Declaration of Independence

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness. - That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed.

Thursday, May 4, 2017

Economic Freedom

            The liberty principle for this Freedom Friday concerns economic freedom. The economy in the United States crashed eight years ago, and it has not fully recovered. Long-time Democrat voters switched parties and put Donald Trump in the White House. Since the night of the election, we have heard nothing good about Trump and the so-called “idiots” that support him.

            All we hear from media is that Trump is a rotten President who has not accomplished anything good in his first 100 days. Liberals are absolutely crazy with hate for Trump and his supporters. I am grateful for alternative news sources that bring the truth to us. Recently I read an article praising Trump, and I rejoiced to see something positive about him.

            Jeffrey Tucker, Director of Content for the Foundation for Economic Education, posted an article titled “Trump’s Tax Plan is Brilliant Politics and Even Better Economics.” I had to read the article just because it is mostly positive! Tucker explains that under Trump’s tax plan, the following tax rates drop: corporate profits (35% to 15%), capital gains (23.8% to 20%), and individual rates (drop to 10%, 25%, and 35% with the standard deduction being doubled). Deductions for charitable giving and mortgage interest are kept while estate taxes and alternative minimum tax are dropped. He says that the best part is the dramatic reduction on corporate profits.

            Tucker explains that the U.S. “government has tried to mastermind an economic recovery,” but it has not worked. After explaining how the government failed, he says:

Economic growth must come from the private sector. It must come from investment in private capital. The owners of this capital who are doing well and earn profits should be allowed to keep them and invest them. This creates new job opportunities. It allows for more complex production strategies. It expands the division of labor.

The crucial institution here is capital. Sorry, anti-capitalists. It’s just true. Capital can be defined as the produced goods for production, not consumption. It is making things for the purpose of making other things. Think about it. Without capital, you can still have markets, creativity, hard work, enterprise. But so long as you have an absence of capital, you are forever floundering around just working to make and sell things for consumption. This is called living hand to mouth.

Without capital, and the private ownership of capital, and security over your property rights, you can’t have economic growth. You can’t have complex production. You can’t raise wages. You can’t live a better life. Every tax on capital, capital formation, capital accumulation, and business profit reduces the security of property rights over capital. This is a sure way to attack economic growth at its source.

And this is precisely what American policy has done. The rest of the world has been wising up about this, reducing taxes on capital for the last 15 years. But the US has languished in the mythology of the past, regarding capital not as a font of prosperity but rather a fund of stagnant resources to be pillaged by planners in government. It is not surprising that this strategy results in slow growth and even permanent recession.

            Tucker continues with his explanation of how this tax cut will “unleash” the masses of “pent-up energy in this country.” He further explains that he thinks – because of “experience and intuition” that the following will happen: “If this tax plan goes through, the entire class of entrepreneurs, investors, and merchants will [receive] a loud signal: this country is safe for you to realize your dreams and make the dreams of others come true. … It prepares the entire country to weather [the next recession or financial crisis] better than we otherwise would.”

            Tucker’s article has much more information in it, and it deserves to be studied. I like the sound of positive comments. I also like the idea of an improving economy. If Trump’s tax plan sounds so good to an economist, it must be good for our nation. I hope it is.

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