Change 101: How to stifle the economy
Last week’s column: “Banking nationalization: The trend continues,” examined the origins of the mortgage banking crisis and pinned the tail squarely on Presidents Carter and Clinton. According to Investors Business Daily, President Bush attempted what The New York Times called “the most significant regulatory overhaul in the housing finance industry.” Led by Rep. Barney Frank (D), Congress refused any overhaul.
Suffice it to say that when the Justice Department tells banks that they must pay substantial fines if they do not lend money or provide mortgages to people who can’t even pay their telephone bills, those banks have, in effect, been nationalized.
Now we turn to the stock market which, since the election of Barack H. Obama (BHO), has seen the Dow-Jones Average decline by over 30-percent. Let’s say Jack and Jill invent the Gizmo, a useful device beloved by their friends and neighbors. Jack and Jill want to reach a wider market via television advertising. Jack and Jill form the Gizmo Corporation with 100,000 shares of common stock at a par value of $1.00. Jack and Jill put up $51,000 of their money to buy 51,000 shares, thereby retaining their controlling interest in Gizmo. Jack and Jill put their $51,000 to work by expanding the Gizmo plant.
Some private investors see some profit potential in Gizmo, Inc., so they buy the other 49,000 shares. Jack and Jill use the $49,000 on television advertising that brings in so many orders for Gizmo that Jack and Jill must hire employees to help them make more Gizmos to meet demand.
Gizmo, Inc. is so successful that Jack and Jill open several Gizmo plants around the nation. That means more employees with health-care benefits, more employees paying social security, property and sales taxes. To supervise their nation-wide Gizmo business, Jack and Jill buy a small bizjet and hire a flight crew.
Enter our new Changer-in-Chief (AKA BHO) and his Democrat majority in Congress. They contend that business people who use corporate aircraft are bad people. Corporations that make money must pay more taxes and the money of wealthy individuals must be redistributed to the poor. Also, the Changer-in-Chief says those corporations that (unlike Gizmo, Inc.) have made very bad business decisions will be bailed out using taxpayer dollars -- meaning more government control over them.
Even though Gizmo is a good product, the value of its stock declines. In fact, all stocks decline. Many who normally invest in stocks keep their cash, waiting for the market to bottom out. Money for the further expansion of Gizmo dries up. Gizmo can’t get loans because the banks are waiting for their government bail-outs. No one is buying or selling anything. So, no sales taxes are collected.
According to the Heritage Foundation, “Some 7 to 9 million borrowers may be at risk of defaulting on their mortgages.” Folks who can’t or won’t make mortgage payments are not likely to pay their property taxes, either. With reduced or no tax revenues, local governments must curtail law enforcement. Ergo: Government can no longer “keep us safe in our persons and property.”
Criminals see this chaos as a golden opportunity. They rob law-abiding citizens of their property and, in some cases, of their lives. Government sees the problem as too many guns in circulation. In violation of the 2d Amendment, the law-abiding are ordered to turn in their firearms. The criminals are delighted. With no police or fire-fighters on duty and the law-abiding citizens disarmed, criminals are in pork heaven.
Now, Jack and Jill are asking: Why are we being punished? Is the Changer-in-Chief acting from a lack of experience and/or a lack of understanding of capitalism? Or, is his objective the conversion from capitalism to socialism? Who voted for this guy? Is this the “change” they voted for? Maybe next week we’ll have some answers. Or, maybe not.
William Hamilton, a syndicated columnist and a featured commentator for USA Today, studied at Harvard’s JFK School of Government. Dr. Hamilton is a former assistant professor of political science and history at Nebraska Wesleyan University.
©2009. William Hamilton.