Wisconsin Takes a Step Forward, the UK Takes a Step Back

Posted by PITHOCRATES - March 9th, 2011

 A Foul Stench Wafts across the Rheine

Empires come and go.  But one truly transformed the world.  And still is today.  The British Empire.  Their representative government, property rights and economic policies unleashed unimaginable growth and prosperity.  They gave us the Industrial Revolution.  And we’ve never looked back.  Great nations started as British seedlings.  Canada.  Australia.  India.  New Zealand.  To name a few.  And, of course, the United States.

Sadly, the UK strayed in the 20th century.  As many nations did.  Including the US.  Thanks to a foul stench that wafted across the Rheine.  Karl MarxFriedrich Engels.  They wrote a book.  The Communist Manifesto.  And their goal was to replace capitalism with socialism.  And then replace socialism with communism.  The ultimate welfare state.

The British government exploded in the 20th century.  They nationalized industries.  Raised taxes.  And empowered unions to the point that the nation was at their mercy.  If they didn’t get the pay raise they wanted you didn’t have any electricity.  Their strikes were notorious.  People called them the British Disease in the Seventies.  But help was on its way.

Thatcher and Reagan cut Taxes to Economic Prosperity

Margaret Thatcher was prime minister during the Eighties.  And she started turning the UK around.  Like her counterpart did in the US.  Ronald Reagan.  Both cut taxes.  And nearly doubled their tax receipts (see High income tax will cost the country dear by Telegraph View posted 3/9/2011 on the UK’s Telegraph).

Between 1979 and 2009, UK corporation tax rates fell by half, even as the revenue from the tax rose by half – hard evidence that lower taxes encourage economic activity and boost Treasury receipts.

People deride ‘trickle-down’ Reaganomics in the US but it worked.  And it worked in the UK, too.  Because jobs are everything.  If you don’t have jobs your economy goes into the toilet.  If you have jobs your economy soars.  It just doesn’t get simpler than that.  And how do you create jobs?  You give people a reason to be brilliant.  Give entrepreneurs an incentive to create something.  Let businesses be profitable and they will take every opportunity to grow their businesses.  To be even more profitable.  All the while creating jobs.  Every step of the way.  The more they grow the more jobs they create.  And the better life gets for everyone.

Of course, remove that incentive and it’s the opposite.  If you raise taxes you reduce profits.  And that removes incentive.  Well, they are raising taxes again in the UK.  And what will the genius entrepreneurs do?  Well, what would you do?

Behavioural changes prompted by the higher rate – with entrepreneurs departing for more benign tax regimes or devising ways of avoiding the new tax – are set to flatten economic growth and lead to a collapse in tax revenues. The think tank estimates that the cost to the Treasury over a decade could be as much as £350 billion… Why should wealth-creators stay here when almost two thirds of their income is taken from them? The answer is that they won’t.

History has shown that higher tax rates rarely bring in the money the government expects.  While lower tax rates bring in more money than any of the naysayers ever dreamed.  So why, then, do they keep raising taxes?  Politics.

The Deed is Done in Wisconsin

Big Government needs supporters.  With the wane of private sector unionization, it’s getting harder and harder to get people to support Big Government.  Because people who work and enjoy life have no need for government help.  So they need to find people who do.  Or create them.

Enter the public sector unions.  These people beg for high taxes.  Because they are paid with tax dollars.  So the more people in the public sector, the more people there are to support big government spending.  It’s a little of the old you scratch my back and I’ll scratch yours.  And to sweeten the deal, public sector workers not only get pretty decent pay, they get outrageous benefits.  All paid for courtesy of the taxpayer.

And this is what is at issue in Wisconsin.  The union was ready to cave on everything but the collective bargaining.  Because that’s how they pass the full cost of their benefits onto the taxpayer.  Without the taxpayer having any say in the matter.  Until now, that is (see G.O.P. Tactic Ends Stalemate in Wisconsin Union Fight by Monica Davey posted 3/9/2011 on The New York Times).

The bill makes significant changes to most public sector unions, limiting collective bargaining to matters of wages only and limiting raises to the Consumer Price Index unless the public approves higher raises in a referendum. It requires most unions to hold votes annually to determine whether most workers still wish to be members. And it ends the state’s collection of union dues from paychecks.

So now if they want a raise larger than the Consumer Price Index (as a lot of raises are determined in the private sector for COLA raises), they have to ask the taxpayer to approve the raise.  And you can see why they are against this.  They want to keep getting big raises without the people paying them having any say in the manner.

And the whole choice thing about staying in the union?  And making people write checks for their union dues?  Why, if people do that, some are not going to stay in the union.  Not all union members vote Democrat.  But nearly all union dues go to Democrat candidates.  So, of course, the unions don’t want any of these changes to come to pass.  Or government.  Because the little arrangement they had was a nice way to dump bushels of taxpayers’ money into Democrat pockets.  Often against their will.  Or without their knowledge.

Public Sector Union – A Vehicle to Steal Money from the Private Sector

Everyone knows what we need for economic prosperity.  Thatcher and Reagan showed how to do it in the Eighties.  And they turned around nations that were in a pretty sorry state.  Tax cuts spurred that economic activity.  And filled government coffers.  However, Thatcher cured the British Disease.  And Reagan fired the air traffic controllers.  They stood up to the unions.  And that choked off a lot of money funneled (i.e., laundered) to the opposition parties.

And this is what the Left fears in Wisconsin.  That responsible government beholden to the taxpayer may waft out from Wisconsin and infect other states.  Thus turning off the great spigot of coerced political contributions.

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LESSONS LEARNED #44: “Liberal Democrats have to lie because there are more taxpayers than tax consumers.” -Old Pithy

Posted by PITHOCRATES - December 16th, 2010

Lying to Make Future Liberal Democrat Voters

Ask anyone some questions about the Great Depression and they’ll probably get them wrong.  Why?  Because their history teachers revised history to make government look better.  Government wore the white hats.  And business wore the black hats.  Because their teachers were public school teachers.  And the teacher unions are one of the strongest unions in the country.  The government takes care of them.  And, in return, the public school teachers takes care of government.  By turning out as many future liberal Democrat voters as they can.

So what did our teachers teach us about the Great Depression?  Evil rich people caused it.  By speculating in the stock market.  And it was their speculation that caused the Great Crash which caused the Great Depression.  Rich business people bad.

Then Franklin Delano Roosevelt (FDR) rode into Washington and saved the day.  FDR expanded federal power and went to work to fix things.  He punished the rich (raised taxes).  Created a huge federal bureaucracy to manage the economy.  And spent money like there was no tomorrow.  Public works programs.  Even gave us Social Security.  He made everything better.  Big hearted government people good.

That’s the history in our history books.  The only problem is that it’s wrong.

Tax Cuts and the Roaring Twenties

This is the story told because it favors those who favor expanding government.  Big Government wants to tell us what’s best for us.  And our public schools want to shield our children from their parents.  Because they (and Big Government) are smarter than parents.  So they revise history.  And lie to our kids.

Really?  Come on, they’re not really lying to our kids.  I mean, what reason could they possibly have to lie to our kids?  Just look at the demographics.  The far Left, those in government who like to spend money and tell us how to live our lives, are about 20% of the population.  The other 80% have real jobs and pay taxes.  And this is a problem.  How do you convince 80% of the people (who pay taxes) to pay more taxes so the government can spend it against their wishes?  All the while having the government telling these taxpayers how they should live their lives?  Easy.  You lie.  And you lie to their kids.

There was an economic boom before the Great Depression.  The economy was roaring so strong that they called it the Roaring Twenties.  And it had nothing to do with speculation.  We were building automobiles.  Electrifying the country.  Selling electrical appliances.  And building radios.  This was no speculative bubble.  It was real and strong economic growth.  And guess what kicked it off?  Tax cuts.

Higher Tax Rates Shelter Wealth instead of Creating Jobs

They don’t talk about this in the history books.  Because no public school teacher or government bureaucrat likes tax cuts.  Because economic growth created by tax cuts sends a very simple yet powerful message.  We don’t need Big Government.

Following World War I, government was a bureaucratic behemoth.  With a huge federal debt.  Fighting world wars can do that.  The Progressives, who gave us Prohibition and other nanny-state-like things, liked that big bureaucracy.  They liked activist government.  But even they knew that a high debt was not good.  And being the zero-sum economists they were, they knew only one way to reduce that debt.  Higher taxes.  And their candidate for the 1920 election, James M. Cox, promised to do just that.  And he lost the election.  Proving that Progressives don’t understand economics.  Or the American people.  Those Americans who have jobs, at least.

Warren G. Harding won that election.  And his secretary of the treasury, Andrew Mellon, understood economics.  To find a better secretary of the treasury you have to go all the way back to our first one.  Alexander Hamilton.  Mellon understood business.  And understood rich people.  High tax rates did not bring in more tax money.  Why?  Because rich people know how to shelter their wealth.  But give them a lower tax rate where they can make and keep what they earn, they’ll invest that money and create jobs.  They’ll pay more in taxes (even at a lower tax rate) because they’re not sheltering their wealth.  Their employees will pay more in taxes because they’ll have jobs.  And this is what happened during the Roaring Twenties.  People were working.  Making durable goods (cars, electrical appliances, radios, etc.).  Times were good.  Very good indeed.

Government Activism Gives us the Great Depression

The United States became an economic juggernaut during the 1920s.  The Americans were eclipsing the Europeans.  We were not a superpower yet.  But the Europeans saw the writing on the wall.  They wanted to form their own union of European states to compete against the economic powerhouse that was the United States.  We were kicking ass and taking names.  And no one could hold a candle to us.  We were unstoppable.

Then Herbert Hoover became president.  He was a progressive republican.  He liked activist government.  Hoover was a Big Government Keynesian and wanted to use the powers of government to end the business cycle.  He believed high wages meant high prosperity.  And in parity between farm and nonfarm prices.  He was everything FDR would become.  In fact, the Hoover administration started a lot of the FDR New Deal programs.

Farmers had mechanized their farms.  They plowed more fields than ever.  And grew more than ever.  With bumper crops prices fell.  Normally not a problem.  You just sold more.  But the war was over.  European farmers were farming again.  Not only did they not need our crops, they slapped tariffs on our exports to protect their farm prices.  So farmers couldn’t sell enough to make a profit at the lower prices.  Farmers went bankrupt.  Farm loans went unpaid.  Farm banks failed.  The Federal Reserve failed to provide liquidity to help other farm banks in trouble.  More failed.  This rippled into the nonfarm banks.  Which contracted the money supply.  Business started to hoard their cash because of the tight credit market.  They cut back on production.  Laid people off.  Then the Smoot-Hawley Tariff went to committee in Congress.  Business responded, knowing that that higher tariffs on imported goods they used would increase their cost of production.   They hoarded more cash.  Cut back on production.  Congress passed the Smoot-Hawley Tariff.  Other nations respond by imposing their own tariffs.  This resulted in a trade war.  Business sales fell.  Production fell.  More banks failed.  Hello Great Depression.

Tax Cuts Stimulate Economic Activity

This is the part they don’t teach you in history class.  It was government involvement that killed one of the strongest bull markets in history.  And would prolong the Great Depression.  The growth of government and the anti-business climate created great uncertainty.  And that didn’t go away until World War II.  When James Byrnes (head of the Office of War Mobilization) allowed business to make fat profits if they could deliver the vast quantity of war material needed to defeat Hitler, Mussolini and Tojo.  And they did.  The Arsenal of Democracy won World War II.  Private business doing what they do best.  Business.

But liberals like to spend money.  Our money.  And tell us what’s best for us.  To do that, though, they need us to vote for them.  And telling us that they want to take more of our money while telling us what’s best for us won’t make us vote for them.  It didn’t help Cox to tell the truth in 1920.  And no other presidential candidate since.  Because the 20% of the population that agrees with them isn’t enough to win an election.  You need some of the 80% who have jobs and pay taxes.

History has shown tax cuts stimulate economic activity.  They did when Warren Harding cut taxes.  When JFK cut taxes.  And when Ronald Reagan cut taxes.  This truth doesn’t make a good argument for raising taxes, though.  So our public schools and Big Government revise that part of history.  And lie to our kids.  Until they bleat “Business bad.  Government good.”  Like good future liberal Democrat voters.

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