Only a Liberal…

I like Dick Morris, and his book Fleeced, but I came across a sentence that irked me, and its a theme that has entered the spotlight lately with the financial crisis. It’s a passage from his hedge-fund managers tax break chapter:

“The bottom line is simple:for the rest of us, keeping 65% of our income after the taxman leaves is adequate incentive to send us to work each morning. So why do private equity fund managers feel they deserve 85%?”

Morris’s comment about “adequate incentive” implies that incentive is a single point on the “action” scale. Once you reach it, you have received adequate incentive to act. Morris’s goal is to get you to be angry at Democrats who allow hedge-fund managers to classify their commission as a capital gain, but he does it with class envy.

Incentive exists on a progressive spectrum, not at a single point. If incentive is only a threshold to be reached, why would there be high school dropouts and PhDs existing on the same planet? If you change incentives in any way to any system that affects millions of people, it will have drastic results: good or bad.

If you reduce the incentive for people to become hedge-fund managers IN ANY WAY, especially a 133% increase in their tax burden, it will affect the hedge-fund industry as a whole. That includes all the managers assistants, the janitors in the building, the shareholders. When you reduce the bottom line for any company, you remove capital from the market. Rich people use capital to start businesses, and businesses employ people, provide healthcare and pensions.

Macroeconomics and the financial crisis

Both candidates have been pontificating about all the changes they’re going to make. They’re gonna slash this and invest in that, all the while talking about taxpayer money as though it belongs to them. Obama wants to invest “$15 billion PER YEAR in wind, solar, and biofuel”, all unproven, while simultaneously defunding “unproven missile defense systems.” McCain doesn’t want to decrease the defense budget like Obama, but he is no different on the environment than Obama. They both pander to the environmentally compassionate nerve of Americans who are appallingly ignorant, and totally unconcerned, with macroeconomics.

A disturbing amount of Americans think that driving a certain automobile and using a certain lightbulb will affect the climate of a 510 million square kilometer planet while simultaneously thinking only rich people will be affected by doubling the capital gains tax. Obama and McCain constantly talk about “working families” and the student “struggling to pay tuition.” Families will always struggle while working, and students will always struggle with tuition. Presidents cannot micromanage the free market to alleviate such things. The President has a job description, and it has NOTHING to do with college tuition. NOTHING.

Obama claiming he can overcome the market

You don’t have to be a macroeconomist to understand the fallacy of one of Obama’s campaign talking points. He tells us he’s gonna prevent the outsourcing of American jobs by offering a $3,000 tax credit for businesses that create jobs here in America. This will work great, unless the benefit of taking a job overseas is greater than a $3,000 tax credit (which it usually is). Obama didn’t tell you that because he wants to increase American jobs. He wants to increase Americans voting for his nonsense.
Up until the recent crash, financial experts would spout utter, crystal-ball nonsense about what you should do with your money and what will happen in the stock market. After the crash, every news show would have an expert on and ask them what’s gonna happen. “Is this the bottom?” or “Will it get worse?” None, that I’ve seen, will answer the question with anything but “I DON’T KNOW.” The reality is, they never knew, and the recent activity in the stock market is all the proof you need.

You can’t tax a corporation

This all goes back to my previous comments on taxing the rich; YOU CAN’T TAX A CORPORATION. Both candidates pander to this class envy nonsense. Let me simplify it for you. Congress writes a bill that raises the taxes on a gallon of gasoline by 10 cents. President ObamcCain signs it, and the “middle class” rejoices that rich oil companies are paying 10 extra cents.

On what planet do you think a public oil company, who has shareholders that react to its profits, will simply eat the 10 cents per gallon, which would amount to almost $150 billion per year? Their stock would plummet if they did that… unless…what if they just raised the price of a gallon of gas by exactly 10 cents?

When you tax an industry of corporations, all you do is tax the consumer. There is no “incentive” for the corporation to lose that money you’re taking, but there is incentive for them to raise their prices and go on their merry way. Or maybe they only raise their prices a little, and fire a couple thousand employees to make up the difference. Corporate taxes are hidden sales tax, and until regular Americans learn that, politicians like McCain and Obama will continue lying to you about how much they care about the “middle class” and “working families.