The Road to Economic Demoralization -- Washington Is Going the Wrong Way
By Lawrence Kudlow
July 13, 2009
Page 2 of 2
Incidentally, our 40 percent corporate tax rate is already almost 15 percentage points higher than the corporate rates in most of Europe.
Washington's enormous expansion of the state-, local- and federal-government spending share of gross domestic product to over 40 percent -- including Bailout Nation, TARP and takeovers in numerous industries -- is eerily reminiscent of Old Europe's old policies. And in an ironic twist, Europe seems to be moving toward a lower tax-spend-and-regulate, Reagan-type approach, while the United States is regressing to the failed socialist model of Old Europe. This makes no sense.
Higher tax rates undermine the incentive model of growth. At the margin, investment risk and work effort become less rewarding. On top of this, Obama's regulatory moves toward greater government control of the economy will further drown animal spirits in a sea of red tape born of bureaucratic officialdom.
Think about this in terms of the threat to nationalize heath care, which is over 15 percent of the economy. Additionally, Washington's cap-and-trade proposals will essentially nationalize the entire energy sector -- another 15 percent of the economy -- sending long tentacles into every nook of the economy that's impacted by energy, which is virtually everything.
And all this comes on top of the U.S. government's takeover of auto companies, banks, AIG, Fannie and Freddie. Instead of Schumpeterian gales of creative destruction, we're on the road to economic demoralization.
Here's the clincher: Year-to-date, Dow Jones stocks are off 8 percent, while China stocks are up 71 percent. The world index is up 4 percent. Emerging markets are up 25 percent. They're all beating us. None of this is good.
We're going the wrong way. That's why stock markets are not voting for the United States any more.
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Note -- The opinions expressed in this column are those of the author and do not necessarily reflect the opinions, views, and/or philosophy of GOPUSA. >> Back -- Page 1 2
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