Rant #12 - "Buffetting" the Truth for Some Distorted View of the World

Yesterday I was sitting in Starbucks just outside Waukesha, WI surrounded by the upper-middle class to upper class managers and executives that make this Wisconsin's richest county and largest tax-source. At the same time, I was reading an article about Democratic leadership vilifying the wealthy and demanding they pay more taxes because it is their "duty". It hit me - are we all so naive to think that such policies stop with the defeat of their first target? I intend to make more money to support my family as I get older. Could I be next? Here, companies such as GE and Red Prairie, AT&T and Kohl's have found refuge from the claws of the socialist tax policies of nearby Milwaukee County and it's historic hub of stubborn, hard-edged working class grit, the city of Milwaukee. Waukesha County has the highest property taxes in total receipts in Wisconsin, as well as the highest income tax collections of any county, though not for it's aggressive, progressive (or regressive) taxes, but because of the freedom the county has provided to generate that wealth. In turn, Waukesha County has given back in big measure.

I believe many of our inequalities, both social and economic are rooted in and caused by the efforts of "social engineers" in their drive to exercise their power for "social justice". They have hijacked the emotion of compassion and slapped it into a liberal vehicle that drives circles around common sense, but never goes anywhere. The politicians of the nation's wealthiest communities succeed in posterity when they care less about social justice than social empowerment. But many, sadly are falling into step with the liberal action line: "everyone deserves the same thing."

You must see the biggest difference between conservative and liberal philosophy is belief in where the ultimate social justice can be found - is it in the human heart or the laws of the land? Is the role of government to protect its people from enemies foreign or domestic, or is it to protect us from not only ourselves, but even nature itself, environmental and human? Is the role of any authority to empower, train and facilitate the excercise of mature freedom, or to protect it's subjects from any and every potential threat or discomfort? Have we failed to depend on the varacity of the human spirit to survive and instead turned to a collaborative body so easily manipulated by power to depend upon for our basic needs? We have raised a generation of weak, unambitious push-overs who have no concept of trial by fire, solid work ethic or moral absolutes.

And this too has resulted from the aforementioned looking for a way to "protect" and "defend" the "helpless". In fact, they have secured their helplessness by infusing dependence into their very core. Our governmental bodies were once mockingly referred to as "big brother", but that was so long ago. Our default mentality has become one of expectance; you and I are now owed so many "rights", they make the Bill of Rights look primitive.

It seems that health care has now become a "right" for every American, and it has become the "duty" of the wealthy to share the largest portion of the tax burden. When foolish people build a metropolis on a Hurricane Alley bullseye, it is now the responsibility of a federal government a thousand miles away to save those people and give money to the ones who threw their futures away on a swamp. So, to fix these disadvantages, often well-meaning crusaders gather up the democratic momentum to pass laws that will "never let this happen again", not taking into account all the unintended consequences.

Look at a couple of examples of "unintended consequences":

The poor African-American communities in 1960's America had been shunned by the workforce, struggled with the onset of de-segregation for the first time in 200 years, and needed a helping hand. So we invented a welfare system that hardly fixed the original problem and created a larger one: there's no need for working fathers and responsible families to exist, because the government paid for the house, the food and other "discretionary" items.

In the 1970's and 1980's there were abuses in the Oil industry, both locally and abroad that harmed the environment and lead to severe damage to coastlines and wildlife: laws were subsequently passed that made it so difficult and expensive to build refineries and explore new sources for oil that current crises in spiking energy costs have resulted from 30 year old plants and 40 year old fields losing the ability to meet demand. Oil companies aren't raking you over the coals, they're building new refineries they couldn't afford to build before because of restrictive policies and massive profit losses. But nonetheless, environmental hyper-sensitivity and emotional politiking has triumphed over responsible common sense and costed consumers literally billions of dollars in foreign dependency and uncertainty.

Take a picture of the easiest target: Exxon made nearly $40 billion in profit last year, never mind that Exxon is the largest corporation in the world and made only a 10% profit on $400 billion in sales. It's much easier just to blame them and their evil greedy shareholders than think rationally. They already pay more taxes than most of us would think. Financial commentator Jonathan Williams noted last year that “the tax burden on American ‘big oil’ … exceeds total GDP of 150 of the 184 countries ranked by the World Bank.” In addition, the profit margin of “Big Oil” is on par with returns in many industries – somewhere between 8 and 10 cents on the dollar – and actually lags behind many others. In other words, Exxon’s huge raw profit is simply a reflection of the company’s massive revenue stream.

Once more, never mind that those "evil greedy shareholders" are most likely your pension fund, your retired grandparents or your own personal retirement account.

But I digress...

The reason I mention the above is to frame the argument for keeping government where it should be - in a role of "responding" to problems if needed, not a tool to "react" when a problem needs to be fixed. To address one shortfall, we put out thoughts into black and white, creating a new problem that falls into the gray area between. Then we pass another law to clarify and solve THAT shortfall and again create perpetuating shortfalls over and over again. It was Thomas Paine who said "Government, even in its best state, is but a necessary evil; in its worst state, an intolerable one."

I fully acknowledge that there are thugs and wicked people in this world that will always try to manipulate and take advantage of the weakest around them for their own personal gain. And it is a rightful place for the government to assure everyone the same opportunity to succeed. But it is NOT it's rightful place to assure everyone the same ACHEIVEMENT of that success. We now have more than one generation that has grown so lazy and dependant that it is nearly impossible to imagine having to plant, grow, harvest and feed our own families with the natural tools found around us. But that is exactly the ethic that made this nation great and placed it in the position of becoming the wealthiest in the history of man. You would never know by driving down the streets of urban America, seeing the total lack of respect for authority, honor of marriage and family, devotion to a fine education and an ambition for a solid, well-paying job. While Milwaukee, Wisconsin suffers with a 25% unemployment rate within the inner city there are several hundred welding jobs paying over $20/hour at the two largest mining companies in the world only a short bus ride away. How can this be, in a land that gives you so much opportunity to succeed? I believe it is because in an attempt to assist the needy, we made them unable. With any economic or legal system there will be shortcomings and abuses if human beings are involved in the process. Our goal should not be to simply eliminate the forces of evil that seek to take advantage of the weak, but to liberate the inate force within each neighbor to reach higher and not be impeded by social ineptitude OR an entitlement mentality of dependence. Sadly, we have created both through "social engineering".

I would dare to say that the severe inequalities that exist in our nation today are not a result of "capitalism" run amok, but rather our attempt to somehow FIX it by inventing a hybrid of socialism/capitalism. We have taken two competing, opposite philosophies and tried to fuse them together, when the human conscience knows better.

So back to Starbucks... as I sit here among all these proud members of America's top 5% taxpayers, I am reading an article in U.S. News, dated July 16, 2007, page 51, by reporter James Pethokoukis. I am reminded that the taxes on the rich and large corporations is simply another political power tool liberals use to flex muscle and engineer a better society, yet fail in the end. He makes my argument patently clear in his words regarding Hillary Clinton and Warren Buffett:

"Clinton praised Buffett for understanding it was the national duty of wealther Americans to pay higher taxes. In a May 29 speech Clinton said, 'It's simply not fair that as corporate profits have skyrocketed, the percentage of taxes paid by corporations [has] fallen... It's as though we've goneback to the era of the Robber Barons'.

[However, she failed to mention] the combined top federal, state and local corporate tax rate in the United States of 39.3% is the second highest among industrialized economies and nearly 11% above the average. Back in 2000, the average international tax rate was 33.6%, but [foreign] governments have been slashing rates like mad to atteact foreign investment. The rate differential is one reason U.S. companies try to avoid repatriating profits that they make overseas."

Now tell me, how does this status-quo scenario benefit the poor? How does "punishing" the wealthy by demanding they pay their "duty" to society actually help the unemployed who need to find a lower paying job because Company X went overseas to make their retired shareholders an income? Ohhhhh, uh oh.... time for a new law. This time, let's tax the profits of companies made and retained overseas as well. That should work, right? Cross your fingers, because that's as good a chance as you might have.

Mr. Pethokoukis continued with his analysis:

"...Companies are paying more [taxes] already. In 2006 the feds took in $354 billion in corporate income taxes, 70 PERCENT MORE THAN IN 2000! [Emphasis added] And perhaps lowering corporate rates might actually generate more business and revenue. There's the old axiom that says whatever you tax, you get less of."

I will offer you the proof of his statement that he lacked the space to include:

• Across-the-board tax rate reductions in the 1920s reduced the top rate from 71 percent to 24 percent. The economy boomed, growing by 59 percent between 1921 and 1929.
  In fact, the decade began with less than a quarter billion dollars in annual revenue from the wealthiest 5% to the Treasury, and ended with nearly $1 billion, despite cutting taxes on the wealthiest Americans by nearly 60%! The Revenue Acts of 1921, 1924, and 1926 reduced the top rate from 73 percent to 25 percent.
  
• In 1930, Herbert Hoover raised tax rates from 25 percent to a maximum of 63 percent, and Franklin Roosevelt boosted them to 79 percent later in the decade. The 1930s, to put it mildly, are not remembered as one of the American economy's better decades.
  
• Across the-board tax rate reductions introduced by President John F. Kennedy reduced the top rate from 91 percent to 70 percent. These lower rates, along with substantially lower taxes on savings and investment, are associated with the longest economic expansion in American history.
  
• The Johnson surtax, enacted in 1968 during the administration of President Lyndon Johnson, combined with the inflation-induced bracket creep of the 1970s (subjecting taxpayers to higher rates even though their real incomes had not changed), resulted in a decade of stagflation.
  
• Reagan's across-the-board tax cuts ushered in America's longest peacetime expansion, helping to create 20 million new jobs and pushing incomes and living standards to record highs. The U.S. Treasury also enjoyed a doubling in tax receipts, while cutting the rate at which they collected them from the often-stigmatized "evil" wealthist Americans. These high-bracket earners ended up paying a higher share of the tax burden simply because they were investing and earning more in a free, less-regulated environment.
  
• The tax rate increases imposed under George Bush and Bill Clinton are associated with the slowest growing economy in 50 years and a decline of more than $2,000 in the average family's income.

Source: The Heritage Foundation

Every couple of decades the momentum shifts and another generation of people decide they have a great idea to solve the great evils and social ills of our society, assuming that previous generations had never thought of them first, or tried them... let alone failed at them. Now we have another assembly of arrogant politicians who think that their "new bright ideas" are going to lead us into the promised land.

A wise and witty U.S. President once said: "Recession is when your neighbor loses his job. Depression is when you lose yours." Let's hope it never gets to the point of proving his words true.

Keep your head up and your feet down this next election and maybe we can delay those other idiotic economic minds from engineering our self-defeat a little longer.