Sunday, July 17, 2011

It's A Gray Area: Fundamentals are the answer to the recession - by Judge Jim Gray

The fledgling program TAP America is trying to strengthen the U.S. economy by encouraging people to buy more American products as a matter of patriotism; however, like so many other political proposals, it sounds like a nice idea, but it won't work.
Just like Communism's mantra of "From each according to his ability, to each according to his needs" sounded good to many people, it simply will not work. A more apt slogan is, "You can't fool Mother Nature."
Why? Because the "invisible hand" of economics is always present. Practical reality regarding Communism means that if people have no incentive to work by receiving the benefit of their labors, they won't work. Similarly, if people are able to choose between a good quality shirt selling for $12 that is made in another country, or a similar good quality shirt that is selling for $20 that is made in the United States, some may be patriotic for a while and pay more for the domestic shirt, but not enough to matter, and not for long.

That is the reason all of the talk about preventing the "outsourcing" of jobs is nothing but talk. If a company overall can make a much better return, or just stay in business, by having its manufacturing or other services performed elsewhere, it is economically inescapable that this will occur, as long as the quality of the work is acceptable. And putting artificial barriers in their way will not only be unsuccessful, they will mostly be counterproductive.
So how do we put America back on the road to prosperity? Not by the government activity of passing laws or installing more programs. But instead by going back to our roots, which means we must out-work and out-compete everyone else.
How can this be done? We must focus upon our strengths by emphasizing the areas in which we compete best, and also go on to develop more of them.
What are some of these areas? Fortunately there are many in which our country excels, such as in Internet technology with companies like Facebook and Google; computer technology with companies like Intel, Apple, IBM and Dell; agricultural and construction equipment with companies like John Deere and Caterpillar; the entertainment industry with companies like Disney and Six Flags; large-scale retail sales with companies like Costco, Home Depot, Wal-Mart and Best Buy; soft drinks and other beverages like Coca Cola and Pepsi Cola; aerospace companies like Lockheed and Northrop Grumman; and niche companies like Coach and Tiffany. And that is not even addressing all forms of agriculture, as well as heart valve, knee and hip replacement products and our system of higher education, all of which are still the best in the world.
In short, we can compete with anybody, and we can pay good wages and maintain safety in the workplace and the environment along the way. All we need is to get away from our general state of pessimism and a dependence upon government to do it for us.
Most people do not understand that government does not create wealth. Instead, government takes other people's wealth, keeps a lot of it for itself, and then mostly distributes the rest to those for whom there is a political benefit. Such a system not only engenders a demeaning and initiative-sapping welfare system that traps the poor, it also engenders an enormously lucrative welfare system for the wealthy.
But if our tax money is spent by the government, that spending should be concentrated upon "shovel-ready" projects, such as issuing contracts to private companies for maintaining and upgrading our physical plants like bridges, parks, and water pipelines and sewers. This spending will actually provide good jobs to our workers and spur the economy. But otherwise government incentives like tax breaks, even for necessary things like research and development, mostly evolve into nothing but politics. Thus they should be avoided.
The other critically important thing we must do is to reform our income tax system. Not only are the tens of billions of dollars that are spent annually in record-keeping for taxes and preparing tax returns not contributing to our general welfare, people now are actually being punished under the present system for saving and investing money. Reversing that would result in a huge stimulus for our economy — and enormous savings for almost everyone.
Unfortunately, the biggest opponents of tax reform, surprisingly enough, are not accountants and tax attorneys, they are members of Congress. Why? Imagine how much political power members of Congress presently have by controlling who will and will not receive tax breaks that can be worth millions and even billions of dollars. So people who stand to benefit from those tax breaks logically spend hundreds of thousands of dollars to support politicians who will pass legislation that will save them millions.
In sports, successful coaches always concentrate on fundamentals, and that is the winning strategy we should go back to as well. Hard work, education, industriousness, creativity, less government involvement in the economy, and incentives and rewards for achieving success are the things that made our country great. We will once again be prosperous when we elect politicians who will help us to bring those qualities back.
JAMES P. GRAY is a retired judge of the Orange County Superior Court, the author of "A Voter's Handbook: Effective Solutions to America's Problems" (The Forum Press, 2010), and can be contacted at

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