Has Obama Read Hazlitt?
Dear Mr. Obama
I truly believe that in terms of intelligence you are the smartest president we have had in very long time. HOWEVER, that does not mean your policies will work. Your policies are merely a continuation of what the establishment has taught you, after all, history is written by the victors and in this case the victors were Kenysians.
Have you read Henry Hazlitt’s Economics in One Lesson? If you haven’t I will summarize chapter 5 for you and the rest of your associates. Chapter Five: Taxes Discourage Production. Where taxation hampers growth and discourages investment. It is an astounding, 2.5 pages.
You seem to think that your stimulus package will “create investment and jobs” however Hazlitt would contend it does the exact opposite.
First and foremost, Hazlitt points out that many fail to think of taxes, when they are levied, as taxing (A) to pay (B), but that is in fact exactly what you are doing. In fact, you’re taxing those in the upper middle class (the entrepreneur) that provide the “jobs”. Now in this case you are taxing A (the entrepreneur making, let’s say, $300k) to pay B (Citigroup, AIG, Bear Stearns, and, soon to included, will be executives of our nation’s insurance companies). In this case, (B) took excessive risks and made excessive money by making loans with money they didn’t have (which is the nature of factional reserve banking) and paid themselves salaries that were up to 500 times what the masses (A) make.
Now when I read Chapter Five, I thought, well maybe (B) needs a helpful hand in certain situations. I mean, I am grateful for the Subsidized Stafford Loan that allowed me to attend Syracuse University. But my assumption assumes that you taxing (A) the rich to pay be (B) the kid trying pursue the American Dream. In my case that would be a young old from the middle nowhere trying to make my own version of the American dream. Mr. Obama’s version goes something like this: Tax(A) which is the so called rich (small business owner), to pay bailout (B) the mega rich. Am I missing something here?
Next, Hazlitt comes with assumption that capital investment is needed for entrepreneurial growth. When someone invests they take a 100% downside risk with their cash receive a (assume 28% capital gains tax) 72% possible upside return. Hazlitt states:
If they (the investor) lose, they lose a whole dollar, and if they win, they win only a fraction of a whole dollar, they decide that is foolish to take risks with their capital. In additional capital available for risk taking itself shrinks enormously. It is being taxed away before it can be accumulated. In brief, capital to provide new private jobs is first prevented from coming into existence, and the other part that does come into existence is discouraged from starting new enterprises. The government spenders create the very problem of unemployment that they profess to solve.
From my perspective I am seeing smart money move into muni’s/corporate debt market and out of equities. Isn’t equity investment where the jobs come from? Should I not worry? Will you Mr. Obama provide the jobs so we then will be able to resume being a productive country? What about my American Dream? I am not sure being a government employee was part of that Dream? We all know that government is very efficient and productive so I hope you get this stimulus rolling. Now I understand why you are not worried about the re emergence of a bull market in US equities, it’s because you plan on making a full blown bull market in Government employment.
God Bless Change, God Bless America, God Bless Mr. Obama.
Signed From the Grave
H.L Mecken
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