Beyond Stage One Politics

Carolyn Phippen

Elizabeth Warren has made waves by recently announcing that the rich aren’t paying their fair share in taxes and that as part of a “social contract,” they owe the rest of society for the wealth they have accumulated. Social contract, the most recent buzzword of the left, apparently means that if you prosper in this land of relative freedom, then you owe a greater part of your wealth to a government that has apparently granted you the opportunity to be productive by providing you with things they have been given the responsibility to provide for all of us – roads, education, freedom from criminal interference, etc. Apparently, the social contract doesn’t require anything of those who choose to bleed society dry by taking its resources and producing nothing.

A number of years ago I was involved in an organization that dealt with foster-care issues for my state. At one point, those of us involved in this organization were asked to share why we chose to become involved. The most common refrain was a desire to “give back.” My response was nothing of the sort. I don’t do good because of what society has done for me; I choose to do good because of who I am and because I care about the suffering of others. Government has no real power to provide anything beyond what the productive in society produce and pay; not the other way around.

Our greatest gift is to live an honest, constructive life by doing our best to improve ourselves and those around us every day and to work hard to provide for ourselves and our families. The greatest destruction we can wreak is to allow a sense of entitlement to lead us to expect that others owe us a portion of their labors, especially a greater portion than we ourselves are willing to give voluntarily.

Bill Gates’ and Steve Jobs’ innovation increased the productivity of every single human being in every part of the world. What honest person can say with a straight face that they owe you some cash along with the myriad blessings that are ours because they chose to develop and utilize the brilliance of their minds? Using their God-given talents in a way that makes our lives easier and enables us to do things that just a decade or two ago were completely unimaginable is an incredible gift. To be given such a blessing and then respond with, “Well, we [may or may not have] paid taxes that paid for those roads and enabled thousands of individuals to get to work so they could make all of our lives easier, but could you throw in a couple bucks too?” just sounds kind of trashy.

Would we be a better society if those innovate, productive individuals had chosen to sit on the couch watching Oprah, collecting a welfare or disability check? I’m certain Jobs could have applied for and received disability during most of the past decade if he’d chosen that road. According to the thinking of Warren, had he made such a choice he wouldn’t owe us anything. Because of the fact that he instead chose to work hard, developing products that are sought after the world over and allowing phenomenal efficiency and personal enjoyment, he owes us a portion of whatever he makes. The very act of producing something everybody wants is apparently worthy of punishment. Hey, in the old Soviet Union nobody made anything anybody wanted but everybody there had a job; maybe this administration does have a jobs plan after all!

Carolyn

We all heard the news last week that yet another company on the President’s tour of success has declared bankruptcy. Solyndra, a solar panel manufacturer and, according to President Obama “a testament to American ingenuity and dynamism,” has sought bankruptcy reorganization.

In December of 2010, with less than one month’s reserves on hand, Solyndra sought to refinance by asking the Energy Department to subordinate $385 million of the $535 million guaranteed by the government. This would allow them to obtain an additional $75 million from outside sources. The Energy Department agreed, putting taxpayers behind new investors if things were to go wrong.

T.J. Rodgers, founder of Cypress Semiconductor and former Chairman of Sunpower, said on The Kudlow Report that on the day of President Obama’s visit to Solyndra in 2010 a secretary asked him what it meant that the President was there, visiting their competitor. He says that his response was, “Set your watch. That company will be out of business in one year.”

According to Solyndra President and CEO, Brian Harrison, “Regulatory and policy uncertainties in recent months created significant near-term excess supply and price erosion.” Regulatory and policy uncertainties? Huh, hadn’t heard that anywhere before. Looks like it might be a deeper problem than that, though.

According to Rodgers, the thin-film technology used by Solyndra is “lousy,” low efficiency and the cost per watt is double other technologies. He noted that the typical Silicon Valley startup is full of great ideas in a “crappy” building; Solyndra, on the other hand, built a palace which, according to reports, cost $700 million. The company also made the mistake of building their manufacturing facility in California, the worst state in the nation to manufacture, Rodgers added.

Solyndra’s cost per job amounted to $1.5 million, and now those workers are without jobs at all. Money well spent, or simply another attempt to override private markets and supplant them with an uninformed bureaucratic vision of utopia?

Rodgers, on the other hand, knows a thing or two about the solar panel business. In 2001, he invested $750,000 in SunPower, a solar panel manufacturer which uses a technology much more efficient and easier to manufacture than most others. Within a matter a months, Cypress Semiconductor, the company he built, had invested $168 million in SunPower, including the purchase of additional plants and equipment (Solyndra’s new plant alone cost $700 million . . . in this economy?). That company, by the way, is still around and growing despite management and R&D shakeups over the past couple of years.

Reminds me of the comment made by the Social Security judge, David Daugherty, who pretty much hands out Social Security Disability like candy (nearly 100% approval rate v. an average of 60%), “Some of these judges act like it’s their own damn money we’re giving away.”

Carolyn Day

I recently came across a genuinely bitter, angry liberal who was absolutely convinced that the only way to get us out of our debt mess of $14.26 trillion was simply to tax the rich and large corporations so they pay their “fair share!” (Just curious, but what is it about “large” corporations that makes them inherently evil, while “small” corporations are apparently acceptable. I’m wondering if the disdain also applies to a company that makes huge profits while employing very few people – does it fall into the category of “large” and bad or “small” and still good?) Anyway, it’s about time that the Michael Moore logic of there being enough money in this country to pay off our debt, it just needs to be redistributed to the people who didn’t earn it, needs to be put to rest.

Interestingly enough, Walter Williams discusses the economics of such a strategy in an article today.

Let me lay out the basics:
*If we were to tax every household in the US making over $250,000 a year at a rate of 100% on the amount exceeding that $250,000, we would bring in $1.4 trillion. (Better yet, if we were to take 100% of everything those greedy bastards earn, it would bring in $1.97 trillion – that’s what you get for being more productive than the solid citizen making $249,999!)
*If we were to take the profits of every Fortune 500 company, that would amount to another $400 billion.
*If we were to confiscate the entire net worth of all 400 billionaires in the US (who do they think they are owning businesses, homes, and jewelry anyway? Those things should only be owned by the poor; oh yeah, that home thing for the poor didn’t work out so well . . . ), that would equal $1.3 trillion.

The grand total we will have raised would be $3.67 trillion, which will run our government for a whopping 9 months or so! Now that we have all the money of the rich our debt problem will surely be solved, won’t it? Oh, we still will have a debt of $14.26 trillion and no way to fund anymore government programs because those who know how to run businesses efficiently and productively would have just been forcefully dissuaded from doing so, in the US anyway? Uh oh. Any better suggestions out there?

Robert Barro of Harvard University’s business school recently analyzed the impact of the unprecedented extension of unemployment benefits to 99 weeks. In his analysis, he concluded that had unemployment benefits not been extended so drastically, we would probably currently be seeing a rate of unemployment around 7%.

The original estimate by the administration was that unemployment wouldn’t exceed 8%, and they claim that was the high most economists expected even before the passage of the stimulus bill, back in Q4 2008. Seems as though the stimulus has been anything but, and Recovery Summer has been a major bust. The good news out recently is that consumer retail spending increased 0.4% in August, the largest increase in five months. Autos, electronics, and furniture were all down, but apparently back-to-school shopping saved the day and I don’t think the effect will continue into the coming months.

We are currently seeing historically high rates of long-term unemployment, at 46% of all unemployed. This is worsened by the fact that the longer one remains unemployed, the lower the chance of finding work. As discouragement kicks in, many simply give up and stop looking.

In his textbook published last year, Paul Krugman had this to say about generous and long-term benefits, “Public policy designed to help workers who lose their jobs can lead to structural unemployment as an unintended side effect. . . . In other countries, particularly in Europe, benefits are more generous and last longer. The drawback to this generosity is that it reduces a worker’s incentive to quickly find a new job. Generous unemployment benefits in some European countries are widely believed to be one of the main causes of ‘Eurosclerosis,’ the persistent high unemployment that affects a number of European countries.”

While US benefits are typically 33-50% of worker pay, when adjusted for payroll taxes, child care, transportation, and other expenses of working, it can be economically feasible for many to make the choice to wait a while longer to look for a job. In fact, Mother Jones recently published an article explaining that rates of long-term unemployment among college graduates are substantially lower than among the non-college educated. This is consistent with the idea that when lower income workers adjust their pay for expenses, which eat up a larger percentage of income than for most middle-and upper-class (generally college-educated), staying home a few more months just may make sense.

My husband was recently speaking with an older gentleman who works at a local convenience store. It was late at night, and without any other customers in the store they started talking about their lives. It turns out this man had recently moved from another state after his business of 15 years was destroyed by the recent economic downturn. He sold high-end home furnishings and when people stopped buying and furnishing homes (and started living within their means), his business came to a screeching halt. He lost everything, picked himself up, and moved to a place where he was able to find a job working nights in a convenience store. He’s there most nights, with a better attitude and demeanor than many workers in a whole lot of industries. He’s grateful for a job and for the self-respect that comes from working hard. As the economy turns around, he and people like him will move back up. What of those who don’t work for nearly two years? Many will be left behind permanently.

But hey, the campaign slogans for those politicians who’ve potentially handicapped millions of jobless Americans will be great, won’t they?

Take a look at Steve Wynn’s commentary on the destruction currently being foisted on all of us, courtesy of Washington, due to out of control spending and regulatory policies.  Unfortunately, most American businessmen can’t simply relocate a portion of their business overseas to countries with “steady,” “predictable” governments like Macau and China (?!) in order to mitigate the lack of “stability and predictability” in Washington.  I’m afraid the small businessmen are the new “forgotten man,” those who did nothing to contribute to the financial meltdown but who are now being taxed to pay for the bailouts of the guilty and their cohorts in Washington.  All the while, the uncertainty of massive new regulation is strangling innovation and investment.