And so it begins!

If you’re a regular visitor to the Drudge Report, you’ve probably already seen this. That’s where I found it. But it’s worth posting again. Take a look at what happened on the floor of the Chicago market on live television! You can see it at CNBC.

Mr. Santelli says something I was thinking about earlier today: “you can’t buy your way into prosperity.” Think about how you would handle this in your own life. If you saw your own income declining, would you go out and buy the most expensive car you could find? Of course not! Government believes the rules are different for them but they are not. If government held to common sense fiscal policy, these kinds of spending binges would never happen. No nation has ever taxed itself into prosperity and no nation has ever spent its way into prosperity. The period known as the longest period of peacetime prosperity began as a result of Reagan’s policies. He believed if we gave the producers in the country (the rich) a break, they would be able to put their money to work creating jobs thereby creating more revenue.

To quote Julie Andrews in The Sound of Music (my favorite movie, in case you’re taking notes), let’s see if I can make this a bit easier. If you are intimately familiar with how an economy works, I apologize for talking down to you. When I lived in Florida, I started and ran a retail operation with my wife. We sold at flea markets, outdoor festivals, and eventually, a couple of malls. When we started, we had just a few items on a rickety table. We put some of our money into buying products which we would then sell for more money than we paid for them. That’s called profit. We would then take the profit and buy more products which we would sell thereby growing our business. We had a philosophy of keeping our profit margin low and selling a lot of product in order to keep the products fresh and cash coming and going. Soon we were becoming known for our low prices. Eventually, we were selling out of three locations at the same flea market. I had to hire a couple of workers to help us expand our business. Once we had enough experience in the flea market, we decided to move our business indoors to the mall. We were a full-fledged business, paying employees and paying our taxes. This is the model of how a business grows.

So let’s look at how my business affected the economy around me. When I opened my business, I had to get a license from the city, so the local government got some money. When I bought product to sell from wholesalers, they made money and paid taxes on the income. When I rented my spot at the flea market, the market made money and paid taxes on it. When I hired workers, they paid taxes on their income. When I sold product, I collected tax on the sales so the government got some from those transactions. When I moved into the mall, I paid a LOT more than I did at the flea market so the mall was paying a lot in taxes. I had to sell more to make the rent payment, so I collected more sales tax. And so on. . .

This is known as supply side economics. If I had been able to keep more of the money I was charging for my products, I would have been able to either lower my prices (theoretically enabling me to sell more product) or expand my business, also allowing me to sell more product. Either way, it generated more income and taxes. Now, imagine at a time when business is dwindling, the governent decided I needed to pay MORE in taxes. I would not have the resources to keep my business afloat. Now imagine both of those situations in the scope of thousands of businesses affecting millions of people. That’s billions in taxes, either way.

And now, those who are intimately familiar with these basic economic principles, traders on the floor of the stock market who buy low and sell high every day, are starting to revolt at the notion that the government is going to reward those who haven’t shown any ability to stimulate anything other than the banks’ foreclosure departments.

Obviously, these are just a bunch of Republicans who hate Obama and wouldn’t like him no matter what he did! To paraphrase Jesus, a prophet has no honor in his home town. I’m sure that’s all that’s going on here. They couldn’t possibly be right! Right?!?

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1 Comment

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One response to “And so it begins!

  1. The only problem with supply-side now is that there are no alternative sources of income for the government to turn to while waiting for it to work. The turn-around is about 2 years on these things. Furthermore, when you are overcome with panic it is hard to think of these things. Although I like Santelli’s remark about Cuba. Truly this is where we are headed. But the problem is so much deeper than anyone is willing to recognize. We need to get back to basics, train kids to honor their aging parents and not expect the gov’t to do it. We need to encourage businesses to keep jobs in the US by taxing imports. Make it cheaper to work here. Maybe tax credits for companies that do not outsource overseas. WE need to lower taxes on those who employ people – that is called job creation! We need to stimulate business to generate jobs NOT poor people to buy crack. Hmm, at least they will forget the nation was once free.

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