A question that hangs over this country is whether the policies out of Washington will help our economy grow.
Nobody really knows, of course. Students of economic history, I suspect, are not encouraged by what they see. A lot of them see the following cards stacked against the economy for the longer term.
1. Government stimulus packages have not worked well in the past. Our own Great Depression and Japan’s recent years in the doldrums are good examples of stimulus failure. Lots of studies show that most government stimulants stimulate little.
We, of course, are plunging deep into debt in launching stimulus packages. It is like you taking out a massive loan for a faulty business. The loan does not help the business grow. Meanwhile you have burdened it with more debt.
2. Massive indebtedness hurts economies. Huge deficits hurt economies. They slow down growth. They cripple economies with repayments for years ahead. There are mountains of histories of economies that underscore this point. We are suffering immense deficits and a mountain of debt.
3. Raising taxes in recessions is a bad move. History confirms this. Logic alone should tell us this is so. If a business was suffering, do you think it would make sense to raise the taxes it must pay? If a household is struggling, is it wise to raise taxes on it? Of course not.
If the cap and trade (tax on energy) bill passes the Senate we will be taxing every household and business in this country. We are also about to raise various tax rates when the Bush tax cuts expire. The President also promises to raise capital gains taxes. And this week we heard a proposal to slap a 5.4% tax on high earners to pay for healthcare reform.
Meanwhile the huge spending bills will require higher taxes to pay for them. Congress is talking about a national sales tax. It also talks about whacking the big earners with drastically higher Social Security taxes.
4. Mean-spirited attacks on business are like boomerangs. In various ways they come back to hurt us. Our government is abusing and attacking businesses. It is ramming laws and regulations down their throats. It is breaking laws in order to tame them. This may provide short-term satisfactions. In the long term, it will damage industries and our economy.
5. Governments do not run businesses well. The evidence is overwhelming that this is almost always so. Governments have tried to run power companies, phone companies, steel companies, car companies, railroads. Rarely have they run them well.
