Special Bulletin 04-2010

ANALYSIS: Tea Party leaders are already blasting both the President and the Republican leadership for not hearing the people last month. If this bill is any indication of the change so many went to the polls to see, it does not appear that much will come from the effort.

     One of the basic messages of the electorate was for sanity about the deficits, and the first bit of legislation that it seems will pass to extend “the Bush tax cuts” will add over a trillion dollars to the deficit by also extending unemployment benefits for over a year. To add insult to the electorate’s more recent demands, congress then started piling earmarks onto the bill.

     It is understandable that no one in either party wants to see the huge tax increases hit the paychecks of Americans in January if the tax cuts are not extended. Even so, the deal that was worked out has both bases deeply disappointed. The left is disappointed because “the rich” are included in the extension. The right is disappointed because the tax rates were not made permanent, but even more so because of extending the unemployment benefits for another year plus, and then pouring salt in the wound by piling on earmarks to this bill. Altogether this is estimated to add well over a trillion more dollars to the present mushrooming cloud of the U.S. deficit.

     Most feel empathy for those who lost their jobs because of economic troubles that were no fault of their own, but studies show that there are jobs available, and that those receiving benefits often do not get serious about finding a job until their benefits run out. This is not true of all, but it is of many, especially if the jobs available are not equal to what those unemployed had before. Even so, running up the deficits even more will no doubt inhibit the job creators even more.

     The obvious answer is to create jobs. The left claims the unemployment benefits stimulates the economy by putting money in the hands of those who do not have any so they will at least spend it on basic needs. There may be a small impact from this, but it is hardly measureable. Even so, the main point is not being addressed by this, which is that the government does not have this money to give, and by running up the deficits even more at this time it is soon going to make Monopoly money more real than the American dollar.

     President John Kennedy was the first to propose that tax cuts would stimulate the economy, and President Reagan proved it, using tax cuts to pull the country out of the Carter recession that was one of the worst in U.S. history. Soon the government was taking in more taxes even with the cuts because the economy was stimulated. Soon not only were more people working, but people were making more. JOBS are still the key to our recovery from the present economic crisis, the Obama Administration and congress has been talking about this for over two years now, and nothing has yet been done to really do it.

     To extend the “Bush tax cuts” just keeps the economy where we are now without really adding any more stimulus. Obviously to let these tax cuts expire would be a devastating blow to the economy in its presently weakened state, but we can’t look at this bill like a stimulus. The way that this has come will likely hurt the economy more than it helps it by revealing even more the knee-jerk anti-business sentiment in the Obama Administration, and also the ignorance about the economy on the part of the GOP leadership.

THE ANSWER: We need to cut taxes even more, and do it in a way that will help create jobs by truly stimulating the economy. How can we do that without running up the deficits even more? By the obvious answer no one seems to have the vision or the courage to address—by cutting our bloated, inefficient and incompetent government. Our federal government should be about 20% of its present size. Our present leaders would call this preposterous, but that only reveals how blind they are to our real problems.

     If the unnecessary red tape and overregulation were cut out of our government, and the technology available was applied for getting its necessary work done, our federal government could be 20% of its present size, and could be producing far more and better services than it is now. We would have no budget deficit, but rather a huge budget surplus, paying down our debt, not adding to it. This would free trillions of dollars that are now being consumed in the black hole of government, and could create enough economic stimulus to propel American economic leadership for the next fifty years.

     This could not be done all at once, but if we just resolved to cut government by 10% a year until we get it right, cutting unnecessary regulations, and modernizing operations, just the trend would encourage business like few things ever have. This would also cause the rest of the world to start looking to the U.S. again as the best place in the world to do business.

     This may sound idealistic, but it is basic and pragmatic, and doable. One question that immediately arises is, “What would all of the present government workers do?” How about this idea — get a real job! If our government was managed right we would have an employment problem still, but it would be the opposite of what we have now—we would not have enough workers for the jobs available.

     There are other factors and changes that would have to be made to get to this point, but it is easily within our reach. The longer we delay in implementing them will make the changes more painful than they may have needed to be, but they would not ever be nearly as painful as what we are right now experiencing. This is no longer something we can do—it is something we have to do--now.

     In spite of recent reports and statements, we can cut the federal budget like it needs to be without cutting entitlements. We have to get it planted in our mentality that instead of cutting entitlements we need to cut government. Entitlement programs may need fixing, but we need to look at how we can make them better for the truly needy, not cut them. Right now only a fraction of the money allotted to our entitlements are making it through the sieve of government to actually get to the recipients because of mismanagement and overregulation. Fix government incompetence and inefficiency and we would have plenty to meet present obligations.

     Why don’t those in government see this if it is true? Because those now running our government are politicians, not leaders. Right now we are being led through some of the worst economic storms in history by those who do not understand the economy.

     Most of our elected officials are lawyers, and very few lawyers can understand our economy. The training that it takes to make one a good lawyer is contrary to what makes one a good entrepreneur. Some lawyers can make this jump, but they are rare. A lawyer is trained to address a problem by making another law, but a leader will address a problem by leading through it. Let lawyers be in control for long and we will have so many layers of laws and regulations that we can no longer move—which is what we now have. The U.S. economy is now like Gulliver—tied down by the little people.

     Gulliver could have easily broken the strings individually, but not hundreds together. We could look at each regulation and likewise think that we can easily handle it, but it’s not any one regulation—it’s all of them together. It is death by paper cuts. Some regulations and laws are obviously necessary, but even most of the necessary ones could be simplified so that they are not hurting us as much as what they are trying to protect us from.

CONSEQUENCES: There are few things that can be more discouraging to economic growth than the concept of taxing the rich. Taxing the rich may seem fair, but it is one of the most basic injustices, and has terrible economic consequences that are a whole lot more than stopping “trickle down.” Would you want to play a game that involved a huge amount of hard work and risk if you were told that if you win at this game you are going to be penalized, looked upon as evil, and your winnings taken away?

     The rich are the ones who have won at the game our government keeps saying they want us to play. By targeting the rich all we’re doing is cutting off our own feet. The very ones the left calls “the rich” are the main job creators in America. These are the ones who make more than $250,000 a year but most are working 12-16 hour days, 6 or 7 days a week to do it. They are constantly at risk from economic trends, but even more from unnecessary, intrusive, and expensive government regulations. I was one of these, at times making more in a week than I thought I would ever make in a year, and at the same time thinking it was not worth it!

     The fact that our economy is chugging along at all is a testimony to how deep, strong, and resilient it is, and how it can trudge along somewhat in spite of the government. The attitude coming from the present Administration is that if you succeed at the American dream you will at the very least be looked at suspiciously, and maybe even considered an enemy.

     I just talked to the owner of a small local bank who was shutting down because recent government regulations were going to cost him several hundred thousand dollars a year and he simply could not afford to stay in business any longer. These small, local banks were not the villains in the craziness of the last few years, but they are being killed by the financial reform the government is imposing on them as if this were intentional. Small, local banks are the main life-blood to small business, which is the foundation of the American economy. They are being killed because of the sins of the big banks. And then our government wonders why so few jobs are being created?

     Small business, defined as having 25 or fewer employees, is one half of the American economy, and they create 75% or more of all new jobs created in America. Why was there not one penny of stimulus for this group in our stimulus packages? Why are the ones who often risk everything to start a small business, who are the main creators of new jobs in America, the ones our government is enraged at for keeping their Bush tax cuts like everyone else? The top 5% of earners already pay more than 50% of the taxes now. Who is going to keep playing the game under these kinds of rules?

     There could hardly be anything more discouraging for small business in America than the way things are being done in Washington now. Even if they are able to keep our taxes from going up in January the attitude being displayed by our government toward business is hardly going to encourage expansion. Even small businesses usually need to be able to plan out more than 2 years, and with these tax levels only being guaranteed for 2 years the help to the economy is going to be negligible. On top of now having an Administration that is hostile to business, we seem to have a GOP leadership that does not understand it. Maybe when the fresh new congressmen, congresswomen, and senators take office there will be enough fresh vision to make a difference. We should know soon, but it has been a long time since an election has brought any real change to Washington, except for increased corruption and the kind of policies and mentality that is killing initiative in America.

SOLUTION: As we have well discussed the most basic need of all, which is a spiritual revival in America, we will not again address that here, but rather the political and economic answers.

     First, in place of the GOP we need a GNP, or instead of a Grand Ole Party we need a Grand New Party. This is not a call for a third party, but a renewal and transformation of the GOP into the GNP. There is not enough time to build the infrastructure of a new party, and the Democratic Party has swung too far to the left to be used until it has a major reformation of its own. There is a foundation in the GOP that can still be used, but it is in desperate need of new leadership, new vision, and new direction. We must put leaders in Washington, not politicians, and this is the best and fastest platform to use.

     It is understandable that the Tea Party leaders do not want their movement associated with either major party because both have been so disappointing, and obviously still remain so out of touch. If there was enough time to start a third party, it might be the way to go, but we probably do not have enough time to do that right, and to do it wrong would almost certainly insure that the wrong people remain in control of our government.

     Transforming the GOP into the GNP could be done in a way that honors the great history of the GOP, and honors present leaders enough to keep the good influence they have—but make it so new in vision and purpose that it would attract the best from both present parties. There are many in the Democratic Party who no longer find their leadership and platform tenable either, but could find a home in the GNP. Think about it. We’ll talk about it more after the holidays.

Merry Christmas, and May this be the Best Year of Your Life.