Friday, May 8, 2009

When is a Community Organizer like an Economist or Constitutional Lawyer?


One can tolerate a Presidential candidate who disparages the economy under the incumbent or opposition party, but upon winning, it’s assumed that the President-Elect will assume the role of healer, beating the drum for growth and optimism. One could also reasonably assume that a President would understand the relationship between growth of government expense (overhead) and the shrinkage of capital available for private sector growth and job expansion due to tax rate increases, as well as the concomitant tax revenue losses associated with private sector revenue and income decline.

It’s also usually assumed that the President would understand the factor that risk plays in establishing interest rates on loans, or expected rates of return on investments. And, in addition to risk, one would expect a Constitutional Lawyer (especially one who taught the subject) to understand the role that the established rule of law plays in creating an agreed-upon playing field that allows all to understand not only their roles and responsibilities, their protections and remedies in commercial transactions and contracts, and the associated level of risk so that they can effectively evaluate and assign appropriate interest rates. A good analogy would be the rules of the road that allow us to drive virtually unimpeded from coast to coast with millions of other people driving on the same roads at the same time.

Unfortunately for the United States (and the world), President Obama appears to have just responded present, but didn’t pay attention during those basic college level economics and law courses he sat through.

Because, if he had actually paid attention in class, and really was attempting to get the economy rolling again, anyone with a basic comprehension of economics wouldn’t initiate massive government spending and taxation; he wouldn’t propose increased taxes on the basic element of production and commerce – energy, the mere hint of which can effectively shut down most business expansion plans; if he really was concerned about encouraging investment he wouldn’t attempt to abrogate the rule of law by disallowing the rights of GM and Chrysler bondholders , and then demonizing those who assert their Constitutional right to private property and equal protection under the law of contracts.

The man who swore on Abraham Lincoln’s bible that he would up hold the Constitution, within his first 100 days has acted against his oath. The institutions that loaned money to Chrysler when it was in trouble were willing to take the risk because they were relying on a legal principle which gives them first claim on the company's assets in case of bankruptcy. Thus, in the worst case scenario, they expected to reclaim as much as 80 cents on each dollar of their investment, limiting their losses. President Obama wants them to accept only 29 cents on the dollar, in the name of "sacrifice." The beneficiary of this sacrifice is the United Auto Workers, a Democratic pressure group which is being shoved to the front of the line and favored above the secured creditors.

With this action as an example, what reasonable investor would want to engage in any transaction with an Obama Administration linked entity? How will the TARP-associated banks attract capital, when the potential for arbitrary rule changes are so high?

What manufacturing business will plan expansion domestically with the threat of massive energy cost increases looming as a result of Obama’s extreme energy taxes, with no alternative lower cost “green” energy sources available in the foreseeable future?

Speaking of investments and taxes, the other major insult to the intelligence of the American citizenry is the issue of taxes on business. President Obama continues the demagogic assault on capitalism by demonizing American businesses over their overseas profits that are not repatriated. A few facts:
  1.  Businesses don’t pay taxes.  Any taxes levies on them are passed on to their customers, who are either consumers or other businesses.  Levying taxes on businesses is a method that politicians use to levy taxes without arousing voters.

  2. American businesses would love to be able to repatriate overseas profits, but if they do so, they are subjected to usurious double taxation, which not only makes them less profitable, but less attractive as an investment opportunity for individuals, pension plans, insurance companies, union retirement funds, etc.

  3.  American businesses would love to be able to repatriate overseas profits, but if they do so, they are subjected to usurious double taxation, which not only makes them less profitable, but less competitive against foreign competitors operating here in the U.S., and overseas.

  4. We want American businesses to operate overseas.  We want them to be effective competitors not only here in the U.S., but in their competitor’s home base.  It is business war, and we want them to be competing on a level playing field.  Right now they’re not.

  5. The U.S. has the second highest business tax rate in the world.  A significant reduction in the U.S. business tax rate (or better yet, an elimination of business taxes) would make the U.S. a business investment magnet, attracting capital from all over the world to invest in our country. The tremendous inflow of capital available to U.S. businesses would propel this country into unprecedented wealth that would facilitate huge tax revenues that could be used to fund not only all the social programs that the Democrats would desire, but develop all the alternate “green” energy sources that they espouse.
But even if Obama would finally come to the realization that his policies were counter-productive, it wouldn’t change anything, because the bottom line with most Democrat politicians is that it’s not about their stated objectives, they just want to control people’s lives. That’s why one of the changes that has to come about is that we get away from the perception of Right vs. Left, Conservative vs. Liberal. It’s really a case of Statists (those who want to run the government and dictate how everyone else should live their lives), vs. Individualists (those who want to be allowed to live their lives under the freedom and protection of the Constitution).

We thought we were electing an economically savvy Constitutional lawyer.  We got a radical community organizer, steeped in Chicago politics....


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