Originally published in American Thinker on November 29, 2009
We are at the mercy of economic "experts." These practitioners of the "dismal science" are managing large sectors of our economy in accordance with theories learned in Ivy League Universities. They have assured us that the lessons learned from the Great Depression will prevent another such occurrence.
The problem is that every forecast by an economic expert can be matched by an equal and opposite forecast. Often these conflicting forecasts are made by the same individual. Economist Howard S. Katz provides an explanation for this situation in his book, The Paper Aristocracy: "Modern economics claims to be a science. This is a sham and a fraud." Katz bases this conclusion on his observation that "[w]hen it fails to predict future events it does not act like the scientist, disregarding false theories in search of the truth; it acts like the Indian Medicine Man who has failed to make rain. It equivocates, rationalizes and tries to make minor adjustments." Unlike an Indian medicine man, an influential economist might not only be unable to bring rain, but he may also cause drought.
The State of New York provides an example of the disastrous effects of an economic policy. When Governor Paterson, a politician with a long tax-and-spend record, came into office, he declared that taxes were too high. Paterson stated, "We will rue the day that we tax the rich, if the rich, who are the job-creators in New York, stop doing it, and then people are leaving to find jobs in other states." Yet Paterson signed a budget which included 6.1 billion dollars in projected new taxes and fees. Paterson seemed to realize the folly of his action, stating, "None of this makes sense." Tax revenue from these increases was running 20 percent below projections. In a lucid moment, Paterson responded, "Tax the rich, we've done that. We've probably lost jobs and driven people out of the state."
There is a popular idea that the loss of the "rich" is not a problem. Governor Paterson apparently joked that Rush Limbaugh's decision to leave New York due to tax increases was a good thing. Paterson stated, "If I knew that would be the result I would've thought about the taxes earlier." The New York Times concluded, "Limbaugh's vow won't change much" in a state with such a massive deficit.
Of course, the taxes on one individual, no matter how wealthy, will not have a noticeable impact on government revenue. But is Limbaugh alone in his decision to leave? Buffalo Sabers hockey team owner Tom Golisano announced that he was moving to Florida shortly after the New York State budget was passed. Galisano reportedly pays $13,000 a day in taxes. The head of New York's ACORN-affiliated Working Families Party is reported to have said "good riddance to Golisano."
According to the New York Times, "people don't relocate because of high taxes." However, Deadline Hollywood reported that "Oprah and her people have long limited the time she spends in Montecito so she doesn't exceed the number of days mandating her to pay exorbitant taxes as a California resident." Apparently Oprah Winfrey does not read the New York Times. Perhaps Limbaugh, Golisano, and Winfrey are isolated examples -- or perhaps not.
The problem of avoiding taxes is not only a state issue. David Farr, the CEO of Emerson Electric Co., asserted, "I'm not going to hire anybody in the U.S. I'm moving. They (Washington) are doing everything possible to destroy jobs." The Obama administration disagrees. Kevin Griffis, a spokesman for U.S. Commerce Secretary Gary Locke, replied with an e-mail from Singapore: "This administration has made a significant commitment to U.S. manufacturing, including reforming the country's health insurance system to bring down costs and make American companies more competitive globally."
Farr is not alone in his determination to abandon the anti-business climate of the United States. Eleven major companies have relocated or are in the process of relocating overseas: Tyco International Ltd., Foster Wheeler AG, Weatherford International Ltd., Nabors Industries Ltd., Noble Corp., TransOcean International Group, United America Indemnity Ltd., Cooper Industries, Covidien, Ingersoll-Rand PLC, and Accenture Ltd. The U.S. has the world's highest corporate tax rate after Japan, but we have been promised that free health insurance will make American companies competitive.
In addition to increased taxes, there are other incentives to relocate outside of the United States. The federal government now sees the need to regulate executive compensation. This is a very popular idea, and politicians like popular ideas. Paying executives tens of millions of dollars a year does not seem reasonable. And the majority of Americans agree: high salaries for American CEOs must be regulated.
The market proves otherwise. If the market offers executives significantly larger incomes to relocate, many will relocate. Josef Ackerman of Deutsche Bank reportedly stated, "We can't wait to get our hands on all that top talent." A reasonable person might say, "The market be damned." The market can at times be very unreasonable. As an illustration, suppose the owner of an NBA team were to conclude that bouncing a ball was worth only $100,000 a year. Where would his team be in the standings? What would the team's attendance figures be? As a result of this change, how many hot dog vendors would be laid off?
In February 2008, Michelle Obama stated,
We left corporate America, which is a lot of what we're asking young people to do. Don't go into corporate America. You know, become teachers. Work for the community. Be social workers. Be a nurse. Those are the careers that we need, and we're encouraging our young people to do that.
As corporations relocate overseas, we will become a progressive utopia of teachers teaching social workers and social workers ministering to the needs of teachers. Somehow I do not think this will work.