Freedom Line Blog

Already navigating a turbulent economic sea, Americans are bracing for the single largest tax increase in history this January 1.

Democrats fighting for their political lives believe they have a winner soaking “the rich,” but we’ve noted the destructive effect that raising taxes on the top bracket will have on the struggling economy.  Not only will they hit small businesses (which create most new jobs in America) particularly hard, but individuals in that bracket carry a disproportionate burden of consumer spending, which makes up 70% of our overall economy.   In this video clip from CNBC, even often left-leaning Don Peebles considers tax increases for the highest income bracket a destructive idea:

If we spend more money paying taxes, then we will have less money to invest, less money to employ workers…  We can’t take a bad situation and make it worse by taxing people more at a difficult time.”

Liberals cannot win this debate on the substance, so they instead hope to win on the rhetoric by framing the issue as “the Bush tax cuts.”  But Bush will have been gone from the White House for two full years by the time the tax increases hit.  We’re not debating new tax cuts, and Bush is long gone.  Rather, what we’re talking about are looming tax increases.  Namely, Obama’s tax increases.

Robert Kennedy once described himself thus: “There are those that look at things the way they are, and ask ‘Why?’  I dream of things that never were and ask ‘Why not?’”  Perhaps the strongest criticism against liberalism is the charge that too many of its prescriptions for achieving the good life begin from premises in a world that doesn’t exist.

For cold-eyed realists like playwright David Mamet, the answer to Kennedy’s second question is easy: people are tempted to pride and selfishness.  And after a lifetime spent in the intellectual employ of liberalism’s ‘why not’ ethos, Mamet rejected his former worldview in an essay for the Village Voice, and followed up his rejection of state control in favor of free markets in his new book Theatre.

A review of the book by Commentary’s Terry Teachout reveals Mamet’s stinging rejections of the liberal mindset in favor of conservative-libertarian explanations for how the world actually works.  For Mamet, his conversion is a matter of his personal philosophy catching up with his art, which is characterized by dark struggles for power in an unfair world.

But lest readers think the notion of realism is code for worst case scenario of the human condition, don’t worry.  Instead, Teachout describes Mamet’s reading of conservative luminaries like Thomas Sowell, Paul Johnson, Milton Friedman and Shelby Steele as persuading him that “a free-market understanding of the world meshes more perfectly with my experience than the idealistic vision I called liberalism.”

For the moment, Mamet stands alone as a free market supporter in the playhouses of elite theater.  Taking a cue from his characters in Glengarry Glen Ross and Speed-the-Plow, Mamet probably doesn’t care what others think.

Admittedly, there is a certain attraction to dreaming of a world that doesn’t – and probably can’t – exist.  It explains the popularity of fantasy tales for which Hollywood studios make hundreds of millions of dollars selling as a form of escape.  For artists like Mamet, though, the real world in all its imperfect complexity provides a much richer source of inspiration.

In an era where politicians are challenging playwrights for creating the most compelling drama, it’s good to know of at least one professional artist who prefers reality to fantasy.

America’s technology sector can provide a wellspring of economic dynamism and new employment.  As long as government doesn’t poison that potentially abundant font, that is.

At a seminar today entitled “Technology and Economic Recovery” hosted by Americans for Technology Leadership, panelists Shahin Kohan, Dr. Joseph Fuhr and Karen Kerrigan explained that our information technology (IT) sector offers a much-needed vehicle by which we can overcome economic stagnation.  Dr. Fuhr explained that IT spending is expected to grow 2.3% per year between today and 2013, compared to expected gross domestic product (GDP) growth of just 0.5% during that span, and that employment in the IT industry will grow by over 1 million jobs compared to expected employment shrinkage in other fields.

For her part, Ms. Kerrigan, who serves as President and CEO of the Small Business & Entrepreneurship Council and founded Women Entrepreneurs, explained the destructive consequences of federal overregulation and taxation for small enterprises that create most new jobs in America.  Ms. Kerrigan pointed out that the prospect of even more suffocating regulations and taxation on small business and technology entrepreneurs only discourages innovation, expansion and hiring.  Mr. Kohan, an apparel entrepreneur from Los Angeles who is CEO of Focal Technology Solutions, Inc., illustrated ways in which new technology can assist creative entrepreneurs in a highly competitive worldwide market, along with terrifying examples of how state, local and federal bureaucracy can destroy American jobs and businesses.

The message was simple:  give technology enterprises freedom, and innovation, and critical job growth will soon follow.

There is a strange element of humor when an international bureaucracy attempts to instruct the most prosperous and powerful nation in human history how to boost its economy.  The United States, after all, reached its status by maximizing economic freedom, not by following dynamism-sapping international norms.

Ignoring this reality, the International Monetary Fund (IMF) issued a statement yesterday instructing the U.S. to – you guessed it – raise taxes.  The IMF statement rightfully expressed concern over the nation’s debt that Obama is growing like a gigantic Chia Pet.  Unsurprisingly, however, the IMF failed to recognize this as an overspending problem, not an undertaxation problem.  More specifically, the IMF suggested “cuts in deductions, particularly for mortgage interest; higher taxes on energy; a national consumption tax; or a financial activities tax.”

Note how closely the IMF’s growth-killing prescription matches the Obama-Pelosi-Reid agenda, although at least the IMF didn’t take their “all of the above” position.  Regardless, the IMF (just like liberals in this country) apparently remains oblivious to the fact that incoming federal revenues actually reached their all-time high following the 2003 tax cuts, since lower taxes trigger economic growth, which in turn paradoxically increases revenues.  This is obviously a lesson that the “international community” still needs to learn along with Obama, Reid and Pelosi, but this episode provides yet another illustration why America is better off when it decides to be less like, rather than more like, the rest of the world.

It’s turning into quite a week for the Tory-Lib Dem coalition government in Britain.  After Deputy Prime Minister Nick Clegg’s sterling speech yesterday for more freedom and less centralized government, he and Prime Minister David Cameron released at 30+ page document called their “programme for government.”  (pdf)  In it, they tackle thirty one issues where they aim to put Clegg’s speech into practice.  They cover just about everything.

Importantly, the duo sees their work as an historic opportunity to govern as “a coalition in the national interest” – a paradigm they use to combine the Conservatives’ support for free markets with the Liberal Democrats calls for devolving political power away from London towards local governments and individuals.  (Or, as our Tenth Amendment puts it “to the States respectively, or to the people.”)

So far, the combination is resulting in an agenda that would make Margaret Thatcher smile.  From the forward:

We both want a Britain where social mobility is unlocked; where everyone, regardless of background, has the chance to rise as high as their talents and ambition allow them. To pave the way, we have both agreed to sweeping reform of welfare, taxes and, most of all, our schools – with a breaking open of the state monopoly and extra money following the poorest pupils so that they, at last, get to go to the best schools, not the worst.

We both want a Britain where our political system is looked at with admiration, not anger. We have a shared ambition to clean up Westminster and a determination to oversee a radical redistribution of power away from Westminster and Whitehall to councils, communities and homes across the nation. Wherever possible, we want people to call the shots over the decisions that affect their lives.

With the ongoing write downs in the wake of Obamacare, and the appointment of two majority making union lawyers to the National Labor Relations Board, many in the private sector could be excused if they pine for the days when business was usual.  Add cap and trade to the mix, and it’s entirely possible that Progressives imagine profit to be just another word for unclaimed tax revenue.

So thank goodness for the Supreme Court’s Citizens United decision restoring First Amendment speech rights to groups as well as individuals just in time for the 2010 midterm elections.  Since the Obama Administration is focused on several other toxic experiments in social engineering, any substantive legislative response to Citizens United is unlikely until next year.  Thank goodness.  In the meantime, businesses and the people who give them life have a unique opportunity to use their constitutional right to free speech in support of another pillar of the American Experiment: the free market.

One commercial I’d like to see features several different people providing the kinds of services that Progressives love to claim for government.  If you haven’t before, check out the concepts behind CVS’ MinuteClinic, the KIPP Academy, and Grameen America microfinance bank.  They and many others prove daily that – if given enough space – the free enterprise system is the quickest, best, and most sustainable way to enhance wealth and well being, for everyone.

American liberals love to praise supposedly superior European governance and culture, oblivious to the irony that they nevertheless continue to live in the United States.  This phenomenon became particularly visible during the ObamaCare ordeal, as liberals claimed that we must somehow join the rest of the “industrialized world” in providing unsustainable government-controlled healthcare.

Well, here’s a dose of sobering reality.  As noted on a front page story in today’s Wall Street Journal entitled “Europe’s Choice:  Growth or Safety Net,” Europe has stagnated economically for the past two decades compared to the United States.  Worse, this has occurred even as Europe continued its failure to carry their own weight with respectable defense expenditures.  From 1990 to 1999, Europe’s gross domestic product (GDP) grew 2.0%, compared to 3.3% for the U.S.  From 2000 to 2008, Europe only grew 1.7%, whereas the U.S. grew 2.2%.

Yet we’re supposed to emulate their example?  Can’t liberals just move there instead?

Google stands as one of the leading cheerleaders of so-called “Net Neutrality,” that benign-sounding movement to expand government’s regulatory reach over the Internet.

“Net Neutrality” is a bureaucratic “solution” in search of a non-existent Internet problem, and it would stifle incentives for Internet service providers to innovate and expand networks.  Currently, Internet service providers invest $60 billion or more annually toward network buildout and advancement, which is critical in this age of ever-expanding web traffic.  Without that enormous service network investment and expansion, Internet bottlenecks will increase and technological evolution will slow.

But why should Google or other Net regulation proponents worry about its negative impact on consumers, Internet service providers and network expansion?  It’s much easier to remain a free rider on networks that other people have built, and sanctimoniously advocate federal regulations for others.

But a funny thing happened to Google when it attempted to test the waters itself in providing high-speed Internet service.  In a piece this week entitled “Tough Road for Google’s Network,” The Wall Street Journal reports how Google quickly discovered that building Internet service infrastructure isn’t quite as easy as it looks.  Last month, Google announced that it would build high-speed Internet connections for up to 500,000 people in America.  Just one month later, however, Google realizes that “building such a network is a giant construction problem, with the cost potentially surpassing $1 billion.”

According to Jim Baller, an attorney providing consulting services to Google, the experience has been sobering:

Beyond the cost issues and economic challenges in terms of what it takes to develop the infrastructure, to me one of the most significant barriers is that we don’t have a vision of what [ultra-high-speed Internet connections] will enable us to do.”

A Google spokesperson added:

We know that other companies have been in this business a long time.  We’re not pretending to have all the answers.”

Actually, Google did pretend to “have the answers” insofar as it advocated “Net Neutrality” regulations that would do to the Internet what the “Fairness Doctrine” would do to free speech.  Google quickly discovered how difficult life as an Internet service provider can be, and it needs to realize that “Net Neutrality” would only make it tougher.

Hopefully, Google’s experience will encourage it to reconsider its destructive position on “Net Neutrality.”  American consumers, tech sector employers and even Google itself will be better off for it.

Fresh off his famous catastrophes on the healthcare and deficit reduction fronts, Barack Obama momentarily shifted his bumbling gaze yesterday to Net Neutrality.

What exactly is Net Neutrality, you ask?

Well, think of it as ObamaCare for the Internet, and you get the essential idea.  Net Neutrality would federally bureaucratize Internet service by dictating rigid price controls and traffic surge management to providers, among other toxic provisions.  The Internet seemed to be doing just fine so far, what with the ongoing explosion of content delivery and devices like the iPhone.  But why should that stop Obama from “fixing” something that isn’t broken?

In an unintentionally amusing commentary entitled “President Obama Hearts Net Neutrality,” Stacey Higginbotham praises Obama, who appears to be shifting his Midas-in-reverse focus to this dangerous campaign.  When asked about Net Neutrality, Obama responded:

I’m a big believer in Net Neutrality.  I campaigned on this.  I continue to be a strong supporter of it.  My FCC Chairman Julius Genachowski has indicated that he shares the view that we’ve got to keep the Internet open, that we don’t want to create a bunch of gateways that prevent somebody who doesn’t have a lot of money but has a good idea from being able to start their next YouTube or their next Google on the Internet.  So this is something we’re committed to.

Consider the absurdity of Obama’s comment.  He curiously demands that we “keep the Internet open,” even though it has somehow managed to remain open all this time without the need for crippling Net Neutrality regulations.  And he suggests that Net Neutrality is necessary to allow innovators to “start their next YouTube or their next Google,” leaving one to wonder how anyone ever managed to start YouTube or Google in the first place without Net Neutrality.

Net Neutrality advocates dishonestly concoct the bogeyman of sinister Internet service providers blocking web content, but the reality is that America faces a continuing exponential increase in Internet traffic.  This rapid growth will require innovations and investment by Internet service providers to carry it, just as they have done to date.  Obama wrongly alleges that Net Neutrality is somehow necessary to allow the next YouTube or Google, but the truth is that the next YouTube or Google will be impossible if network providers are prohibited by bureaucratic Net Neutrality regulations from managing the surge in data traffic.

The need for freedom and flexibility of network providers to innovate will become even more critical as Americans increasingly shift to smart phones.

As noted by a report in today’s Wall Street Journal, “carriers are already running at over 80% capacity,” and “are scrambling to build out next-generation networks that promise higher bandwidth and faster speeds.”  If Obama and his FCC succeed in imposing suffocating Net Neutrality regulations that they recently proposed, however, service providers’ difficulties will only increase as Obama bureaucratizes the Internet in the same way that he attempted to bureaucratize healthcare.

Americans concerned about the future of Internet growth and innovation must therefore act quickly to stop Obama’s reverse-Midas Net Neutrality scheme.  Please contact your Senators and Representative immediately and demand a stop to this destructive scheme before it’s too late.

Oregon, whose 11% unemployment rate exceeds the national rate by a full percentage point, sits just to the north of California, whose suicidal economic policies have provided a close-up lesson that reducing economic freedom reduces prosperity. As a result, Oregonians have seen first-hand the mass exodus of jobs and residents stemming from those policies.

So as Oregonians head to the polls tomorrow to consider two tax-raising ballot measures, we’ll see whether they’ve internalized California’s straightforward lessons.

Proposition 66 would increase Oregon’s personal income tax on “the rich” by fully 2%, and Proposition 67 would foolishly increase the corporate income tax. You know…  those corporations that actually create jobs and add to the economy.

Just as California’s reckless tax-and-spend policies have driven residents and jobs to surrounding states, Oregon may astonishingly slit its own wrists in the same manner by passing these measures.  Residents and community leaders in Washington, Idaho, Utah, Montana, Nevada and Arizona may welcome the resulting influx, but it will mean doom for Oregon. Nike, Inc. founder and chairman Phil Knight, hardly a starched-collar conservative, has labeled Propositions 66 and 67 “Oregon’s Assisted Suicide Law II,” and some economists predict 70,000 lost jobs if the measures pass.

So which way, Oregon?  Freedom and prosperity, or suicidal tax increases?  Massachusetts, Virginia and New Jersey voters have learned the lessons of Obamanomics, and now we’ll see if the news has traveled out to the West Coast…

Barack Obama has done little, if anything, right during his year in office, but he’s obviously perfecting the art of shameless hypocrisy.

Appearing on CBS’s 60 Minutes yesterday, Barack Obama said with a straight face that “the people on Wall Street still don’t get it.  They don’t get it.” For good measure, he also broadly labeled bankers “fat cats” who have behaved in an “irresponsible” manner and not shown “a lot of shame.”

Let’s see.  This is the same Barack Obama who promised to address the $0.4 trillion deficit, only to add a trillion to make it $1.4 trillion in just his first year.  In other words, he is addressing the deficit by…  tripling it.  Lest one reflexively attribute that to his inheritance, this year’s deficit is on an even worse trajectory.  He is also the man who proposes adding an endless array of new entitlements and highly-paid new federal employees to an already-unsustainable budget trajectory.  He is also the man who seeks to reward the same federal bureaucracies that failed to recognize the financial bubble, and even abetted it, by granting them nearly plenary powers over the entire struggling economy.  He is also the man who aims to compound the nation’s economic woes by imposing catastrophic healthcare costs and carbon taxes upon it.  He is also the man who seeks to increase taxes on broad swaths of struggling individuals and small businesses by allowing rates to increase next year. He is also the man who promised to usher in a new era of international diplomacy and peace, only to see rogue regimes such as Iran increase their menace since his inauguration.

Yet he says that others “don’t get it?”

Laughably, he mocked bankers for being “puzzled” why the public is “mad” at them.  Perhaps he was merely projecting his own puzzlement at his record-low poll numbers, which similarly reveal a public “mad” at him?

The Small Business & Entrepreneurship (SBE) Council this week released its annual ranking of individual states by business friendliness, and the results aren’t surprising to anyone who understands the importance of lower taxes, less regulation and fewer labor burdens.

After noting the inhospitable business environment cultivated by the Obama White House and the Pelosi-Reid Congress at the national level, SBE Council chief economist Raymond Keating highlights the critical role played by individual states in fostering small business growth.  As Mr. Keating notes, “small businesses, of course, drive innovation, economic growth and job creation.  If we want to get our economy back on a solid, robust growth track, then we need pro-entrepreneur policies at the federal, state and local levels.”

The study incorporates some 36 government-related factors, including tax rates, regulatory costs, state government spending, property rights and energy costs.  And the results are not shocking.  Pro-growth states like Texas, Florida and South Dakota lead, whereas notoriously basket-case states like California and New York sink toward the bottom.

It’s often said that the states serve as policy test laboratories in our federal system, so here’s hoping that someone directing our national levels of government learn the simple lessons offered by the SBE Council’s latest report.

Apparently, former president George W. Bush “went against (his) free-market instincts” when he approved the Wall Street bailout towards the end of his administration.  Better late than never I suppose.

After issuing his mea culpa, “W” had some words of wisdom for his successor:

And without mentioning President Obama by name the former President did have some rather pointed comments for the current Administration claiming that generally “history shows that the greater threat to prosperity is not too little government involvement, but too much.”

Bush, who as President also signed off on massive aid to the auto industry, warned against a government takeover of the economy fearing it would eliminate free-market enterprise.  “As the world recovers, we are going to face the temptation to replace the risk and reward model of the private sector with the blunt instruments of government spending and control.”

Do as I say…

During a week in which Nancy Pelosi force-fed her job-killing healthcare bill to America, it was timely that the Kauffman Foundation released a report on how jobs are created in this country.

According to their study released last week, two-thirds of jobs created as recently as 2007 came from enterprises less than five years old.  Indeed, according to the U.S. Census Bureau, almost all of America’s net job creation since 1980 came from new businesses.  This stands to reason in our dynamic economy, where giant firms tend to become complacent and wither, whereas new innovators with novel ideas rapidly expand and create new jobs.  Think of General Motors and Microsoft, for instance.   Before that, the horse-and-buggy industry lost employees to the auto makers.  This is the nature of our economic system.

With this in mind, what are Barack Obama, Nancy Pelosi and Harry Reid doing to create jobs?  We’re not referring to temporary work funded by dollars borrowed from future generations or wrenched from more productive uses via taxation – actual jobs?  Stated differently, what entrepreneur in his or her right mind would consider this a promising moment to take risks and hire new employees?  From healthcare “reform” to carbon cap-and-tax legislation to higher taxes to financial regulation, Obama, Pelosi and Reid see employers as mere scapegoats who should be saddled with even higher costs of employment.  They bail out dinosaurs like GM and Chrysler, but leave smaller entrepreneurs to suddenly subsidize ObamaCare and the ever-expanding federal government.

The unemployment rate just jumped to 10.2% despite Obama’s promise that it wouldn’t exceed 8% if we swallowed his “stimulus” medicine.  At what point does he wake up and smell the real-world coffee?  Will he ever?

Here’s a contradiction to chew on for a while:  Google’s chief executive Eric Schmidt tells The Washington Post that he’s wary about destructive overregulation of the Internet…  Yet he simultaneously favors so-called Net “Neutrality?”

According to Mr. Schmidt, “it is possible for the government to screw up the Internet, bigtime.”  The article reports that he went so far as to say that “it would be a terrible idea for the government to involve itself as a regulator of the broader Internet.”

We couldn’t have said it better ourselves.

But how can Mr. Schmidt square his accurate concern about destructive Internet regulation with his advocacy of Net “Neutrality,” which would needlessly introduce federal rules into Internet service for the first time?  Stated simply, he can’t.  Nevertheless, he and Google foolishly advocate Net “Neutrality” because they believe it serves their short-term corporate interest.  Of course, the insurance and pharmaceutical industries initially believed the same thing about ObamaCare, before belatedly recognizing the toxic longer-term reality…

The kerfuffle over Rush Limbaugh’s expulsion from the group attempting to buy the Saint Louis Rams has garnered a lot of press coverage today — most of it from those embracing the politics of partisan indignation.

As a man of the right, I take no small umbrage at politics intruding where it doesn’t belong, and professional sports is one of those areas. As a matter of principle, Rush’s bid for the Rams shouldn’t matter any more than it would if Al Franken was trying to get a share of the Vikings or if Maureen Dowd wanted a piece of the Jets (which I would really, really like to see).

What’s getting lost in the shuffle, however, is how much the Limbaugh expulsion reflects that professional sports in general — and the NFL in particular — operates in an unfree market.

Remember that professional sports leagues are essentially cartels, restricting membership and raising bars to entry. Heck, Major League Baseball is even exempt from federal antitrust laws.

In the NFL, this empowers as few as nine of the 32 teams to block the sale of another. To have an atmosphere of such limited competition and to have your competitors empowered to veto your ownership wreaks of an inefficient and dysfunctional market.

Rush got the boot for essentially political reasons, but maybe it’s a blessing in disguise. Otherwise, that champion of capitalism would end up with equity in a system that essentially looks like a medieval guild.

Strangely, this piece comes from the Huffington Post but it’s authored by Dylan Ratigan of MSNBC, who seems to be more open-minded.

His point?  Democrats so often claim that the “market” is broken because health care is expensive and too many people lack health coverage.  Well, one reason that health care is too expensive is because the government helps to create health care monopolies in the states and even prevents consumers from shopping across state lines for cheaper/better insurance.

There is no true “market” for health care if you live in North Dakota where Blue Cross controls 90% of the market.  There is little choice in Maine where Wellpoint controls 71% of the market.  Capitalism works best when consumers have choices between companies.  Health care companies should beg and compete for our business, not the other way around.

In a historic election result, German voters this weekend turned toward tax cuts, free markets and labor reform, and sent the leftist Social Democratic Party (SDP) to its worst-ever performance.  What made this election historic wasn’t the reelection of Chancellor Angela Merkel and her center-right Christian Democratic Party (CDP), but rather the unprecedented success of the free-market Free Democratic Party (FDP) and Germans’ rejection of socialism.

The FDP platform calls for reduced taxes, deregulation, moderation of Germany’s suffocating labor laws and strong ties with the United States, and its leader Guido Westerwelle confidently called for tax simplification and lower rates during his victory speech.  German business also welcomed the results, with German Chambers of Industry and Commerce spokesman Heinrich Driftmann confirming that “the election result is a clear vote for courageous reforms.”  Although Chancellor Merkel was elected in 2005, her slimmer victory margin forced her to enter a governing coalition with the socialist SDP, which threw a wet blanket on her market-oriented agenda.  With the FDP’s remarkable showing, Germans expressed their desire to finally implement that freedom agenda.

This result sends a clear signal to Americans as Obama attempts to impose his own socialist model upon the United States.  Germans have seen that model first-hand during this global economic downturn, and soundly rejected it to provide a welcome example for American voters.

According to CNN, capitalism, the original inventor of fantasy sports, steel, smiles, ice cream, and prosperity has reinvented itself in the shadowy realm of fantasy football.

For those who follow the pigskin, you’ll remember that the quarterback for the New England Patriots (Tom … something) tore several ligaments in his knee last year.  Fantasy owners who drafted him were left with a huge loss in point production, and had to settle with an inferior quarterback, likely one from New York or Philly.

In response to this suffering, some intrepid entrepreneurs decided to essentially offer insurance for the fantasy sports market.  Fantasy “players” can now buy insurance for players, in the event they are lost to injury.  As a result of such genius innovations in the market, fantasy sports are now an $800 million industry.  Regrettably, the number of relationships and marriages that fantasy sports has destroyed is incalculable at this moment, but I wouldn’t put it past the market to give everyone an estimate.

Of course, fantasy football was already a nice product of capitalism before people started making money off of it.  For millions of over-enthusiastic beer-drinking football junkies across the nation, fantasy sports provide plenty of psychic income.  Thankfully, the IRS has not yet begun to tax this potential revenue stream.