all levels to get money to help those who need a temporary hand or even permanent help if they are unable to work. Since I have already shocked you, let me shock you even more:

** I don't believe the government should be providing schools (on a national level) or insuring standardization (of anything) simply for the sake of standardization. That is the province of the states and local governments. I want the people to build schools and raise the money to educate their own children - just like Americans did for so long before a big federal government started sticking their nose in. I want the states to compete with other states for providing a better life for their citizens, just like I want many business to compete with one another.

** I don't want their money for roads. I don't want their money for bridges. The only money they have is MINE anyway. With few exceptions, infrastructure is the province of the states. Stop taking our money and doling it back out to us. I'm very tired of the government taking our money and then redistributing it for projects THEY think are needed. This is the hallmark of socialism.

** I don't want the federal government thinking up things all Americans "need" to have done for them. Let the states provide what their citizens tell them and do what they can afford to do.

** I guess you can tell that I think the government ought to be regulating Insurance companies instead of being one. Make insurance companies toe the line; make them become responsive to citizen's needs. Break up the bloated bastards so that new small companies can start up and compete with more personal services. Our government has failed us miserably in this regard and now would have us believe they can do it better with one big top-heavy unmotived "company".

I say let the government protect the citizens by requiring insurance companies to take the bad risks with the good, and, where needed, pay part or all of the insurance coasts for the poor. In short, let's ALL of us be insured, and let us pay a bit more than we normally would have to, in order to insure the poor as well.

The federal government in the U.S. HAS become an oppressive Big Brother and nanny. And I hate it. It is stifling to my liberty and insulting to the people, the hopeful immigrants, who built my country through the years. I don't expect you to understand. You were born on a different planet than I was. I'm sure these notions seem outrageous to you. Unfortunately they sound outrageous to a huge number of "Progressive" Americans too.

The clash of ideologies in the U.S. is coming to a head now. The next few years will bring us much turmoil. The nannies are starting to run out of money now, so the revolution is not far off.

Thomas Jefferson was one of the men who helped found my country. He believed in states rights and was very wary of giving too much power to a federal government, though he recognized the need for one. But he cautioned that we must watch it closely or it would get away from us. He said...

"I predict future happiness for Americans if they can prevent the government from wasting the labors of the people under the pretense of taking care of them."

He also said: "The tree of liberty must be refreshed from time to time with the blood of patriots and tyrants."

I believe that tree is being strangled by the excesses never envisioned for our federal government, and I believe it is long overdue for a pruning. If blood of patriots is again needed to mix with the blood of tyrants in life-giving puddles on the ground to feed that tree of liberty, there are still enough patriots here to supply it.

My new friend, I know very well that Europe doesn't understand America. They never have. Sadly, a growing number of Americans no longer understand it either. There have always been Europeans who say they don't understand why a big government must necessarily infringe on the personal liberty of citizens. Sadly, there are many Americans now who have grown up thinking the same thing. Their thinking is short-term and shallow, and they haven't properly studied history.

It simply is not possible to cede more and more power to the government without losing more and more power yourself. It is a trade-off and a bad one. It is the path to sheep-dom. We would do well to heed the words of our founders: the larger the government, the smaller the individual citizen.

We the people?

At the very beginning of the U.S. Constitution, before it starts in on the specifics of governance, it lists the reasons for its existence.

To form a more perfect union

To establish justice

To insure domestic tranquility

To provide for the common defense

To promote the general welfare

To secure the blessings of liberty

Six things. One would hope that all specific procedures and laws ensuing would harken back to one or more of these general goals. One would expect, for example, for congress NOT to pass a law which does away with our armed forces.

One could argue that the fifth reason authorizes the current nanny state. Perhaps even the second reason, too - if you assume "Social Justice" as well as legal justice.

Today, the only tenet the government really adheres to doesn't appear on that list: "To redistribute wealth."

Some of you may have gathered from my past writings that I personally prefer the belief that the government is best when it is concerned with finding ways to facilitate personal liberty and individual initiative rather than coming up with actual social programs and then pushing that agenda, a certain group of people having decided this or that program will make all citizen's lives somehow better.

My opinion, however, doesn't automatically mean most Americans don't want a nanny state, womb to tomb care from their government. I recognize that. All I can do is fight for my idea against THEIR idea, by trying to garner majority support. I don't mind having to do it that way; it seems very congruent with the concept of democracy, and I like democracy (with certain modifications.)

The only thing is, it seems like the two concepts (nanny state versus individual liberty) are not things that can really coexist: the more social programs and other things the government thinks up that are in their opinion good for me, the more necessary it is for them to take personal liberties away from me. Little by little, chunk by chunk.

The pendulum seems to have swung very much in favor of Uncle Sam as nanny right now. This is probably not surprising since there are a lot of new inhabitants who don't remember having a lot of personal freedom, who mostly come from countries with governments who are not that big on personal freedom for their citizens anyway. It is also not surprising since, because of past government social programs, more and more of us don't have a lot of money left anymore and the current government entitlements look pretty good. Best not to try to look too far into the future, though; nobody is dumb enough to think the current entitlements are financially sustainable, let alone add more stuff to the dole menu.

I also have this theory that there should be a balance between Capitalism and Socialism, if only to produce jobs for those who might WANT to work rather than suck up a dole. However, that is not likely to happen again until the nanny cycle has run its course. Only when the government has drained all the producers of all their money, only when the government has printed so much worthless paper that $20 might buy you a pack of chewing gum, only when "entitled citizens" are suddenly forced back into productivity and self-responsibility again in order to survive, will the cycle of capitalism will resume.

Like that ol' Phoenix, capitalism always rises, of necessity for human survival, from the ashes of the false and cruel dreams of socialism.

Lest I leave you with the mistaken thought that I believe it is the Liberal Left who is the cause of all of America’s troubles, let me be quick to say that I firmly believe it is the Rabid Right - the Ridiculous Right - who continually paves the way for the Loony left and even makes them necessary.

If Communism suddenly seems to be attractive to the “masses” of despairing people who see no future anymore for either themselves or their children, it is because the policies of the Right drive them to that despair.

“... the Right prepares the way for the Left — in both the United States and Russia. The Right gives the motivation and creates the sense of desperation and moral outrage that leads people to embrace utterly implausible solutions like socialism and communism.” —Jeffrey A. Tucker

Without wars, unemployment, inflation, there is no need for revolution. Without those things, there is no specter of evil capitalism with which the Loony Left can strike fear into the hearts of the desperate.

For all of Obama’s socialism and semi-brainless economic strategies, the Right have only themselves to blame. Those of us who take neither side suffer the the futility that goes on around us. We are left with the attacks and counterattacks, Left against Right, Right against left, on and on and on - when all we really want and need is progress through greater liberty.