Party Line Economics

Last Wednesday, I read an interesting editorial in the International Herald Tribune. It was titled “A sobering census report: Meager income gains.” This editorial struck a chord with me. So did the two in the New York Times that cited the same census report. I tend to avoid commenting about party politics, but the correlation between the weakness of the economic expansion over the past five years, and the current Republican led government in Washington D.C., is too strong to ignore. I am not an Independent, I am unaffiliated. Being identified with one particular political party doesn’t interest me. The issues that benefit the average US citizen, families, the environment, and small businesses, are those that interest me most.

The current economic expansion (many think it ceased expanding a while ago and is now recessing) has not benefited everyone. In the editorial, the Tribune argues that “…the trend becomes crystal clear: The only group for which earnings in 2006 exceeded those of 2000 were the households in the top 5 percent of the earnings distribution.” That is quite an indictment for an administration that has pushed tax cuts that do in fact benefit the wealthy. For the most part, I support pro-business monetary policy. Stimulating interest rates is important for business growth. So is moderate taxation. It is irrational to think that you can tax businesses enough to cure the ills of society. There is a balance between taxing a business so much that it stifles growth, and not taxing it enough. I also differentiate between small and large businesses. They have different needs and different resources. They also contribute to society in different ways.

Horst Engineering is very much a small business. The company and its sister companies  are heavily impacted by taxes (property taxes, personal property taxes, federal corporate taxes, state corporate taxes, income taxes, entity taxes, sales tax, etc.). At times, it feels as if you are driving for growth and fighting the government in the process. However, our management recognizes that paying taxes is essential and that it is a contribution to society, but taxes are not an incentive. We grow our businesses for different reasons, but not to increase the amount of taxes we pay. Largely, lower taxes benefit the company, and that is a good thing. Nevertheless, the current tax policies have not benefited most Americans. Census reports show that poverty rates have declined at a very slow rate for such a developed nation, and median income for workers younger than 65 have declined. This is a bad mix as more and more citizens have joined the ranks of the working poor.

It is typical to believe in capitalist societies, that economic growth is the key to raising living standards. The Tribune editorial states, “…economic growth alone has been insufficient to provide better livings standards for most American families. What are needed are policies to help spread benefits broadly-be it more progressive taxation, or policies to strengthen public education and increase access to affordable health care.”

The Republican administration led by President Bush is getting bashed. With the wars in Iraq and Afghanistan sucking tremendous wealth and resources from our economy, the spate of political scandals, and the persistent denials of wrongdoing; it seems as if the situation could not get worst. Now, we are facing the prospects of recession and economic expansion is no longer a “win” for the Republicans to point to. Consumer confidence isn’t shrinking-it shrunk. There is no question that a change in leadership would benefit us right now. We need some fresh policy ideas and our economy needs some fresh direction.

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