By David Galland, Casey Research: Recently
I helped out with some delivery chores. As I drove about, I discovered
that one of the roads I would normally use was closed by roadblocks. It
was, I imagine, due to road repair work. I had to reverse course and
take a substantial detour.
I wondered why the road crew hadn't put
up a sign indicating the road was closed back at the main intersection,
but I shrugged and muttered something like "Typical government
operation."
Driving back home, this idea of roadblocks took root
in my mind. The thing is, only governmental entities can set up
roadblocks – at least, legally.
Obviously, there are times when such roadblocks are entirely appropriate... for example, when a bridge is found to be dangerous.
In that case, putting up a roadblock to let drivers know that the road is a no-go makes perfect sense.
For
example, a temporary warning sign to let people know that there is a
road crew fixing potholes ahead makes sense and that sort of thing.
Otherwise,
unless a road is damaged to the point where driving is either
impossible or ill advised, there should be no roadblocks set up. Makes
sense, right?
The decision to
set up a roadblock should be taken only by people who are close to the
problem, who understand the issues, and can deal with the problem on the
road, fix it, and open it up again as quickly as possible.
Imagine
then a world where government officials, as often as not operating
hundreds or even thousands of miles away, are in control of the
roadblock rules.
Despite having no real knowledge of the problem
at a local level, they dictate that those roadblocks be set up and made
permanent based not upon the specific condition that a road is out, but
rather based on political expediency, cronyism, imaginary threats, and
donations by influential lobbyists.
In a world like that, where
roadblocks are set up all over the place and without any real thought to
the consequences to road users, imagine how difficult it could be to
get from Point A to Point B.
In fact, it would not be out of the
question that the single road leading to your house could be blocked,
leaving you no way out.
While that seems rather extreme, I would contend that it is a valid metaphor for the world we now live in.
To make the point, a couple of weeks ago, I discussed my recent
travels to Ireland and Portugal and the devastating consequences the
actions of the European central planners have had on those economies.
Before
the European Commission bulldozed their way of life, the Portuguese
fishermen made a nice living. They made money and supported their
families the same way they had for generations. Life was good.
But
not long after Portugal's admission into the Eurozone, however, they
woke up one morning to discover their own regulatory roadblock.
It
was cooked up by bureaucrats thousands of miles away who have no idea
of the local challenges or hazards it would bring to the local economy
and the families that rely on it.
This roadblock required them under law to destroy their fishing boats, thereby preventing them from earning their livelihoods.
Another example of roadblock insanity can be seen in energy policy here in the US.
Hollow Sound Bytes and Pointless Platitudes
Politicians bray about the need for energy independence.
Behind
the scenes, however, they kowtow to the environoids and special
interests by littering the landscape with roadblocks that prevent energy
companies from achieving and innovating our way to exactly the
independence they tell us we must have at all costs!
Here's where it affects you:
Government has set up another sizable roadblock. This time it is in the path of savers.
By
meddling in the market in order to allow the debt-bloated government to
continue its out-of-control spending, the Fed has suppressed interest
rates to the lowest levels in US history.
Almost overnight,
retirees and others who counted on the yields earned on savings to cover
living costs have come to a dead stop in front of a roadblock placed in
the way of their most pressing needs.
Their
finances now in tatters, even people in their 70s who have worked hard
and saved all their lives are being reduced to serving up French fries
at fast-food joints.
For another roadblock, look no further than Obamacare.
In a recent Reason
magazine article, it also expressed the same sort of convoluted logic
that has gone into creating a series of related roadblocks. As one wit
put it:
"If you think health care is expensive today, wait until it's free."
One
of those roadblocks has to do with the considerably higher taxes tucked
away in reams of unreadable legalese that will shift yet more funding
from the private sector to the public. Here's the text from an email
sent to Doug Casey by a financial professional friend of his this week:
You
may have had only a casual interest in the debate over the Obama Health
Care bill, and even if you followed it closely, the headline discussion
seemed to be more on the inclusion of millions of uninsured citizens,
the penalties for not being insured, etc., vs. the fact that this is a
noticeable income tax increase on investment income.
For
those who have an adjusted gross income of $200k ($250k for joint
returns) or more, the number on the bottom of the first page of your
1040, which comes before itemized deductions, charitable gifts, or
personal exemptions, there is a +3.8% uncapped tax applied on all
investment income (capital gains, interest, dividends, etc.), plus an
obscure provision of the code known as the Pease, which reduces the
value of itemized deductions, adding another +1.2% to the tax rate.
Be
aware that if the current "Bush tax cuts" are not extended, the current
long-term capital gains tax rate of 15% will go up by two-thirds to 25%
beginning 1/1/2013. The top rate on dividends will nearly triple from
15% to 44.6%!! Ouch.
Unlike Social
Security taxes, which are capped, the Health Care tax is uncapped. The
mouthy Warren Buffett is finally getting his wish – paying more than a
15% tax rate. Instead of just writing a check for more, which he is
certainly welcome to do, as an advisor to the administration, he
probably had some influence on getting it applied to all higher-income
Americans.
As you know, I am not a tax
attorney nor an accountant, so am sending this as a heads-up, and if it
is relevant to you, you should confirm the details with your tax
advisors.
On the topic of throwing up more tax roadblocks, here's
one from overseas… sent along in an email from our own Vedran Vuk. In
Vedran's own words…
"Most of the time
when we think about raising taxes, it's the threat of millionaires
leaving. We don't usually think about them not coming to a country.
Here's an interesting case of Zlatan Ibrahimovic signing a soccer
contract for 14 million euros per year. If the new tax goes through in
France, he will be taxed for 75% over the first million euros. If the
tax does go through, good luck attracting multimillion-earning players
to France. A lot of people in the 99% will be pretty unhappy when all of
their sports teams become horrible as a result of the tax."
My favorite quote from the article is:
"Ibrahimovic
will earn 14 million euros annually, sports daily L'Equipe reported.
Sports Minister Valerie Fourneyron said that indicates that European
football needs more regulation."
Yes, just what the world needs – more roadblocks.
Of
course, this time it's to block decisions that the football team's
management believes it needs to make in order to win (and therefore
attract fans, sell tickets, and raise rates to sponsors).
Insane.
I recently ran into a public-high-school English teacher and asked how the education business was going.
His response was, "Do you have four days for me to tell you all that's wrong?"
"It
seems like every month some team or another shows up from the
government in order to introduce a new teaching program. And the really
frustrating thing, is that none of these people has ever taught school."
He
went on to say that it becomes clear very quickly that they have no
idea what they're talking about and that each new protocol was conceived
by some bureaucrat with no teaching experience either.
It was
eye-opening to hear such emotive language from a public-high-school
teacher – in my experience, most of the people who choose that
profession are largely on board with the whole big-government thing.
Yet, it seems that more and more people are beginning to catch on to the idea that central planning is not such a great idea.
It's how you end up with roadblocks where roadblocks don't belong.
It's
how you end up on a road you never intended to travel along, forced
there by roadblocks that don't make sense and clearly don't help.
Ultimately you risk getting hopelessly lost, or you turn around go back the way you came and start again.
So yet another school program gets introduced, another law, another rule. And it all starts again.
Happily, it is almost a certainty that, in time, the bureaucrats and their many roadblocks will be shoved aside.
I
say that because there really is a limit to how long people will put up
with being denied access to their fundamental rights of life, liberty,
and the pursuit of happiness.
There is only so long that
entrepreneurs will put up with having to navigate around more and more
roadblocks in order to provide a product or service to consumers, when
such roadblocks serve absolutely no useful purpose.
Unfortunately, while there are a number of things you can do to get started and plenty of sound advice along the way, it will take time.
That's
because there is still a considerable swath of the voting public who
actually buys into the idea that government is a force for good and that
without it, equality and justice would go by the wayside.
And so
it is that the US and virtually all of the large economies around the
world are still firmly in the grip of the notion that central planning
is the only way to get to the green pastures that surely must be just
over the next hill.
Or, more specifically, the next round of legislation and policy machinations (read "roadblocks").
There
has never been a starker example of the mindset of the current
administration and its many followers than a comment made by President
Obama this week. Here it is:
"If you've got a business, you didn't build that.
Somebody else made that happen."
Somebody else made that happen."
His point is that essentially, all human progress is due to the good work of governments.
- That without governments, there would be no roads to set up roadblocks on.
- There would be no Internet.
- There would be no body of case law nor a judicial system to enforce that law.
- There would be no telephones.
I disagree, and so do many others – including many from past governments who see the direction Washington, DC is taking and don't like it.
I contend that this view of the world is essentially the opposite of the tenets of the capitalist/free-market model.
In the view of Mr. Obama and his ilk, We the Sheeple are all but helpless without the government to lead us forward.
That
the US government's activities as a share of GDP have gone from well
under 10% at the beginning of the last century to over 40% today – and
will go over 50% by the time Obamacare is fully implemented – makes it
clear that this country is now operating on principles that run
completely contrary to those that promote success and economic
well-being.
The consequence of continuing to operate on this model
will be a steady decline in the quality of life for most Americans,
while favoring a ruling elite that produces nothing… except more
roadblocks.
Ayn Rand will someday be celebrated as a futurist.
But
how does one fight back? Grab a gun? Don't even think about it: the
Second Amendment may have been intended to protect against a tyrannical
government, but the actual truth is that the weaponry of the US
government is so incredibly advanced at this point that even the most
well-armed militia wouldn't last a minute.
No, the best way to "fight back" is to get wise to the whole thing.
Understanding what's happening and knowing where the roadblocks are likely to be just makes sense.
And
having clearly set out strategies that both sidestep the roadblocks and
preserve your wealth is not just a good idea – it's critical.
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