How to Get Out of a Recession, Part Two

It is unfortunate but really quite true that our federal government is not good at doing much. Is there anyone out there happy with the current state of the education system? Remember when Uncle Sam stepped in to bust up Ma Bell and "fix" the phone company. Things are good now, but for years, phone companies could just take over your service. I once received a bill from MCI, yet I never signed up for MCI service. It was a mess. This is also true on the state and local level (New Orleans post Katrina, the city of Detroit, California).

I don't expect many arguments on this notion. The government is not, has not and will not be the model of efficiency and quality. The founding fathers endeavored through the Constitution to limit the powers of the government. These were men determined to establish a life without oppressive elitists meddling in their lives, it was the reason they left Great Britain.

So you are probably wondering when I explain how to get out of a recession, or maybe you are more interested in the rumor of Nancy Pelosi's hermaphrodite (freakish) nature. Stick with me, it's all coming.

So how does a government create jobs? I don't know. I suppose they create new bureaucracies and staff it with the unemployed. This bogs down an already cumbersome structure with dead weight. How many times have you done business with a government agency lately. I can remember when Kendra (my wife) and I went to get our marriage license in downtown Detroit. When we finally got to the window, the clerk treated us as if we barged into her home and pried her away from her soap operas just so we could get married. How rude of us. I can concede that people have bad days, but this is consistent behavior for government workers. Does anyone enjoy a stint at the Secretary of State's office? How about the unemployment office?

What's the point here? Do we think the same people responsible for the miserable performance of dozens of largess programs can create viable jobs and control market conditions? I for one do not have that much faith. Job creation is the realm of businesses. Business owners create jobs. Has anyone ever received a job from a poor man?

The United States currently has the second or third highest corporate tax rate on the planet. Already hamstrung by the high costs of health care and legacy costs for bountiful benefit packages we have become accustomed to, the US is not competing on a level playing field with the rest of the industrialized world. According to an analysis by Investors.com, corporate tax rates all over the world have been steadily declining, while the US rate has remained at around 40% for over a decade. The world average is 25.5%.
If this corporate tax rate were cut along with cuts for individuals and small businesses a few things would happen as a direct result. Large corporations would find themselves with millions more in cash and liquidity. Entrepreneurs would invest these funds into new plants, new equipment. Construction companies would contract for the concrete, steel I beams, electrical and plumbing work. People would earn money the old fashioned way, they would work for it. They would provide goods and/or services in response to the demands of more money in the hands of consumers.

When consumers get fired up, they buy things. This is true stimulus. The market moves unencumbered by unnatural forces. What are unnatural forces? Here's my best example. Somewhere in a Washington government building sits a 24 year old young lady who went to one of the nation's best colleges. She studied environmental sciences and business management. She decides that my family needs a hybrid vehicle so her bosses enact tax credits for people who purchase 'green' vehicles. Now, do I want or need a small, green, expensive vehicle? Absolutely not. A few months ago, when gas was around 2.40 a gallon, GM sold 17 flex fuel Sierra pick up trucks. Just 17 trucks.

The natural pick up truck market is about "big shiny trucks". Big engines. Huge towing capacities. Large payloads. You should need running boards to get into the cab. This is what pick up truck drivers are into; not the size of their carbon footprint. The young lady in DC can't change this with laws or tax codes. Let the market run free. It will run amok once and a while, but it always corrects itself.

Where was all this money before? It was in the hands of politicians. These are the men and women who put in legislation for a sixty million dollar "bridge to nowhere" in a Homeland Security bill.

Has anyone stopped to think out the long term consequences of electric / petroleum hybrids. Isn't our electrical grid already inadequate? What happens when 10 million people plug their cars in? And if your rechargeable car gets 40 miles per charge, will the company you work for offer receptacles in the parking lot for free? These are the same dopes who gave us the compact flourescent bulb. It's so environmentally friendly you have to have a HazMat license to dispose of one.

Every time in recent history when tax rates were cut, government revenues increased. I will support this in part three.

How to Get Out of a Recession

This is my attempt at blogging. I have never done this before and I am sure I will break some rules and do the things that novices do. I apologize in advance and can accept almost any criticism, so have at it.

For years I have been involved in an email debate with my uncle. We have furiously debated current events of all types. He's been a worthy opponent. I have a tremendous amount of admiration and respect for my uncle, but when it comes to politics and similar ideologies; I believe he's wrong.

Our debate has kept me honest. Not surprisingly, not every news story that declares Nancy Pelosi is a freakish hermaphrodite is true. But more on that later. We have both spent hours squinting at our monitors vetting stories to make the other's party look broken. I feel like I have waded through this large pile of manure that young ideologues attempt to pass off as journalism and have filtered out some truth. I know I have analyzed this stuff more than the average citizen and I believe I have some interesting things to say. We shall see.

Recently, my uncle wrote to me declaring that historians hold Hoover responsible for the Great Depression and FDR is regarded as the one who pulled us out of it, and he did it with stimulus money. So I looked into this claim. It turns out, one of the most popular opinions for the depression was a global collapse due to Europe abandoning the gold standard, hardly the fault of Hoover. This happened as a result of huge reparations left for Germany to pay. The Deutschland was forced to print money and soon Europe followed suit.

In 2004, Harold Cole and Lee Ohanian, two economists from UCLA (Ohanian is vice chair of the university's Economic Department), reasoned that FDR actually PROLONGED the Depression through pro-labor and anti-competition legislation signed into law in 1933.

What's interesting is what was reported by UCLA's Newsroom site. These are comments from 2004. I don't think many people had even heard of Obama then and the term "stimulus" was not widely used either. I point these things out so no one can accuse either of professing a political agenda. These findings were too early to be in response to anything this administration has done.

"Why the Great Depression lasted so long has always been a great mystery, and because we never really knew the reason, we have always worried whether we would have another 10- to 15-year economic slump," said Ohanian, vice chair of UCLA's Department of Economics. "We found that a relapse isn't likely unless lawmakers gum up a recovery with ill-conceived stimulus policies." http://newsroom.ucla.edu/portal/ucla/FDR-s-Policies-Prolonged-Depression-5409.aspx

That's almost prophetic. I encourage everyone to check out www.recovery.gov This is the website the government has established to show us an accounting of the stimulus package passed earlier this year. It's a joke. Even Democrats are calling for some accuracy and accountability from the White House.

Here's a bit from ABCnews.com, not FoxNews or Rush Limbaugh.

House Appropriations Chairman David Obey is calling the inaccuracies on Recovery.gov, the $18 million Web site that's tracking stimulus spending, "outrageous," and called on the Obama administration to immediately fix problems that have come to light.

"The administration owes itself, the Congress, and every American a commitment to work night and day to correct the ludicrous mistakes," said Obey, D-Wis. "Credibility counts in government and stupid mistakes like this undermine it. We've got too many serious problems in this country to let that happen."

Bravo for Mr. Obey. More to come...