Helping the Poor

Comes today word that House Speaker and uber-leftist Nancy Pelosi wishes to press ahead with plans to impose a massive tax increase. Proving that he’s smarter than the people who supported and elected him, President-elect Obama apparently intends to make this his very first broken campaign promise. Even cobalt Corzine, and no less an authority than the indomitable Paul Krugman, cautioned against envy-based tax increases in times of economic weakness.

Now, obviously, the necessary conclusion at which one must arrive, based upon essentially unanimous opposition to tax increases today, even from New Jersey Democrats – who increased every tax known to mankind, and then invented new ones – is that taxes hurt the economy. Logically, if they damage the economy in bad times, they do so in good times, too, and, hence, in the interests of keeping the good times rolling, should be minimized.

How, though, to balance the leftist credo – so eloquently expressed by Hizzonor when he averred that government exists to "responsibly share our economic bounty – against the unequivocal evidence that attempts to do so through taxes targeted at "the rich" undermine the economy?

Indeed, consider the long litany of leftist failure: is it not astonishing how often they hit the poor while aiming at the rich?

Remember the luxury tax? The Times reported it this way:

"The boat tax ... enacted in 1990, was originally seen by Democrats as a way for the Government to extract revenue from people wealthy enough to buy boats costing more than $100,000. But it adversely affected many craftsmen and artisans who lost jobs when boat sales slumped and boat builders went out of business."

This paralleled the NJ experience with heavy trucks. "Lessee", the Florio-ites pondered. "We need $$$$ to fatten government and ‘help the poor’. Heavy truck sales were $1 billion last year. Voila!! Slap a 7% tax, and we’ll get $70 million!!"

Er, wrong.

It simply devastated heavy truck sales, while reaping about 1/70th of projected revenue. Who got hurt? The "rich" guys who sold heavy trucks.

And, now, the example of NJ’s 2.5% "affordable housing" tax presents itself. As presented to the Legislature, the Administration asserted it would bring in $200 million per annum.

According to the papers, it produced a princely $5 million, and the Guv wants to put it "on hold". Again, who got hurt? The "rich" guys who would otherwise be employing banging nails and sawing boards.

Gee willikers, Mr. Wilson! You mean that people with money actually take tax policy into consideration? "Rich" people aren’t stupid enough to blithely submit to confiscation? They don’t act like Jon Shure contends? High taxes hurt the economy, and, especially, the poor? Golly! Who coulda guessed?

History provides (at least) two parallels to today’s economic crisis: 1929, and 1981. The respective crises were met very differently by very different presidents. Herbert Hoover – a proud progressive who increased federal spending by 50% and created many of the programs FDR later expanded – met the economic downturn in true progressive form: he increased governmental spending, undertook massive public sector infrastructure projects, raised taxes on "the rich", and slapped on huge protectionist trade barriers. FDR’s New Deal was nothing more than Hoover writ large, and, predictably, proved an even larger failure. The Depression continued until Lend Lease, the draft, and building the North Carolina, Essex, and their sisters bailed us out.

The last great economic crisis we endured came when we actually listened to the Democrats during the Carter Administration. That produced an assertedly Keynesian impossibility: simultaneously high unemployment, high interest rates, and high inflation. And, of course, stratospheric taxes.

Immediately upon taking office, Reagan, despite falling revenues, cut taxes (massively for those horrible "rich" folk) and checked spending. The result: short term pain, which caused liberals no end of apoplexy. The Times pronounced supply side economics dead when it did not deliver instant prosperity.

But prosperity it most certain delivered. By 1983, the economy had turned, and the Reagan Boom commenced, lasting until federal "affordable housing" programs helped kill it off.

Unfortunately, the lesson of the New Deal which the Democrats took to heart, is that the polity lacks a long-view. They want relief NOW!!! And if providing that relief TODAY happens to prolong the misery, it’s still political gold. FDR won his first two reelections, despite worsening the Depression, by buying people’s votes. They credited him with "helping" during the down times, but failed to appreciate that his policies actually perpetuated the Depression.

To reiterate my Father’s often repeated observation, the Republicans are the "eat your spinach" Party, advocating policies because they demonstrably best serve the long term interests of the country. The Democrats, on the other hand, are the "have some candy" Party, advocating policies which make you feel good today, but which create huge problems tomorrow.

Which Party prevails depends upon whether the people act like responsible adults or impatient children.

Reagan, an adult, took the long view: freedom = prosperity. His policies worked, both politically and economically. FDR took the short view: help TODAY. His policies worked politically, but failed economically. Disastrously so.

Huge deficits and massive new spending, paid for by indebting our kids, will not create prosperity. If we wish to run deficits in down times, those should be created by general, permanent tax cuts for the productive sector, specifically business. That would create real jobs, inspire consumer confidence, and revive the economy. One time gimmicks like Obama’s proposed "cuts" will have no such effect (except, interestingly, to undercut Social Security, but that’s a different column).

If the left really wants to help the poor, it will stop trying to (governmentally) help the poor and let a free economy provide prosperity. That would be change we can believe in.