Questions, I get Questions

A few weeks ago, I wrote about this so-called stimulus package and was asked a couple of questions. Later that day, I boarded an airplane that would take me to Brisbane, Australia. It wasn't a vacation, it was a business trip and although I did get a couple days for some sightseeing, it was all quite intense, During that trip, some questions were asked and I promised a response upon my return. Also during my absence, we had a grandson born. After 8 granddaughters, we were kind of excited to finally have a grandson in the mix. With all that going on, and some pressing things around the house and the job, things kind of slipped my mind. I even said I would post the answers yesterday, but my honey-do list just wouldn't allow it. We are a large blended family and we have lots to do, but it's also loads of fun. We keep busy. Enough of my excuses, let me get on with the job.

The first question was:

Which portions of the stimulus package do you consider pork? In other words, which do not create or contribute directly to creating jobs? Just curious -- when I read the list of what got cut, I couldn't pick out anything that wouldn't have helped the economy.

Most of those projects were just that. Pork. Pet projects that have been around for awhile. Most of them aren't even ready to be worked. Very few are what they called "shovel ready" While a few have started, they were mostly smaller projects. The larger ones, were either still in design or approval. Many more were on wish lists, projects that were either just concepts, or not yet even in design.

Much of it won't kick in for two years or more. There will be little or no impact to the economy. Many of these are short term construction projects which will end after a few months. Those jobs will be gone again.

If by chance we see a little help to the economy, it will be short lived. The taxes required to pay for this and the President's projected budget will eventually require a huge increase in taxes at every level.

According to the Wall Street Journal:

A tax policy that confiscated 100% of the taxable income of everyone in America earning over $500,000 in 2006 would only have given Congress an extra $1.3 trillion in revenue. That's less than half the 2006 federal budget of $2.7 trillion and looks tiny compared to the more than $4 trillion Congress will spend in fiscal 2010. Even taking every taxable "dime" of everyone earning more than $75,000 in 2006 would have barely yielded enough to cover that $4 trillion. (empasis added)

So where are we going to get the money to pay for all of this. You can, and rightfully so, blame Bush for his deficits, but these more than double his deficits.

Obama's figures operate under the assumption that this will all be behind us by the ends of this year and there are few economists that agree with that rosy of a picture.

If we are going to even have a chance at paying this back, we will have to raise taxes to a staggering level and whatever short term benefits we might see will quickly dissapear. The tax money that will be collected will not be spent here on projects or benefits, it will be sent to China to service our debt. We will be working for China.

Taxation is a necessity. Over taxation is oppressive. You cannot be taxed into prosperity.

And for the last question:

[I]f not a stimulus package, then what IS your proposed solution to the financial crisis?

We need to let some of these business and banks fail. We need to make it easier for companies to thrive. Lowering corporate tax rates and encouraging investment with lower capital gains taxes will go along way. If companies are allowed to fail, we will see a lot of the CEO salaries start to shrink back to reality. It would be painful, but most economists say that we would start turning things around by early next year.

Capitalism, with all it's inherent flaws, is almost always self-correcting. It's also the engine that fuels prosperity and opportunity. Obviously, we need some regulation to keep the system honest, but to bog industry down in over regulation can also lead to problems and make it expensive to be in business.

Go here for some idea of how vast the system of federal regulation actually is. This is the entire Code of Federal Regulations that regulates ever aspect of of American life. Then add to that, state and local rules and you have a confusing regulatory mess that guarantees many an attorney of a profitable, life-long income.

Businesses do not pay taxes. They are tax collectors. They pass on the taxes to the consumer in the form of higher prices. Also, when you start taxing all of those rich guys, they are not investing it. When money is not invested, companies can't find the capital to expand and hire. If they can't hire, jobs are subsequently lost because every job lost has some kind of ripple effect.

Government does not and cannot create wealth. The more the government taxes means less in the pockets of the people.

VW