SPIN OR REALITY?

Governor Patrick and the legislature have each spoken about the need to make drastic cuts in spending and redundant services as well as tax increases to control the budget during these difficult times. The private sector has been cutting back on workforce size while striving to maintain or even improve productivity.

In the meantime, our illustrious leaders have been busy authorizing new government workers to interview and become new hires on the Commonwealth’s payroll. In fact, since last fall, the Commonwealth has taken on an additional 2,200 workers. This increase puts the responsibility of paying the salary of just under 100,000 workers onto the backs of already overly burdened taxpayers.

In addition to paying for these additional salaries, we are also paying for the newly unemployed whose numbers are sure to grow. That growth will stem,  from among other things, a hike in the State sales tax to 6.5%.  This will drive even more Massachusetts residents across the border to tax free New Hampshire. The sales tax, like the social security tax, hurts those who can least afford additional expenditures; the poor. As you will note, most taxes imposed or suggested by the Commonwealth are regressive by nature and punitive to those the legislature claim to be protecting from the predatory, evil rich…you know, that group of bad men and women who actually create, invent and produce those commodities consumers desire and from which jobs and individual family security is found. Massachusetts’ determination to be a bad neighbor by trying to force New Hampshire businesses into acting as Massachusetts revenue collectors has all but assured an already recalcitrant NH to encourage border crossing shopping incentives. In the end, more small businesses bordering NH will fail as a consequence of not being able to compete fairly and more workers will join the unemployment rolls and find their way into the pockets of the remaining taxpayers.

While State workers are enjoying a growing workforce, towns and city governments are being forced to cut staffs due to cuts in State aid made necessary by the recession. The Commonwealth has yet to make any effort to cut the biggest drain on the budget and the taxpayer – wages, benefits and retirement plans of State workers. Until that occurs, the Commonwealth will not only continue to remain in debt, but that debt will continue to grow with each passing day.

Add to this scenario, the new taxes likely to be imposed by the Feds; including a “wealth surcharge” tax for all people making over $200,000.00/year and for couples making $250,000.00/year. The majority of people in this wage range in Massachusetts are owners of small businesses. The people most likely to be hurt by the “wealth surcharge” are those that small business owners will be forced to cut from their workforce. The net effect of this regressive tax will be to reduce the number of taxpayers contributing to the system, and to add to the number of people drawing tax money from government instead of earning a salary.  It is already estimated that there are 6 people competing for every one available job.  That number is sure to go higher adding to the misery index. Did you know that Sri Lanka already has a “wealth tax”? I guess Obama’s best and brightest feel that taking lessons from 3rd world countries is the new way out of our fiscal storm.

In the meantime, there was a recent decision forced by Martha Coakley’s office requiring business to pay the “prevailing wage” on public works projects; even though workers would gladly (and did)  take the jobs for less. This requirement stems from the discriminatory Davis Bacon Act of 1931, which was part of President Roosevelt’s plan to keep wages artificially high, in association with moving off the gold standard, to overcome the damage of deflation (a condition where money becomes more valuable because there isn’t enough to go around).

This program actually proved to be a great contributor to the Great Depression lasting 15 years or more.  Because public works projects are bids to perform work for the State, the Commonwealth (the taxpayer) is forcing itself to pay more for the project rather than less.  So, what is the point of seeking bids when you are already committed to over payment?

The Davis Bacon Act is still around today because of the influence of labor unions on government, and is a pet of the liberal wing of politics. FDR made a deal with the devil for support and power, and the devil is still demanding payment 75 years down the road.  A key mantra of labor unions when it comes to negotiations has always been that enough is never enough.

President Obama is reading FDRs playbook and following it, mistakes and all, by the numbers. If he continues down this road, expect double digit unemployment to run for two decades or more. Prior to the run up on this particular economic failure, there was no gold standard to act as a limit for spending. We in the U.S. were already running record deficits, spending money that had yet to be earned before the recession hit. The number of dollars being printed today will stretch to infinity making each one worthless unless some restraint is shown quickly.  When inflation hits, people will truly understand what the term depression means.

I think most people would like to see everyone living a good, decent life. The reality is that humanity will only reach that capability when there are no humans left. To quote Reinhold Niebuhr, “Evil is not to be traced back to the individual but to the collective behavior of humanity.”Man is not good by nature; he is good by enlightened reason and by appreciating the value of rational self interest. As Karl Menninger once said: “The voice of intelligence … is drowned out by the roar of fear. It is ignored by the voice of desire. It is contradicted by the voice of shame. It is biased by hate and extinguished by anger. Most of all it is silenced by ignorance.”

So the question, now, becomes: Is the Governor and the Legislature accurately describing what they are doing to lead us out of this mess, or are they spinning. If they are spinning, what are you going to say or do? I’ll check back later for an answer. I have a grand daughter who is in desperate need of someone to serve tea too. See ya!