The Economy, Part III: Big Whiskey Solves all our Problems.

President Ronald Wilson Reagan, I think, put it best: “The best minds are not in government. If any were, business would steal them away.” One need spend but a few minutes watching C-Span to find indelible proof of this.

As I said in my last column, I’m always amazed by the propensity of Congress and of presidents to come to the conclusion that they know better than anyone else how to manage the economy of a union consisting of fifty separate sovereign states each with its own unique interests and demographics, and that only through action on the part of the government will we be able to find happiness or prosperity. This despite the fact (or in some cases because of it) that precious few of them have any real background in or understanding of business or economics.

Right now, our illustrious and much fawned over new president is starting to look like a prime example of just this. For examples of how his policies reflect this, read my last column. He displayed his cluelessness even further last week, in a speech he gave to a retreat of Democrat congressmen in Williamsburg VA.

For the most part, the speech was standard Obama fare: lots of lofty, high sounding words which in and of themselves mean very little, coupled with a list of all the glorious wonders which his “stimulus” bill will accomplish, unaccompanied by anything resembling an explanation as to how. Also thrown into this particular diatribe was a healthy dose of scare tactics, warning about how our economy will go from “crisis” to “catastrophe” if we don’t immediately pass his bill, instead of wasting time paying attention to what’s in it. Of course an Obama speech just wouldn’t be right if he didn’t revive his campaign talking point about “the same failed policies” and so on.

But there was one particular line I found very interesting. When addressing complaints by his critics that this bill was less a stimulus and more a litany of runaway pork spending, he made this remark:

"What do you think a stimulus is? It’s spending — that's the whole point! Seriously.”

Whoa. Damn. You heard it, people. The president of the United States of America does not know the difference between economic stimulus and simple spending.

We are in for an interesting four years.

In case any of you are are as bereft of common sense as Dear Leader, allow me to explain. What stimulates an economy is not the mere spending of money, but the generation of wealth. This is done by providing a product or service in exchange for pay. By default, this must come from the private business sector, since the government produces no tangible product or service for its revenue, but rather uses the threat of force to confiscate it from those who do. Anyone who has bills to pay knows that you cannot generate wealth by spending with reckless abandon. This is exactly what the president is proposing we do, and that we do it with money we don’t have.

That this money will be spent primarily on things which do little to even circulate money isn’t even the point (seriously, $50,000,000 for the National Endowment for the Arts? $650,000,000 for digital TV conversion coupons? Exactly how many jobs are these supposed to create? $335,000,000 for the prevention of sexually transmitted diseases? Here’s a novel idea: don’t fuck strangers. Problem solved, disease prevented, and not a dime spent). The point is, no amount of government spending will cure what ails this economy.

Fortunately, I know what will. So does everyone else who has any concept of basic math and a lick of common sense, but that’s besides the point. It’s my column, so I’m going to play the sage here.

First things first: people, stop looking for the quick fix. A quick fix is exactly what our new economic illiterate in the White House and his supporters are hoping this stimulus will be. They are laboring under the erroneous assumption that simply spending money is the key to a vibrant economy. The truth is, we’ve had exactly this kind of “stimulus” going on for years. It’s called “easy credit”.

In reality, this market correction we are suffering through right now has been long in the making. It’s painful and highly unpleasant, but it really is what’s needed to make us well. Kinda like diarrhea.

Over the last twenty years or so, we’ve been maintaining the illusion that are economy is stronger than it’s really been and that we have more money than we really do, by borrowing money and financing purchases out the wazoo. This can’t go on forever, folks. We all know this to be true, but we really, really don’t want to believe it, and the chaos resulting from the credit crunch is proof. Sooner or later, the piper must be paid. On the micro level, it means that you are going to have to pay that mortgage, or that car note, or that credit card debt. On the macro level, we will have to make good on all the foreign debt we’ve accumulated. In both cases, the money to do so will eventually run out. When this happens, all hell breaks loose.

So the first thing people need to do to get the economy back on track is to start living within their means and, most importantly, revive the notion of saving money. Some people will tell you that saving money will do nothing for the economy, and might even hurt it. Those people fall into two categories: liars and fools. Building up a healthy stash of saved money is the key to being able to make purchases responsibly, which is ultimately just plain good business, for buyers and sellers alike. Savings are also the key to being able to weather new financial storms as they arise (and there will always be new storms). True, this will not immediately put cash into the hands of businesses, but think about this: which businesses do you think are most likely to survive our current recession, the one’s which have backup savings or those which spend every dime the get as soon as they get it? It’s all about the long term, people. No quick fixes.

Secondly, and this is a big one, we cannot allow our emotions to overcome our judgement. For instance, we’re all hearing sob stories about peoples’ homes going into foreclosure. These can be heartbreaking, but the simple fact is these things happen. Most often, they happen because people made stupid purchases they couldn’t afford. Their eyes were to big for their incomes, or maybe they just failed to think about how their lives may change in the future, such as a sudden job loss, or illness, or having kids (apparently those little drool & shit machines are really expensive). But the tug of heartstrings is not a valid basis for subsidizing bad debt. Nor is anything else. People who got in over their heads need to either find a way to honor their contracts or face the music. Same goes for businesses who make bad decisions: if they have to go under, they have to go under. Throwing taxpayer money at these problems may ease a few symptoms, but it will allow the disease to continue unabated. Then, when the money runs out...

As for the government, I think there is one major thing they need to do to enable the process of our economic recovery: get out of the goddamned way.

Eliminate the capital gains tax. This is a tax paid on any gain from the sale of non-inventory assets, such as stocks, bonds and property. In the investment world, this is huge, and that is the area from where most of the capital used in running every sector of the economy comes. When investors see a bigger return, the invest more . They do this, because they know it will make them money. Whatever portion government takes is wasted. Government does not invest, it merely spends. It does this because it is not dependent on wise investment to make money, relying instead on the threat of force to bilk the taxpayers. Also, on the micro, you-and-me level, this will enable us to keep 15% or more of the sale of a home or other piece of property, which we would otherwise have to fork over to Uncle Sam (the thief; not to be confused with Whiskey Sam, the sage-like and remarkably good looking last best hope for mankind).

Eliminate the income tax. The reason is simple: it is the interaction of individuals in pursuit of their own interests that generates and moves an economy. Confiscation of the fruits of their labor, invariably impedes it.

I get flack from some people on this one, but seriously, it’s the wise, and right, thing to do. This includes Social Security and Medicare, which need to be scrapped altogether. Seriously, look at your W2 from last year. How much could you have done with the thousands of dollars, money you worked for and rightfully earned, that the feds withheld from your pay? How much more easily would you have been able to pay your bills? How much more would you have had left over? How much would you have been able to save, for your future? Your children’s education? Your own education? A rainy day?

If nothing else, ask yourself this: are you better off having those five hundred-thirty-five dim bulbs in DC deciding where and how that money is spent, or would you and your family be better off deciding it for yourself?

And while you’re at it, contemplate this: Texas is one of the most financially sound states in the union right now, and it has no state income tax. California is so far in the hole they can’t see daylight, and it has the highest state income tax rate in the nation.

Eliminate business and corporate taxes, if for no other reason than the fact that businesses do not and can not actually pay taxes. In business, taxes are just another expense, one for which a business must compensate by adjusting their prices accordingly. It is the consumers, you and I, who actually pay these taxes.

“But Whiskey!” you might be wondering aloud, “If we get rid of all these taxes, how will the government have enough money to provide services for us?”

Well, there are duties, tariffs, excise taxes, for starters. You know those things specifically provided for just that purpose in the Constitution; that document that’s supposed to be the blueprint for how the federal government operates. But beyond that, here’s a really wild idea:

How about the federal government stop pissing away our money in the first place!

I’ve heard it said that we’re spending around $1,000,000,000 a day on the wars in Iraq and Afghanistan. If so, we’re looking at close to $400,000,000,000 a year. That’s outrageous, especially when you take into account how much of it is pure waste (God bless the troops, and [insert patriotic sounding platitude here], but the DoD is as vacuous a money pit as any other department of the federal government). What’s even more outrageous? The fact that giveaway spending, specifically Social Security, Medicare, Medicaid/SCHIP and Unemployment/Welfare, are almost four times that (nearly $1,600,000,000,000 in 2007 alone). And that’s not to mention the myriad of other departments, bureaucracies, and good old fashioned pork that made up the $2,800,000,000,000 budget for that year (a year which, BTW, saw only $2.4 trillion in net receipts).

If the American citizen needs to live within his means, so does the government. Get rid of all this bullshit, and return tasks such as infrastructure, care for the elderly/sick/unfortunate/useless to the states, where they belong. Let Pennsylvania figure out how to deal with Pennsylvania’s concerns, Maryland to Maryland’s, Idaho to Idaho’s and so on. Says me, it is high time the states stood up and reclaimed our rights- and the responsibilities that come with them- as the sovereign peoples we are and of right ought to be, from the leviathan we’ve created inside the Beltway.

So all in all, the recipe for fixing the economy is to observe the math (I probably could have summed up this whole long assed column up in that one line, but what fun would that have been?). In truth, the math is like God: it is unmovable, and unbeatable. You can ignore it all you like, but when all is said and done, it will always have its way. The longer you try to put it off, the worse the hit will be when it does.

So that’s the economy. In a nutshell. Three columns worth of nutshell. You can thank me later.