I believe in small government. A government should micromanage neither its citizens nor the economy. There was a time when government minded its own business. In 1848, when the Carnegie family, having fallen on hard times, moved from their home in Dunfermline, Scotland, to Allegheny, Penn., 13-year-old Andrew Carnegie got his first job as a bobbin boy, changing spools of thread in a Pittsburgh cotton mill, working 12 hours a day, 6 days a week. His starting wage was $1.20---per week.* Later, his four-dollar-a-week salary as a telegrapher allowed him to work his way up in the railroad industry.
During the Civil War, Carnegie's trains and telegraphs kept the Union army supplied with transportation and communication. Oil wells and other investments produced sufficient capital to permit Carnegie to go into the steel business. Utilizing the new Bessemer process, Carnegie began making steel that was purer and cheaper than that of his competitors. Soon, Carnegie owned iron mines, coal mines, and much of the steel production in the country.
In 1901, Carnegie sold his steel empire to one John Pierpont Morgan for $350 million---in modern currency: $370 billion. Out of this deal, Morgan formed U. S. Steel, the world's biggest company, and Andrew Carnegie retired to Scotland, the world's richest man. Before he died, Carnegie had spent 90% of his enormous fortune on libraries, concert halls, and pipe organs for churches.
During the Panic of 1907, banks were going under and the N. Y. Stock Exchange had lost half its value. J. P. Morgan trotted up Pennsylvania Avenue to the White House and asked to be put in charge of the financial crisis. Pres. Teddy Roosevelt accepted his offer. Morgan went back to his office, bailed out a few banks, and bullied his rich friends into propping up the plummeting stock market. Meanwhile, Tennessee. Coal, Iron, & Railroad Co., the country's second largest steel manufacturer, was about to go belly up, so, to avoid that, U. S. Steel bought it, giving Morgan control of two-thirds of the country's steel market. Thus, with the government looking the other way, Morgan averted an economic depression by forming a monopoly and by colluding with Wall Street bankers. The government had allowed the free market to fix itself.
Our government would not tolerate such cavalier business practices, nowadays. Men like Morgan and Carnegie would be denounced as "Robber Barons" to be pilloried, prosecuted, and plundered. But, back in 1848, with no one to tell him not to work the long hours of that entry-level job for those slave wages, a thirteen-year-old bobbin boy from Scotland dreamed of empire and built one out of steel. That entry-level job, for the unskilled worker, is the first rung on the ladder of success. Raising the Minimum Wage forces employers to remove entry-level job, concentrating money in the pockets of those that have jobs at the expense of those trying to get jobs. Minimum Wage laws make minimize employment.
This is what is happening in Los Angeles, with its five-year plan to hike its Minimum Wage from $9 to $15 an hour. L. A. businesses are reducing their work force, reducing employee hours, and reducing the services that they provide. One trendy eatery cut its overhead by canceling dinner. And MacDonald's is automating several of its L. A. restaurants, having already done so years ago in socialist Europe. (Rather than suffer the indignity of a low-paying job, goes the theory, it is better to have no job at all.) As a result of L. A.'s high minimum wage and other business-hostile policies, Hollywood, now, makes movies in a different LA: the LA that has no wage law. They produce movies in the other LA: Louisiana.**
Under Marxist socialism, not too long ago, the Soviet Union micromanaged the Russian economy with what's called "Central Planning", where the government sets wages, fixes prices, establishes production quotas, and eliminates the profit motive. State-run bakeries routinely ran out of bread in the middle of the day because there was no incentive to bake more. Around-the-block lines of people queuing up for rationed toilet paper was a familiar sight in Russian cities. And, because the Russian government had easier access to Egyptian cotton than to Virginia tobacco, Russian cigarettes were 50% filter. The late William F. Buckley related the story of one political pundit who was asked: "What would happen if the Russians invaded the Sahara?" "Nothing for five years," the pundit replied, "and, then, there would be a shortage of sand."
While minimum wage laws eliminate jobs and price controls produce shortages, high levels of taxation create a disincentive to work. Sweden, where the tax rates climb to around 56%, has a phenomenon known as Plumber Summer. To avoid hitting that 56% tax bracket, Swedish plumbers work nine or ten months out of the year, then go on vacation. Since vacationing is considered a human right in Europe---it is next to impossible to find a plumber in summer. Sweden is not alone in this.
In September of 2003, a heatwave hit France, killing over 10,000 people. Had that heatwave swept across a less regulated, free-market economy like America, most people would have picked up the phone and called one of the legion of plumbers, electricians, and a/c repairmen that would be all too eager to get their business, even if they had to hire additional staff and order more units. But, in France, in the summer of 2003, there was no one to answer that call. As in Sweden, French technicians, to avoid a higher tax bracket, prefer not to stay on the job during the warm summer months of the travel season, so 10,000 people died. I wonder how many of those people in France---many of them shut-ins---were found dead next to their telephones. Those people were, literally, taxed to death.
The tax code is the club that government uses to beat the rest of us into submission. Sacramento leads the nation in bludgeoning the economy to conform it to the left-wing political agenda: wealth redistribution. To combat so-called "income inequality", one must pay one's "fair share" of taxes, whatever that is, and everyone is entitled to a "living wage", whatever that is. "From each according to his ability; to each according to his need"---according to Karl Marx. We must all be broken to harness. Taxation beats the spirit out of us and regulation keeps us trotting in step.
But, if a tax is a stick, a subsidy is a carrot. As Jack Kemp put it: what you tax, you get less of; what you subsidize, you get more of. In addition to punishing ambition by over-taxing over-achievers, government also uses subsidies to favor approved activities. Where subsidies exist, however, quality is, often, sacrificed.
Back in the eighties, I ran my own touring theatre group---we did thirty-minute musicals for school assemblies. For over ten years, Riverside Young People's Theatre commanded a large market share of public schools. I wrote my scripts, paid my composer, built my sets, hired my actors--mostly waiters and waitresses--and took the show on the road all over southern California. I paid my actors $25 per performance and, on long gigs, I bought them lunch. Then, the market started drying up. It wasn't due to a shortage of education dollars---the money was out there. It was because the government had decided to subsidize our politically correct competitors. That allowed them to underbid us and cut into our marketshare. We became less competitive and, eventually, shut down. The government had meddled in the marketplace and driven me out of business.
This is why I believe in small government. A smaller, less intrusive government maximizes both freedoms and opportunities. Using the government to overhaul and re-design the economy is like performing brain surgery with a meat ax. Allowing the State to over-tax, over-regulate, and, thus, re-define the lives of its citizens is like letting children play with matches. Even if you have the best of intentions, it is the worst of ideas.***
Citizens should micromanage the government, not the other way around. Henry David Thoreau said: "That government is best which governs least." As radio talk show host Dennis Prager is always saying: "The bigger the government, the smaller the citizen." But, Thomas Jefferson nailed it: "When the people fear their government, there is tyranny; when the government fears the people, there is liberty."
* Some common laborers started out at less than $1 per week.
** The Louisiana Motion Picture Investor Tax Credit provides state-certified motion picture productions with up to a 30 percent transferable tax credit on eligible in-state expenditures. These include resident and non-resident labor with a spending requirement of at least $300,000 and $50,000 for local Louisiana productions. Louisiana offers an additional 10 percent payroll tax credit for productions using resident labor.
*** The state government in Sacramento should confine itself to paving the roads, maintaining the peace, pumping the water, keeping the lights on, and providing some education. Leave the rest to the private sector and permit us the freedom to solve our problems and live our lives.
http://www.richardreedforstatesenate2016.com
