Kicking The Economy When It's Downspiraling

Kicking an economy when it’s teetering on the edge of recession is stupid. And there is no doubt that our economy is on the edge: 9% unemployment, real inflation around 12%, and less than 1% growth make that obvious. So why are the Democrats so intent on doing so much economic harm? Consider these recent events.

1. The Debt Ceiling Debacle: Let’s start with the 900 pound Eledonkey in the room. If the US gets downgraded, that could be very bad. If it defaults, that would be a disaster. Here are the likely consequences of a default:

1. The obvious problems: Soldiers, retirees, and government workers won’t get paid. Good luck paying your mortgages. Government contractors won’t get paid. Here come the layoffs. Doctors won’t get paid for providing medical services under Medicare. No more health care for you! (say in Soup Nazi voice) No regulatory permits will be issued and no inspections performed, grinding a lot of our economy to a halt.

2. The dollar will collapse. This may not sound like a big deal until you realize this will cause the price of gas and food to rise. New mortgage rates will shoot up, as will ARM mortgages. This will kill the struggling housing market and cause more defaults. Credit card interest will go up too as will the rate on car loans. Think of all this as a likely $200-$300 a month tax hike on your average consumer.

3. The stock market lost 5% of its value last week. A real default would be much worse. Part of the problem is that if US debt is downgraded, then many pension funds (which actually hold most US debt) will need to dump those bonds because they are required by their charters to hold investments with certain ratings. Essentially, you would see a panic in the market as pension funds all dumped their bonds in a panic. This would cripple private sector pensions. A downgrade will also raise the cost of borrowing for the government, making our debt problems much worse.

The fact that the Democrats and Republicans were even playing with this over something as gimmicky as a balanced budget amendment is just infuriating. And yeah, I think the BBA is a gimmick. First, it has zero chance of becoming law because there are enough liberal states to block it. . . they might as well have argued over banning the letter Z from our language. Secondly, even if it somehow forbade taxes (which it can’t), it can be cheated by just playing with the numbers. . . “oh, we’re expecting 14% growth this year!” This was all for show, and yet the Democrats and Republicans played chicken over it. And since the Democrats knew it was a meaningless provision, they played chicken over something of no value -- that's called "spite."

What’s more, the Democrats initially held up this deal because they wanted to impose a trillion dollars in new taxes on the economy. W.T.F.? What do you think the effect of a trillion dollar tax hike would be on the economy? Idiots.

Fortunately, it looks less likely that we will default (he wrote optimistically the night before the vote), though considerable damage has already been done. Yet, there is still a high likelihood of a downgrade because not only were the idiots playing chicken with the default, but neither side even bothered to come up with a plan that is likely to stave off a downgrade. A downgrade won’t be as bad as a default, but it could still lead to numbers 2 and 3 above to various degrees. So if you find yourself paying $6 a gallon for gas, if your house continues to lose value, or if your retirement fund loses 1/3 of its value, that’s why.

2. CAFE Standards: In the middle of this insanity, Obama is moving to raise car fuel efficiency standards. Oh heck yeah! That’s just what I would have done. . . if I was an idiot. While we're busy raising the price of cars, maybe we can also impose a “you’re not dead yet?” tax on our car companies!

3. Medical Device Taxes: The new medical device tax in ObamaCare won’t kick in until 2013, but it’s got its first job casualty. Interestingly, when this thing was passed, the “experts” assured us that no one in the industry would ever try to avoid this tax. After all, it’s only a 2.3% tax. No one would try to avoid that, right?

Last week, GE announced that it’s moving its X-ray business headquarters to China. GE, you might recall, is run by Obama’s jobs czar Jeffrey Immelt, and has a track record of (1) shipping American jobs to China, (2) paying NO tax despite record profits, and (3) getting waivers from Obama for regulations GE itself lobbied for. Well, they agreed to this device tax and now they are moving their X-ray HQ. But don’t worry, they tell us, this has nothing to do with the tax and they aren’t killing any jobs here. No siree. . . but they are investing $2 billion in China including $500 million in research centers, including an X-ray R&D center. So while it’s true they aren’t killing any jobs here yet, they are instead making new ones in China instead of here. And you can be sure that avoiding the new tax was part of the equation.

As an interesting aside, GE makes a very cheap portable X-ray machine for the third world. However, they don’t sell those in the US. . . because it would hurt their more expensive products. Boycott GE.

4. The War With Amazon: Finally, I’ll talk more about this later in the week, but various states are at war with online retails. They desperately want to tax them. Now Senate Democrats are looking to impose national sales taxes on those retailers as a protectionist measure to help local retailers. They apparently think now is a great time to tax consumers.

Do you see a pattern here?

Keep this in mind the next time the Democrats talk about creating jobs or protecting the middle class.