Obama, Kratovil, Comegys – The Triple Threat of Economic Theory

Put a Democrat in government and what do you get – socialism.  Call it what you want, but government interference in the markets is socialism;  the picking of winners and losers either directly, indirectly or by queering the markets.

Living in Wicomico County, I have the dubious honor of observing three individuals who wish to play with the free market while showing less knowledge of economics than my 17 year old.  One man wishes to be our President.  One wishes to represent us in Congress.  The last wants to be the Mayor of Salisbury.

The ONE

Barack Obama is the “ONE”.  He wishes to save us all by “spreading the wealth”.  How?  Obama wishes to turn America into a welfare state unrivaled in our history.  Obama claims that 95% of Americans will receive a tax cut if he is elected.  That’s a pretty mean trick given that 40% of Americans pay no income tax.

Like our Lord turning water into wine, the “ONE” is somehow turning direct transfers into “tax cuts”.  It is almost fortunate that Ronald Reagan is not here to see his legacy dismantled.  Reagan’s “Welfare Queens” will be most of us if Obama has his way.

How will Obama do this?  Two events must take place.  One, the most productive (financially) must pay more in taxes to subsidize those of us who are not as well off.  Second, our children and grandchildren must bear the burden of an even greater national debt.  Before you go off about Bush and the Republican Congress, note that you will get no argument from me.  Few liberals have been a greater critic of either.

The fact is that if we are going to increase the tax rates on corporations and high earning citizens then we are going to provide a disincentive for them.  Corporations are already moving offshore in greater numbers because of our relatively high corporate tax rates.  While I don’t expect to see waves of the wealthy relinquishing their citizenship, history has proven that they will be more reluctant to risk their capital if the government is going to take an increasing share.

While liberals like Obama claim that increased government spending is “investment”, this is merely a rhetorical device to soften the blow of being labeled a “tax and spend” liberal.  Investment comes from those willing to put their capital at risk.  Granted, under the waning days of the Bush administration we are seeing government put OUR capital at risk.  Obama and his socialist brethren are literally liking their proverbial chops at the example set by a Republican party who turned the word conservatism into a synonym for “socially correct” big government.

It’s the Speculators

When gas was $4.00 a gallon, Frank Kratovil opposed offshore drilling.  Refusing to acknowledge the basic laws of supply and demand, Kratovil claimed that it was the evil speculators who were responsible for escalating energy prices.

In a few short months, the price of a gallon of gas has fallen to $2.64 (locally).  Why?  Was Kratovil somehow able to wave a magic wand and abolish those horrid people on the commodity desks of New York and London?

No.  Frank has witnessed a phenomenon that has worked from the moment there were enough people to trade; a phenomenon explained since Adam Smith publish The Wealth of Nations in 1776.  It’s the market Frank.

Due to a variety of factors, not the least of which was a mortgage crisis caused by government interference in the markets, the world’s economy has been contracting.  A contracting economy means a reduction in the demand for oil.

A lowering of demand means a reduction in price (assuming supply stays the same).  Do you get it Frank?  Supply.  Demand.  There are basically the same number of speculators today as there were six months ago.  What happened Frank?

The market is what happened.

Bubbanomics

Salisbury Councilman Gary Comegys is our own local Nobel laureate.  To hear Comegys expound on economic theory from his perch in the Salisbury Council chambers is a thing to behold.  It’s enough to make you lose whatever faith you had left in our educational system.

Comegys is what some would call a “Big Business” Democrat.  He seems to believe that the average citizen should be forced to subsidize residential developers.  A socialist by any other name is still a socialist.

The Salisbury taxpayer does this by building roads so that developers can complete their projects (and paying the developrs for the land to boot).  They reimburse developers for infrastructure (such as sewage lift stations) that only the developer will make use of.  They do this all against their will.

Comegys claims that this interference with the market is necessary to increase the revenue stream of the city.  Unfortunately, Comegys doesn’t spend much time on the expense side of the ledger.  Why else would tax burden of the average Salisbury citizen be spiraling upward?

Comegys may continue to hold out hope that one day he will be called to Stockholm and rewarded for his great “Growth Pays for Growth” theory.  If that ever occurs, I will admit that I should have voted for Al Gore in 2000.

Comegys opposes impact fees.  Again, he argues that the average citizen shoudl subsidize the few.  He does so by claiming that an impact fee will raise the price of new housing.  He can only make this argument by assuming that the developers are not charging what the market will bear.  Again, for the socialist, the market does not work.

Comegys may keep clutching to this totally discredited nonsense, the balance of the citizenry knows better.  Why?  While the average man or woman does not claim any great expertise in economics, they know in their hearts that subsidy is merely corporate welfare.  Corporate welfare queers the market, just as individual transfer payments skew the individual’s incentive to be a productive member of society.

Comegys, however, should be forgiven his transgressions.  Like his brethern Barack Obama and Frank Kratovil, Comegys does not accept the near a priori truth of the market.  While this is the economic equivilent of claiming that the sun is shining in Salisbury at midnight, socialists like Obama,  Kratovil and Comegys must cling to the discredited belief that markets do not work.  If they did not, the reason for their political existence would cease.

cross posted at Delmarva Dealings






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