It’s a Basic Concept — Raise Taxes, Businesses Hire Less

Tuesday, 17 Aug 2010 10:19 AM

By Richard Rahn Newsmax

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The bad news is that the economy is not growing or creating jobs as the juveniles who control Washington predicted.

Most clear-thinking adults, even without formal training in economics, can understand that if the government greatly increases regulations on business (not justified by serious cost-benefit analysis) and increases taxes on labor and capital, the cost of doing business will rise; hence, businesses will have to hire fewer workers.

Obviously, these basic concepts have eluded a majority of the members of Congress and many in the administration because this is precisely what they have been doing.

When reporting on a government action, newscasters often have to say, "I am not making this up." Bloomberg just reported that the Federal Housing Administration (FHA) has agreed to insure a mortgage "that enables buyers to make a down payment of as little as 3.5 percent in a building where apartments are listed from $820,000 to $3 million."

Did we not just have a housing bubble and financial meltdown that was caused, in part, by government encouraging people with too little money to buy more housing than they could afford? And what sort of mental process takes place in a "mind" that thinks it is a good idea for some hard-working family in Peoria with an income of $50,000 a year to be guaranteeing (i.e., subsidizing) a mortgage so that some New Yorker can live in a $3 million apartment? This is precisely what the FHA program will do.

Recently, a chairman of a substantial European bank explained to me why he can no longer take American clients or invest in the United States. Under some of the new U.S. laws and regulations that were designed to get a few billion more dollars for the IRS, those who run foreign banks and have U.S. "tax persons" (citizens and green card holders, etc.) as clients can be held liable both civilly and criminally for not reporting them to the IRS. But, in an age when millions of people have multiple passports and citizenships, there is no way any banker can know with certainty who is and who is not an American "tax person."

As a result, the United States is in the process of driving away, perhaps, trillions of dollars in needed foreign investment and millions of U.S. jobs because a majority of those in Congress are unable to see the very costly consequences of their juvenile actions.

But don't despair. There is good news. It seems that Rep. Maxine Waters and Rep. Charles B. Rangel are being charged with violating the rule that prohibits any federal employee from "discriminating unfairly by dispensing special favors or privileges to anyone, whether for remuneration or not."

Hmmm: Is this not what much of today's Washington is all about? Do we have enough jail space?

Richard W. Rahn is a senior fellow at the Cato Institute and chairman of the Institute for Global Economic Growth.

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