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Over the Edge
To comment on this or other articles, go to Facebook, twitter, or our Youtube channel, where you can see The Weekly Wrap video. James R. Gorrie Managing Editor, Absolute Wealth
Today, I’m writing from my hotel in Newport Beach, California, where the cool, salt air breeze coming off the marine layer over the ocean brings calm relief from the unholy ravages of high summer in Central Texas. Don’t get me wrong; I really enjoy living in Austin, the hill country is beautiful and the people are very friendly…but man, the heat is relentless!
It’s good to visit California again; spent all of my youth and a fair amount of my adult life in and around Newport Beach…so these few days we’re spending here are a definite homecoming for my family and me. Funny what comes back to you…
For many years, I’d surf from 15th all the way up to the river jetty with my brothers, depending upon the swell…or cross over into Huntington Beach and go out off the pier, either north or south side, again depending upon the swell, and the crowds of course. I lived in Huntington Beach too, for while, and did my share of night surfing there; the pier is very well lit.
And when I lived on the beach in NB, I’d just hit the break at 29th for late evening glass-offs after work—when the wind had stopped and the sea would become glassy and the waves smooth and well-formed barreling rights. Afterward, I’d head down the boardwalk—which is really concrete--to Blackie’s for a cold beer. In the mornings we would be at Mutt Lynch’s for an unusually large omelet, or maybe at Cappy’s Café right on PCH (Pacific Coast Highway) for a high stack of pancakes and coffee. It occurs that an awful lot of my life is here, and that they were very good days back then…
But these are better days still, if for no other reason that they are the only ones we have. The world continues to move on, and therefore, so shall I.
Let’s take a quick look at the recently upheld law of the land, Obamacare, in the context of our struggling economy…
Giving and taking away
I find it more than just a bit ironic that the president, in the interest of giving the middle class a break, announced that he will extend the Bush tax cuts for another year.
Think about this for a moment…
On the one hand, Obamacare, the president’s signature “achievement” is the single largest tax increase in the history of the nation, an estimated $500 billion…but will likely be much more.
And that crushing tax burden will fall largely on the already failing and flailing middle class, taking more from those who work the hardest.
But on the other hand, he wants to “give the middle class a break” by taxing us just a bit less for one more year.
Am I the only one that sees the schizophrenic nature of this?
Whenever the economy is underwater, whenever the middle class—the engine of the economy—is suffering, the smart thing to do is to boost the economy by letting folks keep more of what they earn.
Because people—consumers—are rational, and they behave according to their expectations.
It works like this: if you know that you will have less money to spend next year because your taxes will be higher, what will you do?
You will spend less today…and tomorrow. Now, add in the facts that credit is harder to come by these days, many millions are without jobs, homeowners have zero equity in their homes, wages have fallen, and consumer demand for goods and services is low, what do you have? You have a recession on your hands, which is the case today.
But, just by extending the Bush tax cuts for the middle class, Obama is admitting, whether he wants to or not, that lower taxes will help the economy.
I’m not calling the president schizo or anything like that, I’m just saying...
The logic —or utter lack of it—of hitting the middle class with a $500 billion tax in the midst of a Great Recession, is staggering. But yet, that is what is happening.
Where is the rationale for such double-edged policies?
It comes from the belief that ideology is more powerful than the laws of economics or human nature, and of course, it also stems from an unhealthy desire for as much power as one can grab.
And the end game? A broken economy with even higher unemployment, with laws that stifle business and productivity and leave ever more of us dependent upon the state.
But don’t take my word for it…
The California crash
Just look at my home state of California. With an economy that dwarfs all other states, it is totally run by leftist politicians from the legislature to the governor and mayors of its two largest cities, Los Angeles and San Francisco. The policies are union based and socialist in effect. And, as I’ve said in prior editions of The Gorrie Details, with all its wealth, California cannot pay its bills.
And the state’s answer to solve the problem? Raise taxes. Take more from those who produce and give to those who don’t…as the unemployment rises above 11% and people and businesses leave the state in droves.
California now ranks dead last as the least business friendly state in the union. Meanwhile, it is among the highest in unemployment, taxes, union power, and social benefits. And lately, the city of Stockton, California became the largest city in US history to become insolvent…but it won’t be the last. California is in the midst of a crash and taxes are being raised, pushing the economy over the edge.
Why? Because governor Brown thinks, like the president, that economic power rests rightly with government, and not with people.
See any connections with where California is today and where the rest of the nation will be tomorrow? To see the future, just look to where the sun sets over the Pacific.
The truth is, like California’s governor, the president doesn’t really believe in tax cuts. Perhaps the better question for the president would be “why give a tax break if you don’t believe in it?”
In an election year, you do what you need to do get elected—or re-elected—as the case may be. The president knows that the middle class in swing states are the key to winning the election. Giving the middle class a tax break for one more year, or at least pledging too to do so, is what the president believes will get him re-elected.
Once a second term is won, all bets will be off. No electorate to worry about, no middle class rescue to peddle to voters, just the chance to be who and what this president has always wanted to be…
And, from the once-golden state, those are…The Gorrie Details.