Chapter 3The Economic Pathway to Liberty
If industry and labor are left to take their own course, they will generally be directed to those objects which are the most productive, and this in a more certain and direct manner than the wisdom of the most enlightened legislature could point out.
As we look ahead and plan for the next forty years, we must never lose sight of the fact that America is a nation that was built on fundamentally correct principles. These principles have been proven to work in practice, and when they’re ignored, failure is the result.
Glenn C. Graber’s cut-flower thesis of morality states that morality cannot endure when it is cut from its roots. So too will America’s prosperity wither when cut from the roots that nourish it. Not immediately, of course. As we all know, flowers look vibrant after they have been cut. But eventually, without the nourishment that comes through its roots, every cut flower will die.
In America today, the foundational roots of our economic prosperity are being cut by the very people who swore oaths to nurture and protect them.
Politicians think short term, like someone picking a flower to enjoy for the moment. We must think long term, like farmers who plan beyond the next harvest. For the long run, the only way to ensure economic growth is to study and guard the principles that have graced America with the greatest prosperity in world history. We must guard against those who work to destroy our economic roots, either intentionally or through well-intentioned ineptitude.
In the previous chapter we discussed the imminent economic challenges facing our nation. We saw that the greatest threats to our way of life come from our fellow Americans, from those who are elected to represent us.
Despite proclamations from politicians and the media on the left that America is in recovery and we can all relax, we in the Tea Party movement know the truth. The Great Recession is upon us. Things are bad, and they are not getting better. In fact, it appears they are getting worse.
What is holding America back? Why is its economy suffering? Why are so many people still unemployed? As of August 2011, the Bureau of Labor Statistics reported a 9.1 percent unemployment rate. That statistic does not include the underemployed and the hundreds of thousands of people who have simply lost hope and given up looking. In reality, almost one in five Americans who would like to work simply cannot find a good job. With unemployment historically averaging less than 6 percent, something is definitely wrong.
The government has pumped billions of dollars of “stimulus” spending into the economy, with President Obama promising that doing so would keep unemployment under 8.5 percent. And yet unemployment is still far higher, inflation is on the rise, food and fuel prices are skyrocketing, and it seems there is no end of trouble ahead for the average American family.
Meanwhile, Washington, D.C., is booming. As of summer 2011, the average sale price for a home in our nation’s capital was $415,000. This represented an increase of 7.8 percent, or $30,000, in just three months, and 18.6 percent compared to the prior year. Home prices have appreciated 3.8 percent over the last five years in Washington, D.C., while property values in the rest of the country have plummeted. While the center of government thrives, the rest of the nation is suffering. No surprise there.
So what must we do to return America to the free-market greatness that took us from the Jamestown settlement to the great pioneer migrations to the West, through the industrial revolution, to the moon, and now into the modern era of mobile communications and social media? We have to unlock the spirit of entrepreneurship that has always driven Americans to economic greatness. Men and women invest their time, their smarts, and their money into the economy—not to feed a bloated government or to “spread the wealth around”—because they are motivated by the desire for economic gain. They are motivated by the idea that, through their own hard work and ingenuity, they can improve their lot in life. They are motivated by the American dream. But that dream is now gasping for life in this country, and our government is largely to blame.It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.
We need to get government off our backs and free the people to do what Americans do best: create wealth, jobs, and prosperity.
Historically, the government has been most involved in the American economy in four ways:
• Monetary policy
• Direct spending
Each of these is a lever used by politicians to control and manipulate what was intended by the Founders to operate as a primarily free economy based on private property rights. Yet each of these levers is now intended to replace the wisdom of the market with the wisdom of a “ruling elite” that believes it knows better.
The results speak for themselves. We could take this moment to remind everyone of the repeated and predictable failures of government intervention these past years. But instead, let’s ask the following questions. If Stimulus 1 was such a good idea, why did we need a Stimulus 2 or all those other rounds of stimulus under different names? If Quantitative Easing 1 (QE1) was such a good idea, then why QE2—or, even worse, a proposed QE3? If propping up mortgage giants Fannie Mae and Freddie Mac was the right thing to do, why did Fannie Mae report a net loss of $6.5 billion in the first quarter of 2011 and have to come back to the taxpayers for yet another multibillion-dollar bailout? Why are people’s homes still being foreclosed upon? Why is the housing market still in collapse? And where are all those jobs we were promised?
The onus is on government to prove the merits of its anticonstitutional, interventionist, never-worked-any-time-they’ve-ever-been-tried policies. We offer, as a counterpoint, the entire arc of American history, which proves that when we adhere to America’s free-market founding principles we succeed. Period. Works every time it is tried.
Right now, there are hundreds, if not thousands, of people in Washington, D.C., and in departments of economics at universities around the country who are trying to come up with new programs to help the economy. They truly believe that getting our country back on its feet is a matter of developing a new government program, or figuring out which new infrastructure projects to spend your money on, or which new technologies to subsidize.
The truth is that the American economy is like a muscle car, revving its engines and ready to go, but trapped at a government stoplight. Instead of getting out of the way, and letting the economy roar and speed back to life, the government would rather tax those cars to extinction and waste billions of dollars on high-speed trains that are a drag on the economy, not a driver.
Those who run businesses in America, and who don’t depend on huge government subsidies, just want to be left alone. They know where growth comes from. It’s not from Washington. The chief economist of the National Federation of Independent Business, William Dunkelberg, put it clearly: small business owners in particular “do not trust the economic policies in place or proposed . . . The U.S. economy faces hurricane force headwinds and the government is at the center of the storm, making an economic recovery very difficult.”
Or as Ronald Reagan stated, “Government is not the solution to our problem, government is the problem.”
So what can we do right now to take the shackles off the American economy? Let’s start with our tax system.
The American tax system, both individual and corporate, is incomprehensibly complex and growing worse every day. As a simple measurement of this fact, it is worth noting that the number of pages of federal tax rules increased from an absurd 26,300 in 1984 to an astounding 71,684 in 2011. That’s thirty-five times longer than the King James Bible.1 And while the average corporate tax rate in the thirty largest industrialized countries has declined from 38 to 25.5 percent between 1992 and 2011, our comparable rate is now 39.2 percent.
Canada’s corporate tax rate is 16 percent. And its economy is doing better, its unemployment rate is lower, and its dollar is now worth more than ours—none of which was true just three years ago.2
At the individual level, few taxpayers are even capable of figuring out or filing their own income taxes. When America’s treasury secretary can’t even figure out how to file his own income taxes, as was revealed in January 2009, something is radically wrong.
Individual taxpayers spent an estimated 2.43 billion hours in 2010 complying with America’s income tax laws. That is an incredible amount of wasted productivity at the national level. According to the National Taxpayers Union (NTU), “Using the most recently reported average employer cost for civilian workers by the Bureau of Labor Statistics of $29.37 per hour, this time is worth an incredible $71.4 billion!”
And the cost is not just in lost productivity. It’s also money directly out of pocket for American taxpayers. Again, according to the NTU, “Individual taxpayers will spend a lot of money too: an estimated $31.5 billion this year  for tax software, tax preparers, postage, and other out-of-pocket costs, according to the most recent Internal Revenue Service (IRS) regulatory filing.”3
There are serious moral considerations with our tax system as well. Today, more than half of American households pay no income tax at all.4 That means there are now more takers in Amer...