The Stupidity of Raising Taxes in a Downturn

As I’ve said repeatedly, this crisis will make people’s head spin. The latest mind-boggling move is the rise in Treasuries following S&P’s downgrade. At first this is confusing, but remember this is a global crisis, and if global capital panics, only the Treasury market can handle all that capital. So crudely, Treasuries rise. The talking heads on TV misinterpret these moves as a reflection of global confidence in Treasuries, and by extension the U.S., but it’s pretty much the opposite.

This is such a complex crisis that I’m sure some of my statements are confusing people. For example, I’ve received valid questions about my criticism of both the policy of raising taxes and the policy of cutting spending. Most view this as an either/or type of problem, and I don’t blame them. I’ll try to explain my thought process in the coming days while trying to focus your attention on the true solutions to this crisis.

To give you an analogy, it’s like asking if gold is an inflation or deflation hedge. The answer is both and neither. It depends. Is gold considered money by the government and the people? Is the population confident in its leaders? The answer to this question is nuanced and it depends on the situation.

Today I’ll briefly explain my position on taxes. This topic deserves more time than I’m giving it, but let me make some points to clarify why raising taxes in a downturn is foolish.

The Great Depression and Taxes

Revisionist history tends to minimize the role of taxes during the Great Depression. FDR may have been the interventionalist Democrat, but it was Hoover who first raised taxes on the “rich” in 1932 during the depths of the Depression, a mere 3 years into a decade-long Depression. Taxes rose to onerous levels that would make us blush today, yet there was no robust recovery on our balance sheet. Business leaders were attacked by the government, much as they are today.

FDR magnified Hoover’s folly by raising corporate and personal income taxes even more. Democrats and Republicans were both wrong on this one. There was no relief in employment even though corporate debt did well, just as it is doing well now. People look at corporate debt at new highs and wonder the economy is so weak. They forget that corporate debt competes with government debt and that capital sees corporate debt as more attractive. So again, you can’t analyze the rise in corporate debt in isolation; you’re only seeing half the picture.

The problem with raising taxes is that capital now competes globally, and huge sums of money can change hands at the push of a button. When the U.S. was dominant, Federal taxes were unavoidable and states had to compete with each other for business. We have a similar situation today, except countries now compete with each other for capital. Asia used to be poorer than Africa, but now Asia is attracting large sums of capital and growing at incredible rates. Singapore is a tiny island city-state that happens to be one of the wealthiest nations on a per capita basis in the world. Hmm, I wonder how they pulled this one off. Could it possibly be because they are the most business friendly country in the world?

America is blessed with great resources and a dynamic population; if our government had a clue, our economy would be booming. As it stands, our government is creating an environment of confusion and fear. The big boys in the hotel industry have already moved to Macau; if our government decides to tax them to oblivion, guess where they are taking their business? Our government needs to stop taxing income earned abroad so that we can compete evenly with international companies. There are so many policies we can enact that are virtual guarantees to spur business. Sorry, but raising taxes is not one of them, and if you think raising taxes will at least raise revenue, think again.

Recessions are one thing, recessions where there is no solution in sight are another. Pessimism in America has now surpassed levels seen during the depths of despair in early 2009. Confidence is getting destroyed, and this is going to have significant consequences. You are going to see more young people head to Asia in the years ahead because that’s where the opportunities are. Our leaders will be scratching their heads, but they brought this upon our country. This crisis is fundamentally different from any we’ve ever experienced, which means we need to make more than cosmetic changes. Raising taxes is the worst thing we can do, and this isn’t a right vs left issue, it’s a common sense issue. Get it in your heads: capital competes globally; we cannot raise taxes and get away with it anymore.

Share this article
  •  
  •  
  •  
  •  
  •  
  •  
  •  
  •  
  •  
  • rhae

    Yes, yes and yes…As a trader I am mostly focused on the charts… 
    SPY 60m lazy swinger says yes today too.  Will it stay that way? Beats me. Maybe…
    http://screencast.com/t/TyAODzTgbI

  • http://www.siomunzus74.com Gregory Despain

    I simply want to say I am newbie to weblog and seriously loved this page. Almost certainly I’m planning to bookmark your blog . You amazingly have great articles. Thanks for revealing your web page.

  • http://xxxkylierose.com/40/reventando-el-chocho-de-una-rubia-inglesa/ full content

    Spot on with this write-up, I honestly believe that this web site needs a lot more attention. I’ll probably be back again to read more, thanks for the advice!

  • http://www.smutlinxxx.com how you can help

    I’m impressed, I have to admit. Seldom do I encounter a blog that’s both educative and amusing, and let me tell you, you’ve hit the nail on the head. The issue is something which not enough folks are speaking intelligently about. I am very happy I stumbled across this during my hunt for something regarding this.

  • Pingback: losing weight fast

  • http://www.freepornrevenge.com/9/reventando-el-culo-de-una-morena/ follow this link

    Apple now has Rhapsody as an app, which is a great start, but it is currently hampered by the inability to store locally on your iPod, and has a dismal 64kbps bit rate. If this changes, then it will somewhat negate this advantage for the Zune, but the 10 songs per month will still be a big plus in Zune Pass’ favor.

  • http://www.elokings.net/ viagra

    880535 935633TeenVogue? Seeking for fashion advice, celebrity buzz or beauty trends? Uncover it all in Teen Vogue

  • http://bel-prof.info/?p=5369 penny stock

    I have a degree in creative writing from a top university, but still have no significant credits yet. How should I go about getting published in a reputable magazine or web site for the first time? Is self-publishing the way to go? I have short stories that are done, but I am not sure where to send them. I know I need an agent, but trying to get one without ever being published just isn’t going to happen. Any suggestions?.

  • http://esisa.es/portal/userinfo.php?uid=480512 penny stock egghead

    Thank you, I’ve just been searching for info approximately this topic for a while and yours is the greatest I have discovered so far. But, what about the bottom line? Are you certain in regards to the source?

  • http://www.pornstarhut.com/15/chica-buenorra-teniendo-un-orgasmo/ good post

    Between me and my husband we’ve owned more MP3 players over the years than I can count, including Sansas, iRivers, iPods (classic & touch), the Ibiza Rhapsody, etc. But, the last few years I’ve settled down to one line of players. Why? Because I was happy to discover how well-designed and fun to use the underappreciated (and widely mocked) Zunes are.

  • http://www.all4scrapebox.com Auto approve list

    Very interesting details you have observed , appreciate it for putting up. “It is seldom that liberty of any kind is lost all at once.” by David Hume.

  • http://tokumei10.blogspot.jp/ Arlinda Beger

    this site is cool!!!!!!!!!!!!!!!!! http://tokumei10.blogspot.jp/ thx read

  • http://tokumei10.blogspot.jp/ Arlinda Beger

    this site is coooooooooooooooooooooool!!!!!!!!!!!!!!!!! http://tokumei10.blogspot.jp/ thx read

  • http://castleclashfreegems.blogspot.com/ dragonvale hack

    Justin: Future Trunks is by far my favorite character in the Dragon Ball Z universe, hands down. They are extremely good at healing other dwarves,
    and neutralizing all your damage, but they aren’t very
    good at healing themselves. You should also bring some teleporting runes, don’t use the lumbridge teleport that recharges every 30 minutes, because it takes a while to cast
    the spell.

  • http://simpsonstappedoutcheats.gi-a.com Christa

    Mostly its because thhe diet plans are too complex, too restrictive, or perhyaps in some
    cases downright cloged. , Bart’s Dog Gets an F, Old Money, Brush with
    Greatness, Lisa’s Substitute, *Thhe War of tthe Simpsons, Three Men and a Comic Book, Blood Feud
    *Early interview with James L. A youth brand with immense competition needs the latest of ddesign techniques to compete and stay ahead of the game.

  • http://tiny.cc/sugaringzuerich Waxing Zürich

    Does it matter if the lemon juice isn’t freshly squeezed?

  • http://seofornown4eva.com http://seofornown4eva.com

    Every weekend i used to visit this web site, for the reason that i wish for
    enjoyment, since this this web site conations genuinely fastidious funny data too.

  • http://djex.co/overthecounterstdtest42481 home std test

    Most search engines have an picture tab to assist in your searching. Air is invisible, can be a soft breeze or a raging windstorm. World of Warcraft is a popular game with millions of players nowadays.

  • http://bit.ly/1uCzYzm Haarentfernung Zurich

    Did not see something to inform the best way to avoid skin tags, etc. Here is how. Coat skin tags, and so forth. with oil and the wax mixture will not stick to that spot. Use just ample. To not minor and not to significantly.

  • http://www.tuxmachines.org/node/66712 Geri Rucki

    I’ve wanted to write about something like this on my webpage and you gave me an concept. Cheers.

  • http://coolspotters.com/maciejmaslowski auta na akumulator

    enough years , it seems than the interest rate has still the subject of conscience of each client , with adequate powers or would be the tradition of working-class and therefore the maximum allowable procedure after graduation almost anyone to tempt you least expect it raises to the current

  • http://www.ebonyhomos.com/18/tetona-catalana-teniendo-un-orgasmo/ go to article

    I quite like reading an article that will make men and women think. Also, thanks for allowing for me to comment!

  • Pingback: Who is Urazov Nuray

  • http://food.dailybuzz.com/ schody

    You in truth assent to it become become visible austere with one is presentation nonetheless We’ve this topic affiliate marketing especially fundamental part i stroke A no expense without doubt without doubt not twig. It is apparently excessively complicated as anyway as incredibly broad in my opinion. I deem excited in your post, I definitely try to evade you have the belief from your usb slots!

  • http://www.youtube.com/watch?v=LH5koAPe2SI commercials funny

    Sites of interest we have a link to

  • http://firmyioferty.pl/announcements/show/5665/gotowe-spolki-sprzedaz-spolek-z-oo-za-2990-pln?preview=true rejestracja sp. z o.o. w krs

    GRacias por la informacion, ha sido de gran ayuda, yo me encuentro preocupado por la perdida del cabello.

  • http://www.youtube.com/watch?v=0-JBc001nXY funny painful fails

    here are some links to web pages that we link to since we consider they may be worth visiting

  • http://arthritisreduction.com/node/327615 Mitzie Ingebretsen

    I’m normally to blogging and i also truly appreciate your articles. This wonderful post has genuinely peaks my interest. My goal is to bookmark your weblog and sustain checking for brand new details.

  • Pingback: iherb coupon

  • http://Hyungs.com/PXB_Expressengine/206733 Sims 3 PC download

    If your client sees your solution as the answer to impress others, you.
    Supernatural Beings – Play as witches, wizards, werewolves,
    more intriguing vampires, and fairies, each with their own magical
    abilities, traits, and interactions. You can go on the official Microsoft Internet site to download this framework totally free in your
    computer.

  • http://www.socialfriends10.com/index.php?do=/blog/110542/you-can-opt-for-ray-ban-rb-3190-shades/ ray ban black sunglasses

    Silver bracelets epitomizes timeless efficiency byby itself, but as typically the preparing meant for crystals or simply merged with other metals, the visual significance it provides in the individual wearing is certainly inestimable. Pure sterling silver on it’s own is way too soft and also would not be easy for jewellery together with other pretty subjects. Tiffany Gold is manufactured as soon as an additional steel, such as copper mineral, is certainly cheap tiffany jewelry included in your silver antique making it sturdy and hard. As a result though it may be considerably less secure mainly because stainless steel,gold expensive jewelry is certainly even so quite tough together with long-lasting. This is the reason a good amount of wedding rings, charms, pendants, cufflinks for men, belt buckle buckles, physical structure bracelets and more aremade via gold.

  • http://indirim-kuponu.weebly.com/kuponlar/indirim-kuponu-kullanmak indirim

    Can you please help me about this topic ? If yes i will send you an email.

  • http://www.gettinghitchedphotography.com/ Have A Peek At This Website

    tiffany jewellery discountencompasses quite a few diamond jewelry for the wedding party; bridesmaid expensive jewelry, anklet bracelets, sounds or anything else. Engagement costumes necklaces might be projects within the selection of material plus color choice formula; rare metal plated as well as metallic plated using gemstone and even gallstones,cheap tiffany jewellery,a number of shade conjunction which incorporating a contented charm to your account.

  • http://www.connectdirector.com/articles/business-opportunity-in-interim-management social networking online portal

    My compliments, helpful post and an excellent site. Also your post has inspired me to commence writing on items comparable to what you are carrying out. We are creating a premium on-line portal a specially-created site that brings details with each other from diverse sources in an uniform way. The Connectdirector Online Portal – marketing networks & match creating community portal is skilled networking on the Connectdirector “all in 1″ premium web portal supplying organization networking & social networking, contacts, matching, on web content, (internet) marketing and advertising & (enterprise help) solutions. An unique multi-language internet portal thought with a worldwide exposure and a nearby concentrate on each and every wealthy larger high quality on the world wide web content material and dynamic database generated listings for matching personal interest, business interests and social interests and requirements. We at Connectdirector advertising networks and neighborhood portal are an match producing authority in guiding and lowering barriers by direct linking enterprise and social interests and requirements interests on the principles of joint outcome, integrity, compliance and excellence. Summarized Connectdirector is Networking, Contacts, Matching, Content material material, Advertising & Services.If you did not go to our internet web site but and/or you are not a member, then please sign up as we really want to know your thoughts so we can boost our on-line portal. On our web web site you can begin easy to create your network contacts!

  • http://CamWhore.net/ whores webcam

    Perhaps you ought to also a place a forum site on your website to improve reader interaction.,-”‘.

  • http://CamGirls.ws/ live cam girl

    Do you mind usually if I cite several of the content articles so extended as I provide you acknowledgement also as sources returning to yuor internet website? My internet pages is inside the comparable specialized niche as your web page and my web page guests will make use of a few of the details and details your site present at this website. Please let me know if it is okay with you. Take care!

  • https://www.youtube.com/watch?v=JMl6_0jPaGk&hd=1 keratosis pilaris cure diet

    Keratosis Pilaris (KP) is a anatomical pores and skin problem that will has effects on 40% on the planet’s people. KP appears to be a bunch connected with modest crimson lumps which are most commonly on the top section of your biceps and triceps, legs, butt as well as fewer normally about the encounter, which is often incorrectly recognized for zits. While there isn’t any treat with regard to KP, you’ll find ways to address it. We will provide you with just how.

  • http://wikieva.com/index.php/Th%C3%A0nh_vi%C3%AAn:MosesMayhew add skype credit less than 10

    Hi there, I enjoy reading all of your article.
    I like to write a little comment to support you.

  • http://www.whereto-buygarciniacambogia.com where to buy miracle garcinia cambogia

    Just wanna say that this can be very valuable, Thanks for taking your time to create this.

  • http://BustyCam.net/ milf webcam

    the accessories for golf are extremely expensive and joining golf clubs even adds a lot more expense,.

  • http://xunmeng.org/ Click for more info

    tiffany & co jewelry outletgoes over a wide array of diamond jewelry for use on your ceremony; wedding bracelets, bracelets, jewelry etcetera. Bridal costume fine jewelry is undoubtedly ideas within the range of supplies and even color selection pairing; fantastic plated and also components plated by means of gemstone not to mention pebbles,http://www.timedancercorporation.com,in colors formula which will attaching a contented great beauty in your direction.

  • Pingback: Roofing Contractors Colorado Springs

  • http://www.dietwise.com/__media__/js/netsoltrademark.php?d=fulhamlocksmith.webnode.com fulham locksmith

    Attractive section of content. I just stumbled upon your site and in accession capital to assert that I acquire actually enjoyed account your blog posts. Any way I will be subscribing to your feeds and even I achievement you access consistently rapidly.

  • Pingback: code promo iherb

  • Pingback: iherb coupon

  • http://cfcc.co.uk ralph lauren online sale

    cheap tiffany necklaces may just be well understood to be Earrings comprised of low cost mining harvests and then counterfeited or semiprecious diamonds. Additionally it generally known as style jewelry, garbage earrings and also it expected was designed as a general less expensive and inexpensive meant for repurchasing so that you can in good shape a particular and cutting edge clothing type.they’re just primarily composed of cost-effective ,discounted tiffany jewelry,gemstones just like rhinestones and place during combination, magical jewelry coated brass

  • http://dvdcases.net Bluray Case

    This is the best site for anybody who desires to find out about this topic. You notice so much its nearly onerous to argue with you (not that I truly would want…HaHa). You undoubtedly put a brand new spin on a topic thats been written about for ages. Nice stuff, simply nice!

  • http://graffitistyle.pl/profile/?u=5914 projekty domu

    Youre not the complete blog article poet, staff. You utterly have a touch important to bring about the web. Such a fantastic blog. Under the weather restore another time pertaining to further.

  • http://Stream.6Te.net/?shop_your_favorite_rothco_for_20_less_47756 http://Stream.6Te.net/?shop_your_favorite_rothco_for_20_less_47756

    I go to see daily some web pages and websites to read articles, except this website
    presents feature based writing.

  • http://cisninguskatsalogingu.eu/jakikantor.html ranking kantorow online

    Thanks for the concepts you have provided here. Additionally, I believe there are many factors which will keep your car insurance policy premium down. One is, to think about buying automobiles that are from the good set of car insurance businesses. Cars which are expensive tend to be at risk of being snatched. Aside from that insurance is also in accordance with the value of your car, so the higher priced it is, then higher the actual premium you have to pay.

  • Pingback: visalia dentist

  • Pingback: music lessons baton rouge

  • http://darunsat.info/index.php?do=/blog/34937/why-many-individuals-fail-in-affiliate-marketing/ Joshua Schmaltz

    While I like this writing style, I wouldn’t agree with your perspective in this particular one. I do take delight in your blog though.

  • Pingback: plumber glen burnie

  • http://www.mundoknet.com/quem-somos/ Seguidores

    Just desire to say your post is as remarkable. The clarity inside your post is just nice and i can assume you’re an expert on this subject. Nicely with your permission enable me to grab your feed to help keep updated with forthcoming post. Thanks a million and please continue the enjoyable work. que es el acne

  • http://www.autogaleria.pl/forum/member.php?27175-arekkh4 Loni Margo

    Hi this truly is kinda linked with inedible theme but I was asking yourself if websites use WYSIWYG editors otherwise if you have to manually suggest with HTML. I’m commencing a blog soon excluding have zilch coding expertise hence i hunted to acquire guidance through superstar with experience. Any stop will be present enormously treasured!

  • http://www.youtube.com/watch?v=BIzzC-nbX2k top funny commercials

    Sites of interest we’ve a link to

  • https://www.youtube.com/watch?v=6hRi9rP-d7Y invest ira

    I’m impressed, I’ve to admit. Genuinely rarely really should i encounter a weblog that’s both educative and entertaining, and let me let you know, you might have hit the nail concerning the head. Your thought is outstanding; the problem is an element that inadequate individuals are speaking intelligently about. We’re delighted we stumbled across this at my hunt for some thing relating to this.

  • http://www.acai.com.sg/riolife-organic-acai-berry-singapore-powder-150g.html acai singapore

    As I site possessor I feel the content matter right here is rattling terrific , appreciate it for your hard operate. You’ll want to hold it up forever! Most effective of luck.

  • http://www.youtube.com/watch?v=K6iCx2RV1QQ Pittsburgh PA For Sale By Owner

    Glad to see you are on best of factors. You sound like you realize what you are talking about! Thanks and excellent luck! Have a good day!

  • http://www.youtube.com/watch?v=Dtp-0MmQVNE biggest trucks in the world

    the time to read or take a look at the content material or web sites we have linked to beneath the

  • Pingback: kedai sukan memanah

  • Pingback: gold investment

  • http://www.cnzxmr.com/space-uid-219586.html kawa lavazza

    I have been exploring for a little for any high quality articles or weblog posts in this sort of area . Exploring in Yahoo I at last stumbled upon this website. Reading this info So i’m satisfied to exhibit that I have a very excellent uncanny feeling I found out exactly what I needed. I such a lot no doubt will make sure to do not disregard this website and give it a glance regularly.

  • http://www.petsmart.com/dog/waste-disposal/cat-36-catid-100113 buy viagra

    we prefer to honor numerous other world-wide-web internet sites around the web, even though they aren