By John F. Di Leo -
Doubling Down on Recession
The United States economy had its last severe turn for the worse in November of 2006, when Nancy Pelosi’s Democrats won their majority in the U.S. House of Representatives. The country immediately dipped into recession, which Barack Obama’s election two years later locked in for good.
Historically, recessions are followed by economic growth, including heavy GDP increases and sufficient job creation to rehire people who lost their jobs in the last recession. The Obama administration expected the same to happen this time, apparently not realizing that their policies made it impossible.
We have therefore seen an eight year presidency that never broke 3% in GDP growth. An eight year presidency that has seen new company startups plummet. An eight year presidency that has seen the lowest workforce participation rate since records have been kept. 95 million people of working age are now outside the workforce.
The Democrats, in an effort to acknowledge some level of unavoidable truth, have called this “a jobless recovery”… a claim that things are getting better, just without the component of new jobs. It’s ludicrous on its face, and cumulative assessments show that middle class wages have taken such a hit during the Obama years, the middle class standard of living is below where it was when Al Qaeda hit New York in 2001.
What do you call a recession that plateaus but never actually turns upward? It’s not a jobless recovery; it’s a recovery-less recovery.
Enter Hillary Clinton
As a Democratic nominee seeking to succeed a term-limited Democrat incumbent, Hillary Clinton has a number of challenges. Do you tie yourself to the incumbent? Do you run from his record as fast as your little cankles can carry you? Do you pretend your campaign is in a vacuum, and never mention the current administration at all? There is no easy answer, especially with as divided a nation as the United States of America is today.
Fortunately (or unfortunately, however you see such things), Hillary Clinton didn’t have to make much of a choice. She is who she is, with a nearly-fifty-year record on the issues, and could hardly run from past positions the way that her much more politically-talented husband ever could.
So the Hillary Clinton campaign has posted their economic positions on their website, in a page entitled “A Fair Tax System”… and despite the attempted spin, there is no dressing up her positions, which read like a litany of every disproven Keynesian and class-warfare idea of the past fifty years.
1: “Hillary will implement a “fair share surcharge” on multi-millionaires and billionaires…”
Oh yes. The millionaire surcharge. What a great way to begin. This is wonderful for winning votes in a hateful, class-envy demographic such as the ones that the Democrats target nowadays… but as economics, it’s sheer suicide.
This shouldn’t require a masters in economics to figure out. When individual states go overboard on tax rates, the people hit hardest move to other states.
Wealthy individuals move away, so they’re not there to pay any state income taxes at all. More importantly, when they move, they no longer pay property taxes on their homes or sales taxes on their purchases. And they no longer do all the local shopping that make wealthy residents a boon to a community; goodbye to their spending at restaurants, malls, and theaters. You’ve driven them to another state.
When such a measure is adopted at the national level, what happens? If leaving your state won’t do the trick, you leave the country.
There are plenty of places where Americans with money are welcomed with open arms… Caribbean islands, the United Kingdom, Belize, the Isle of Man, Ireland, Australia, New Zealand… and that’s just the English-speaking ones!
A national millionaire’s surcharge would backfire horribly. But it sure makes good politics, for the Clinton demographic.
2: "She will charge an “exit tax” for companies leaving the U.S. to settle up on their untaxed foreign earnings."
The “corporate inversion” has been a target of the American Left for several years… it’s a way to hit companies for two different, and only partially related, issues: companies that move their headquarters abroad, and companies that increase or move production abroad. Punishing a company for doing these things is a similarly awful idea, but not nearly as simple to explain.
Let’s begin with the first part: We have high taxes, so companies sometimes move their headquarters to another country, to pay the lower tax rates on their profits. They’re doing this for tax reasons, right? Taxes are too high already, right? Only an unreconstructed Marxist would think that you solve a problem caused by high taxes by adding even higher taxes on top of the ones already there! Rather than making them change their minds, such a step will just confirm their decision all the more!
And what about when companies move production abroad? Surely that’s a terrible thing, isn’t it? Well, no, not necessarily. The Left is conditioned to accuse companies of treason for setting up manufacturing plants abroad, but there are a number of reasons why they might. Sure, one reason is to escape the crippling union wages, crushing state and federal regulations, and high taxes of their current home.
But in addition, companies often set up foreign plants because they’re more convenient to their growing customer base. There was a time when our main manufactured goods’ customer base was here at home, but no longer. Today, we manufacture for export to South America, Australia, Asia, and Europe. If we set up factories of our own on their shores, it can make our goods more competitive.
To use the most obvious examples: General Motors makes cars in the USA for the USA market, and also makes cars in Brazil for the Brazilian market, just as Japanese carmaker Toyota makes cars in Japan for the Japanese market and also makes cars in the USA for the USA market.
There are therefore two sets of reasons for American companies to move offices or manufacturing abroad: one set based around satisfying a client base, and the other set based around fleeing adverse economic conditions at home.
The American Left, especially the Clintonite anti-business crowd, refuses to acknowledge this distinction. There is a difference between expanding or moving to meet a welcoming market and fleeing economic hostility in one’s old home!
There is indeed much that we need to do, to end the adverse conditions that drive companies away. We need to lower our crippling effective corporate tax rate (currently the highest in the developed world); we need to reorder our labor law’s dangerous prejudice in favor of union power; we need to solve the crime problems of our cities, where businesses have to move because they simply don’t dare stay.
But what is the Democrat response to these issues? Punish them more. Punish them for wanting to move; punish them for wanting to expand abroad. Never mind that a more successful business, wherever this new plant may be, still enriches the company’s American stockholders and US head offices; the Democrats’ only concern is that a production line is moving outside the country, or a plant is shutting down and leaving.
The Democrats won’t think to investigate further; they’ll never admit that it might be their own criminal justice failures, their own friends in the regulatory state, their own confiscatory tax rates that have driven the companies away. No, Hillary and her Democrats just attack, and demand one last penalty payment as the poor employer flees.
Yeah. That’ll leave them loving and missing the United States, won’t it? You can bet the business will be just counting the days until they can move back here, can’t you?
The “exit tax”… A final hail of gunfire as the unwanted party flees, just to make absolutely certain he never returns.
3: "She’ll ensure multi-million-dollar estates are paying their fair share of taxes."
Anytime you say “fair share,” you win bonus points on the class warfare scale. There is a whole segment of the voting population that loves the word “fair” without thinking about its meaning. So let’s discuss its meaning in this context.
When you spend your life building a business, such as a farm, a restaurant, a law office, an insurance agency, a retail store… a part of your goal is to be able to leave it to your kids when your time on this earth is done. The early years of founding a business are a struggle, but as it becomes established, with regular clients, the business becomes something to pass down with pride.
The estate tax, commonly known as the death tax, kills that whole concept.
The death tax usually requires that businesses be broken up and sold in order to satisfy the tax obligation in the estate. Ever wonder why there are so many more corporate farms, and so few family farms today? Why there are so many chain restaurants, so few family restaurants?
It’s the estate tax: when the owners die, the kids must sell the business their parents spent a lifetime building, just to pay the taxes.
Democrat politicians whine about the loss of the family farm, and the prevalence of big chain stores and restaurants, all the time. What they will never do is admit that this unfortunate transformation is the Democrats’ own fault.
So, will Hillary Clinton’s commitment to double down on the death tax help the economy? Of course not. It can only harm it. But her interest lies in the election, not in the improvement of regular American lives.
Politics, not Economics
Studying Hillary Clinton’s economic plan is like reading a “What Not To Do” list. There is literally nothing helpful on it.
She promises more unaffordable free college (how ever will those colleges afford the Clintons’ $200,000 speaking fees then?)… more “picking winners and losers” in the business world (remember how well all those loans to Solyndra turned out?)… more government control on scores of job classification, even to the point of federalizing home care for family members!
Every policy prescription in the Hillary Clinton website is one that will make our economy – and the world economy too, for that matter – suffer even more. The tax hikes, spending balloons, mandated complexity and bureaucratic over-regulation of our economy can only serve to drive more companies out of business or out of the country.
In the final analysis, one can come to only one conclusion: that the Hillary Clinton campaign’s economic plan isn’t designed to help the economy at all; it’s just designed to help the candidate win.
They know that various demographics respond well to these arguments, thanks to a century of "dumbed-down" education. They know that buzzwords and buzz phrases, like “green energy” and “fair share” and “Make Wall Street Pay!” will rack up votes at the polling place in November, and that is all they care about.
Those of us who hope for a return to the sanity of past decades, when presidents respected the job creators and worked toward their success, will be sadly disappointed by a Clinton administration.
And even those of us who hope for a return to the economics of her husband’s presidency, when he was willing to compromise with a more responsible Congress, will be doubly dismayed, as Hillary Clinton is no compromiser, and the 2017 Congress, now almost certain to flip to the Democrat column, is not likely to be a responsible conservative one.
Only a modern Democrat could call for jobs, then punish the job creators. Only a modern Democrat could plead the case for manufacturers staying put, while simultaneously doing everything possible to drive them out.
Copyright 2016 John F. Di Leo
John F. Di Leo is a Chicago-based transportation consultant, Customs broker, writer, and actor. His columns are found in Illinois Review.
Permission is hereby granted to forward freely, provided it is uncut and the IR URL and byline are included.