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President Obama says he has the solution to our nation’s economic ills. It is, of course, in compromise. Compromise, that is, of President Obama’s making, has never been formally articulated, and with which nobody agrees. In other words, President Obama’s compromise looks a lot like unilateral speechifying.
But let’s take his proposal seriously nonetheless. Here’s what he thinks will fix our fiscal woes: “let’s live within our means by making serious, historic cuts in government spending … let’s ask the wealthiest Americans and biggest corporations to give up some of their breaks in the tax code and special deductions.”
Sounds great, right? You don’t own a corporate jet, so you won’t get hurt – and we’ll cut the spending we’ve been needing to cut. Only one problem: Obama hasn’t put a concrete proposal on the table. More than that, his theory itself is deeply flawed. By raising taxes during a recession, Obama’s plan actually fosters a decline in tax revenue over the long haul, meaning that our deficit grows larger rather than smaller. Only a consistent and flourishing Rolls Royce economy can generate the kind of tax dollars America needs to pay off her Boeing-sized debt. If we shrink our economy to the size of a Toyota Tercel – which is precisely what raising taxes does – we can forget about fixing the debt crisis anytime soon.
Liberal solutions to the economy are almost always this wrongheaded. They don’t take into account two basic concepts: fluidity of economic modeling, and opportunity costs. Fluidity of economic modeling means that whatever we do will have an impact on the economy, for good or ill. If we raise taxes, we aren’t just taking a larger slice of a static pie – we are taking a larger slice of a pie that shrinks because people don’t like giving up their pie.
Opportunity costs are costs imposed by forcing people into making silly choices. For example, liberals want to force us to spend our cash on idiotic fluorescent light bulbs. To that end, they regulate away incandescent light bulbs by explaining that doing so will help spur the economy. What they fail to realize is that by forcing people to spend more on light bulbs – money they don’t want to spend on light bulbs – they are forcing them not to spend money on products that are more market-ready and don’t require regulation and subsidization in order to reach market. Ten green light bulbs sold via governmental intervention equals a memory upgrade for somebody’s computer not sold. A windmill forced on the American population means several transformers that we aren’t able to pay for. The consumer is best situated to decide what their lifestyle requires, not the government. Furthermore, the consumer-driven market makes products better and cheaper through competition; the government-driven market generally doesn’t.
For some odd reason, the left doesn’t think that either of these concepts apply in the real world. So they call for raising taxes; so they call for redirecting money from one industry (e.g. the computer industry) to another (e.g. the health care industry or the car industry).
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