America is at a crossroads for freedom, with worldwide implications
I’m going to be blunt here. We have a president, unlike any other, who is truly a hardcore socialist who truly believes in massive government domination. I had to shake my head a little bit when early in the process, some of our Republican candidates, including our nominee, Mr. Romney, talked about Mr. Obama’s incompetence.
Yes, perhaps as a paper shuffler in the Oval Office he is incompetent, but look at what he did. If he hadn’t pushed that health care takeover, it would not have happened. In socialism you don’t nationalize things; that’s messy. You have to actually pay for it, or at least pretend to pay for it.
Much better to turn the whole sector into vassals of the whole government. You won’t exist without their permission. They will tell you what to do, what to offer, what to charge. And you will give tribute to the government in return.
He did it—he’s doing it in health care, make no mistake, in a few years we’ll have government- dominated health care in all but name. He’s doing it in the financial industry; trying to do it in the energy industry; trying to do it on the Internet. Anything out there that reaches a certain size, the government will want to dominate. And so as you know, this is why we even redouble our efforts.
So why is this election critical? You know why. We are truly at one of freedom’s crossroads and it’s not just us, it’s the world. The blunt truth is if the U.S. gets it right, the rest of the world has a chance to get it right. If we get it wrong, the rest of the world is in trouble.
It’s true that countries around the world can adopt certain pro-freedom measures, but since they don’t have the size and the power of the United States, the power of example, it’s easy to ignore.
Remember, Hong Kong has had a variation of the flat tax since the 1940s. We saw how much influence that had on the rest of the world. So it’s critical for the United States.
Another example: In the 1980s when Reagan put in across-the-board tax cuts and then did it again in terms of simplifying the tax code. After the United States reduced income tax rates, within a decade, decade and a half, 50 other countries followed suit in reducing tax rates.
So again, the power of the United States comes not from powerful armies, but from example. Because we grow, we are free. And when we practice freedom, others will eventually follow suit and get the support to make these positive changes.
You’ve seen a huge expansion of government. You’ve seen it in Europe. All the talk about austerity in Europe, don’t kid yourself. There may have been some restraint here and there, but not much. The state is still growing. You see the reality is in Europe is not a pushback on government; it’s crushing the private sector.
Push back the welfare state
Austerity means not [making] massive cuts in spending, not pushing back the welfare state. It means new taxes on the private sector: Spain is going to raise the VAT from 18 to 21 percent, [and] put in an array of new taxes. Britain, two years ago, raised the capital gains tax [from] 18 to 21 percent and wonders why they don’t have a high tech sector. France, going back to its roots.
President Obama should be a lecturer in France next January with the 75 percent income tax rates that they’re going to put in next year.
Supposedly Germans are known for not using wastrel, wasteful spending. Yet what does the German chancellor propose? A new super bank supervisor for Europe, a new fiscal union, which of course just means a massive new bureaucracy.
So the bottom line in this crisis is, the state gets bigger. Big, new bureaucracies. It’s not just Europe; you see it in Japan. Japan has been dead in the water since the early 1990s. So what is Japan doing today to help its bleak economy? They’re raising their top income tax to 55 percent. They’re doubling their national sales tax from 5 percent to 10 percent. They’re raising the inheritance tax, the payroll tax, the capital gains tax. That’s why Japan’s national debt is 200 percent of GDP.
Spending is power
The fact of the matter is, [the Federal Reserve is] manipulating rates, and it’s supposed to stimulate the economy. Maybe they really believe it. But what is the reality? The reality is those artificially low rates subsidize government debt, making it easier to have these gargantuan bond flotations. And so it also means in terms of spending, when it’s easy to borrow, you don’t have to cut back on spending very much.
Why is the president against any real spending cut deal? Because he realizes that spending is power. Spending means resources from you, either through taxation, borrowing, or printing money, which is another form of taxation. So it means more power for Washington. That’s why you’re never going to get a deal with this guy.
And also, those low interest rates, perversely, end up punishing small business owners because they destroy savers, they destroy capital creators, which means less capital for those that create real businesses now and real businesses in the future.
It also hinders the rise of new big companies. In the 1970s, a terrible decade, look what was starting to incubate—Apple, Microsoft, Oracle, AmGen, FedEx, Southwest Airlines, and numerous other companies. Because of that benign environment in the ’70s, ’80s and ’90s they became big companies.
The Kauffman Foundation has done research: one reason the U.S. has 3 ½ to 4 percent growth rates, while western Europe is lucky to get 2 percent, is because not only do we create a plethora of small companies, but each generation we get 50 to 175 that become big companies, major new companies.
So as the old go and wither away a bunch of new ones are coming along. When you artificially lower interest rates you destroy that.
The U.S. is different than the rest of the world in our richness and diversity in the capital markets—and we should acknowledge, appreciate and encourage these strengths.