Saturday, May 29, 2010

Taxing Ourselves and More Random Thoughts

While Pratt is correct that the propaganda is the basis of the sales tax increase in Arizona, I remain somewhat puzzled that the propaganda is effective. While it is true that the public sector unions have been screaming about the failure of education due to lack of funding, any more it seems a broken record. How many times does the taxpayer have to hear the cry before saying enough. More importantly when does the taxpayer realize that states that lower taxes draw businesses to the state while states that raise taxes drive businesses out. For examples look to California and New York and compare them to Texas. New Jersey is another state that has driven high income earners and businesses out of the state, but the new Governor is attempting to change that. He is cutting spending and of course upsetting the public sector unions, especially teacher unions. Governor Christie of New Jersey had a great response to a teacher who was yelling at him “you are not supporting my education. You are not supporting my experience.” Christie said “Well, you don’t have to teach. You could do something else.” The public sector unions are the cause of Greece’s crisis and are leading every Western nation in the same direction.

The massive oil spill in the Gulf has led to a shutdown of offshore drilling and confirmed environmentalist’s worries about onshore drilling. The point I think everyone is missing is that this disaster lies at the foot of the environmentalists. They forced drilling out five miles where the ugly rigs could not be seen from shore. Think how much more dangerous it is to drill down a mile or so in water than to drill on land. A blowout on land would have been stopped virtually immediately. What this disaster should tell us is that we need to collect energy from the safest and cheapest sources. And that is on shore drilling, just offshore drilling, and the use of coal. It would be much less expensive to clean coal than it is to force drilling 5 miles off shore and bear the costs of a blowout like the current one.

The European Union is done, stick a fork in it. It always was a strange beast but now with Germany bailing out the Southern nations, the pressure on it to collapse is higher than ever. The idea of the European Community was to ensure that the terrible wars of the 20th Century did not occur again. If the economies could be tied together, it was thought, then the events that led to the Wars could not happen again. The mistake the community made was to attempt to convert the nations to a single economic entity. It did not seem logical that people and customs as different as Germany and France and Greece and so on could become like the states in the US. The Euro meant that Greece, Spain, Portugal and others could go on spending, running huge debts, and having more than half their labor force employed by government while Germany to the large extent, and France less so would support them. This situation not only creates moral hazard but creates tensions and divisions inside Germany and France. The EU should have kicked Greece out if they wanted to retain the union. Bailing them out will simply delay the collapse of the entire union for a short time.

Speaking of bailouts, will the US bail out California? The public sector unions have refused to accept any budget cuts. Taxes have maxed out – businesses and high income earners are leaving the state in droves. A higher tax of any kind will simply drive more out and reduce revenues. So, will California go bankrupt or will taxpayers in the other 49 states bail it out? If taxpayers do bail out California the same type of moral hazard is created as in the EU. If California gets bailed out, why should any other state cut spending?

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