Stimulate Economy with the Fair Tax

Let’s talk about the Stimulus: you know, that $650 Billion program to keep unemployment below 8% for which the Congress charged us an additional $150 Billion in ear-mark pork for the pleasure of passing it last year.

The Stimulus was focused on saving the non-jobs in the economy: those that consume revenue not create it: state, local, and federal government jobs, including teachers at all levels. It has done nothing to create self-sustaining, revenue producing jobs.

In the act of creating $800 Billion in new debt, the Stimulus is highly counter-productive by ultimately consuming revenue that could have been better applied to sustaining and growing the free market; and by contributing to future inflation (since this debt was monetized by printing worthless currency to buy Treasury bonds that wouldn’t sell in the free market).

Admittedly, the government jobs sustained by the Stimulus didn’t disappear, so there are still families getting paychecks that can’t be sustained without additional government intervention. At best this is a delaying action, not a solution because these jobs are funded by debt that will have to be repaid. When the debt is repaid it will be with dollars withdrawn from the economy that would be better spent expanding the economy. Claiming these as “jobs saved” is duplicitous at best because they are not sustainable jobs. They are more truthfully described as “unsustainable jobs temporarily retained at great taxpayer expense”.

People out of work don’t pay withholding taxes. People who have lost their homes don’t pay property taxes. People without income don’t buy products and services and therefore those who provide products and services don’t buy raw materials, inventory, or pay for labor. As a result, revenue for government entities at the local, state, and federal level are going to be down dramatically.

Every penny that the federal government spends to keep these jobs going artificially makes the long-term problem worse, not better. Of course to look at the timing of the Stimulus spending it is clear that it’s primary purpose was to make the economy look as promising as possible just ahead of the mid-term elections, with 80% of the Stimulus funding scheduled to be spent, not in 2008 or 2009, but in 2010. The administration admitted in 2009 that all the jobs to be created by the Stimulus were already created when less than 15% of the Stimulus had been spent.

Without growth in private sector employment, the government jobs have to disappear eventually as there will be no revenue to fund them; and no saleable debt to continue to sustain them. If the private sector economy has contracted up to 40%, it is simply a matter of time before the government sector has to contract comparably. If the federal government continues to monetize the debt created to fund these bogus stimuli plans, inflation will cripple what is left of the US economy.

It didn’t get too much press, but the Christmas panty-bomber incident impacted the missions of 69 overlapping federal agencies and organizations: none of which appear to communicate with one another sufficiently to protect Americans. Arguably we can expect similar overlap and duplication in all government functions because unlike the private sector, government has never been forced to justify it’s staffing, resource utilization, or existence by competition or value delivered to consumers. As revenues disappear, this will have to change. Imagine the total savings in tax dollars if such duplication and waste is eliminated. With so much waste, the president’s demand that his department heads reduce operation expenses by 3% was farcical.

The “Stimulus” does nothing to improve the efficiency or effectiveness of government; it merely sustains it. Rather than being called a ‘stimulus’ this should rightly be called a “Government job Sustenance” program. The major problem is that as government revenues continue to decline, these jobs are going to have to be reconciled against available revenue and in the absence of any real stimulus to the private sector, there will not be sufficient private sector jobs to assimilate or compensate for lost government jobs.

Earlier this month the federal government admitted to under-counting lost jobs in 2009 by nearly 1 million! In addition they admit that they have no rational way to count how many unemployed have dropped off the unemployment roles as they have exhausted their unemployment benefits; nor to count how many have simply given up looking for jobs that don’t exist; nor to count how many are working part-time jobs because full time employment opportunities are not available. Despite these caveats, they have the audacity to claim that unemployment dropped from almost 11% to nearly 10% and to claim that we are pulling out of the recession. This is the closest practical definition of “Audacity of Hope” so far: the hope that no one will call them on their complete misrepresentation of unemployment data.

Competition is the wicked mistress that keeps the free market lean and mean. It keeps the products and services continually improving and it keeps the market prices continually reducing as competitors constantly look for better methods in order to corral customers for themselves from whomever has them to start with. As soon as government gets involved in the process competition goes out the window in direct proportion to campaign contributions to the key government decision maker(s). A prime example is military spending for weapons the military says they don’t want that get funded anyway because they come from the Appropriations Committee Chairman’s district, or one of their major political campaign contributors. There are as many examples as there are Congressmen.

Our Founding Fathers understood the danger of giving government control of taxation. That’s why they denied the federal government any authority to directly tax Citizens. This safeguard was circumvented by the 16th Amendment and should be rectified by repealing this Amendment in conjunction with the implementation of the Fair Tax.

The Fair Tax represents the best opportunity to actually stimulate the free market, encourage domestic manufacturing, expand the tax base, recover trillions of dollars sheltered off-shore and force Congress to live within their means while freeing billions of dollars of revenue currently wasted in tax preparation and reporting expense that is better applied to expanding the economy.

If we really want to stimulate the US economy, minimize federal government control of the economy wherever possible; repeal the un-implemented Stimulus; repeal the 16th Amendment; implement the Fair Tax then sit back and watch the economy grow back to health.