The Holy Trinity of Economic Ruin: High Taxes, High Energy, High Labor

Tomorrow is Election Day here in the US, the day we find out who will be heading up the Free World, who's ideas have resonated with the people, the kind of system we will be living under. It will be a real watershed moment in American history and everyone should stay up and watch the results to the bitter end—and one way or another, the end will be very bitter—because it is that important.

That said, from some of the responses I have been getting from the Left recently regarding my misgivings over the Obama economic plan, it seems that some of the folks out there have missed the point when it comes to The One, so here it is in very plain language: If Obama wins and if his economic policies are enacted, the economy will tip from recession into depression. There it is. The economy will do this because you do not strengthen a weak economy by increasing the cost of doing business. Leaving aside the ideologically-driven populist, class-warfare arguments that have dominated the economic discussion up to this point, and leave aside the Bush-hatred that is pushing otherwise rational people to call for “change at any price,” the bottom line is that if you increase taxation and regulation, increase the cost of energy and increase the cost of labor over what the market would naturally bear, then you will destroy the economy.

High Taxes

John F. Kennedy understood it (even if his brother doesn't), so did Ronald Reagan and both of the Bushes. Lower taxes equals prosperity, higher taxes equals economic malaise. No nation in history ever taxed their way to prosperity, and yet that is what Obama wants to do. He once claimed that 95% of Americans would get a tax cut. Then it was 95% of American taxpayers. He started at $250,000 as the top level of those who would not see a tax increase. Then it was $200,000. Then it was $150,000. Then it was $120,000. Bear in mind, as a senator, he voted to raise taxes on those who make $42,000 a year, which is probably where the tax increase threshold will stop, if we're lucky, under an Obama Administration. That is, if we are lucky, because there is no way he would be able to pay for the additional trillion-plus dollars in social spending he is proposing by sticking to his original tax plan.

The higher the income tax, the less money you have for your family, the less money you have to spend on consumer goods, the less money you have to spend on services. In other words, the more you give the government for its assorted wealth redistribution programs, the less power you have as a consumer and with a population of weak consumers, the worse the economy will be.

This, of course, doesn't include the capital gains tax, which is 15% under the Bush tax cuts that Obama wants to eliminate. Why? Fairness. Consider the following from the 2008 Philadelphia Primary Debate:

Q: You favor an increase in the capital gains tax, saying, "I certainly would not go above what existed under Bill Clinton, which was 28%." It's now 15%. That's almost a doubling if you went to 28%. Bill Clinton dropped the capital gains tax to 20%, then George Bush has taken it down to 15%. And in each instance, when the rate dropped, revenues from the tax increased. And in the 1980s, when the tax was increased to 28%, the revenues went down.

A: What I've said is that I would look at raising the capital gains tax for purposes of fairness. The top 50 hedge fund managers made $29 billion last year--$29 billion for 50 individuals. Those who are able to work the stock market and amass huge fortunes on capital gains are paying a lower tax rate than their secretaries. That's not fair.

Fair? That is like saying it is unfair to apples that oranges have such thick, sturdy skins. The “Top 50 hedge fund managers” are top hedge fund managers and not, say, secretaries, for a reason. They are where they are because they are good at what they do. This is not a slap at secretaries, it is merely an observation that secretaries are not hedge fund managers any more than apples are oranges.

This idea of fairness is the very basis of Obama's tax plan. Take from the most productive, redistribute to the least so that everything is fair. The problem with this outlook is that it tends to make those productive folks protective of their hard-earned assets. According to Rea S. Hederman, Jr. and Patrick Tyrrell of the Heritage Foundation:

Historically, Senator Obama's tax rate would be the highest individual tax rate since the Jimmy Carter days. Tax shelters and tax avoidance strategies were common when the top marginal rate was 70 percent or higher. This new top tax rate will again encourage these gimmicks, reducing investment and economic growth as resources are squandered in an attempt to avoid punitive taxation.

High tax rates also encourage capital and income flight to lower-taxed areas. There is ample evidence in the United States of individuals and businesses moving to states such as Florida or Delaware to take advantage of their tax-friendly laws. A higher federal tax rate would encourage individuals to move assets abroad to take advantage of lower tax rates in countries such as Canada, France, and Great Britain.

This is not speculation, this is history and, as the philosopher George Santayana put it so well, “Those who cannot remember the past are condemned to repeat it.” The higher the tax rates on the productive members of society, the fewer jobs and greater number of tax avoidance up to and including moving shop overseas to escape taxation. While it may seem “fair” on the surface to impose these taxes and invoke these responses, those who are hurt the most are always those who can least afford it. It is their jobs that vanish because the government is demanding more, their children who face hunger because jobs are drying up as employers seek to protect themselves from predatory government taxation. Then they must rely on the government for support and, in turn, they support the people who enacted these laws that put them in that terrible situation in the first place. It is a self-perpetuating nightmare that takes a once-powerful economy and drags it down into a pitiful socialist welfare state. How is that for fair?

High Energy

You know, when I was asked earlier about the issue of coal, uh, you knowUnder my plan of a cap and trade system, electricity rates would necessarily skyrocket . Even regardless of what I say about whether coal is good or bad. Because I’m capping greenhouse gases, coal power plants, you know, natural gas, you name it — whatever the plants were, whatever the industry was, uh, they would have to retrofit their operations. That will cost money. They will pass that money on to consumers.

That was from a January, 2008 interview with the San Francisco Chronicle—funny how these little gems are coming to light now, right before the election—the same one in which The One also made this little promise:

So, if somebody wants to build a coal plant, they can — it’s just that it will bankrupt them, because they are going to be charged a huge sum for all that greenhouse gas that’s being emitted.

Again, I have to ask why these little details of Obama's energy plan have been kept under wraps for so very long? The question is rhetorical, of course, considering that the mainstream media would sooner commit professional suicide than cross The One. They were like that with Bill Clinton as well, and after he made fools of them, you would think they would know better. Now they look like partisan hacks with zero journalistic integrity. I wonder if the liberals in charge of this country's various schools of journalism have a course on regaining your professional honor? Somehow I doubt it.

Returning to the issue of energy, how in the world do you climb out of the economic morass we are in right now if you knowingly enact policies that will, as Obama himself put it, make electricity rates skyrocket?

You don't. You stay in the morass and wallow around like some prehistoric ungulate stuck in a tar pit before finally going under. Knowing this, what could Obama be thinking? He's not. What he is doing to following liberal ideology to its logical end. This means that Obama is not working from the same point of view as you or me or anyone else who might have trouble paying skyrocketing electricity rates. Nor is he working from the same point of view as those who produce coal or those who use that coal to produce energy. He is working from the point of view of extreme liberalism, and that is the point of view of the radical environmental movement. It is an issue of jobs versus the environment, and if Obama wins, jobs lose. Consider, for example, the response of the coal industry:

Mike Carey, president of the Ohio Coal Association (OCA), today issued the following statement in response to just-released remarks from Senator Barack Obama about the nation’s coal industry.

Regardless of the timing or method of the release of these remarks, the message from the Democratic candidate for President could not be clearer: the Obama-Biden ticket spells disaster for America’s coal industry and the tens of thousands of Americans who work in it.

These undisputed, audio-taped remarks, which include comments from Senator Obama like ‘I haven’t been some coal booster’ and ‘if they want to build [coal plants], they can, but it will bankrupt them’ are extraordinarily misguided.

It’s evident that this campaign has been pandering in states like Ohio, Virginia, West Virginia, Indiana and Pennsylvania to attempt to generate votes from coal supporters, while keeping his true agenda hidden from the state’s voters.

Senator Obama has revealed himself to be nothing more than a short- sighted, inexperienced politician willing to say anything to get a vote. But today, the nation’s coal industry and those who support it have a better understanding of his true mission, to ‘bankrupt’ our industry, put tens of thousands out of work and cause unprecedented increases in electricity prices.

In addition to providing an affordable, reliable source of low-cost electricity, domestic coal holds the key to our nation’s long-term energy security - a goal that cannot be overlooked during this time of international instability and economic uncertainty.

Bear in mind that The One wants to eliminate coal for admittedly ideological reasons. When the Left knifed the logging industry in the back, at least there was a spotted owl involved. Here, it's the religious adherence to junk science and a self-flagellating ideology of fear, guilt and power-grubbing.

The Obama energy plan, brought down to its most basic elements, is like this: Force American society to go green regardless of the success of green technology by making traditional energy sources cost prohibitive and use the junk science that supports global warming to whip up enough popular fear to make the high prices acceptable to an overly-taxed American people.

This means that until the so-called green revolution actually gets enough traction to be a reasonable alternative to fossil fuel—and there is no guarantee that will happen—energy costs would skyrocket to pay for the new taxes, fees and regulations. Companies, as we know, never pay taxes. Consumers do. That means the cost of goods will skyrocket along with the price of energy. We saw that happen when the price per barrel of oil was skyrocketing—prices for consumers shot up across the board. Is there a difference between fuel oil prices and electricity prices in this regard? None at all. Energy is energy and the more it costs, the more everything costs, and who gets hit the hardest? The poor, those who can least afford to have the cost of these basics go up, and also, by Obama's own admission, the little bit of money they would get under his “spread the wealth” tax plan would not touch the costs in energy these people would have to absorb. How is that for fair?

High Labor

From Barack Obama's website:

Obama and Biden will strengthen the ability of workers to organize unions. He will fight for passage of the Employee Free Choice Act. Obama and Biden will ensure that his labor appointees support workers' rights and will work to ban the permanent replacement of striking workers. Obama and Biden will also increase the minimum wage and index it to inflation to ensure it rises every year.

  • Ensure Freedom to Unionize: Obama and Biden believe that workers should have the freedom to choose whether to join a union without harassment or intimidation from their employers. Obama cosponsored and is strong advocate for the Employee Free Choice Act, a bipartisan effort to assure that workers can exercise their right to organize. He will continue to fight for EFCA's passage and sign it into law.

  • Fight Attacks on Workers' Right to Organize: Obama has fought the Bush National Labor Relations Board (NLRB) efforts to strip workers of their right to organize. He is a cosponsor of legislation to overturn the NLRB's "Kentucky River" decisions classifying hundreds of thousands of nurses, construction, and professional workers as "supervisors" who are not protected by federal labor laws.

  • Protect Striking Workers: Obama and Biden support the right of workers to bargain collectively and strike if necessary. They will work to ban the permanent replacement of striking workers, so workers can stand up for themselves without worrying about losing their livelihoods.

  • Raise the Minimum Wage: Barack Obama and Joe Biden will raise the minimum wage, index it to inflation and increase the Earned Income Tax Credit to make sure that full-time workers earn a living wage that allows them to raise their families and pay for basic needs.

Sounds great, right? The One is really going to protect our workers. Not really. He and Joe the Senator are actually protecting unions, not workers, repaying them for years of loyal fealty regardless of the feelings and opinions of their rank and file members. Raising the minimum wage translates into a raise for union members. Banning the retention of strike replacements take away one of business' most effective means of dealing with strikes, as does interfering in the way employees are classified. The worst of this is the Employee Free Choice Act, which makes all union votes public and opens up workers who don't wish to unionize to harassment and intimidation, all under the guise of protecting workers from harassment and intimidation.

The upshot of all of this is an increase in the price of labor across the country as unions start to exercise their muscle again. Unfortunately, the more labor costs, the fewer people get employed. The stronger the unions are, at the expense of the companies they work for, the higher the costs of those company's products and, as a consequence, the lower the demand and that, in turn, puts the company on financial thin ice.

My father tells a story about Studebaker and their plant in South Bend, Indiana. The plant paid a decent wage—not what auto workers were making in Detroit, but sufficient—and with their wages the workers supported a wide variety of businesses in the town. When the time came for contract negotiations, the union demanded the same wages as their Detroit counterparts and the company said they could not do it. There was a strike, and that strike lasted a long time. It wasn't just the company or the workers, it was the whole town that felt the pain of that strike as businesses began to go under since the strikers could no longer afford their goods. Neither side was willing to budge. The union wanted what it wanted and would take no less. The company knew what it could do and what it could not do. Eventually, Studebaker moved to Canada. They shut down their South Bend facility and all those workers were suddenly out of a job.

It has to be remembered that what unions do—and how unionized companies respond—affects more than simply the workers and their families. That strike put many a good small business out of business, and it put many people unrelated to the union or the Studebaker company out of work as well. How fair is that?

The Bottom Line

Barack Hussein Obama's economic plans for this country fall into two categories:

  1. Ideological

  2. Payback

The one category they do not fall into is “Things that are good for the American people.” When wanting to hang onto your earnings equates to greed, when you can't pin down a definition of “middle class” for the so-called “middle class tax cut,” when a candidate openly says that he will send your energy, labor and tax costs through the roof, then you need really ask yourself if this is the person you want at the helm of government. Obama's plan can only lead to two, equally unappetizing consequences: ruin or a centralized command economy. Which do you think he is going to go for, and knowing what you know, are you willing to accept the consequences to your businesses and your lives?