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?
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.
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