America: All Of Your Businesses Will Be Ours

Yes. Let's do this thing.

Captain Capitalism:

First you have the corporate tax rate. Oh sure, not a big advantage, but a large enough advantage it behooves the question, why havn't American firms been fleeing north to set up corporate HQ's? I mean if they're going to endure constant negative media coverage, an ignorant villianization of their existence, why suffer a 39.5% tax rate when you can suffer a mere 33.5% tax rate.

Oh, and did I mention they have nationalized health care? That may not seem like an advantage to us die hard capitalists, but for a corporation that would cut IMMEASURABLY MUCHO on their labor costs as they no longer have to pay health care insurance. So lower corporate taxes, plus savings of roughly 1/3 on labor, all the while still having the benefits of a modern, English speaking economy geographically close to their market. Please, somebody tell me why corporations haven't fled to Canada yet?

Second, corruption. I opined earlier that the US' corruption index would collapse under all the corruption, sleaze and parasitic scum buckets ranging from everybody like big fish like Bernie Madoff to the millions of smaller scumbucket fish like the investment banking, blue blood, bulge bracket nepotist and cronyists who got their jobs because of daddy and not because of skill, but forget that. Even ignoring that likely collapse, Canada is already significantly less corrupt. 8.7 vs. a 7.2. Why deal with a bunch of criminals in institutions such as the government, corporations, your employer or your educational institution when you can have significantly less crime in the institutions of Canada? It's not like we're Somalia, but give it time.

Third, government deficits as a % of GDP. Never mind that the OECD data I pulled for the US is already outdated as Obama just sign the "F#ck America over" bill which puts the real government deficit closer to 10% GDP. Let's just "hope" it stays at the previously OECD projected 5.2%. Whether it's 5.2% or 10%, it's a many-multiple of the insignificant .5% deficit the Canadians are racking up.

Fourth, and what does the fiscal recklessness that causes deficits culminate into? Why the national debt.

Yes, the national debt!

"Sick and tired of having to pay for what you want to consume? Why then just borrow it from future generations by saddling (and screwing them over) with the national debt. All you have to do is vote for socialists who couldn't balance their check books as mommy and daddy paid for their philosophy degree in college, who inevitably ended up in politics, because, well, that's where true scum bags with no skill end up. Slavery isn't dead! It's just deferred! Vote for the national debt!"

Apparently the Canadians (and I know, this sounds crazy) don't hate their children nor their grandchildren. Apparently they seem to have this thing called "fiscal austerity" or "fiscal discipline." Because they've ran smaller deficits, they naturally have smaller debts. Their national debt is only 22% GDP while ours is 52% (oh, and yeah, that doesn't include the debt the genius "stimulus" package just saddled us with).

So you can either forever serve in servitude to pay for the "Great Society" and social security and medicare (because that form of slavery is OK), or you can move and not be so indebted.

Fifth (or as Dave Chappelle says, "fif") corroborating their fiscal austerity and their remarkable ability to maintain the simple 3rd grade level concept of spending within their means, it is not just the government that seems to balance the books, but the people in general. The current account deficit, though a deficit, is only 1.8% of GDP compared to the US' 4.4% (again, Obama, socialists, stimulus, not adjusted, more like 10% GDP, etc. etc., never mind). Yes, not a surplus, but 1.8% versus what in reality will be closer to 11% in the US, where would you rather be.

And finally, six, that whole thing about "Canadians are taxed WAY more than the US!"

Oh really?

You see the ideal measure of the tax rate is government spending as a percent of GDP. In that revenues don't really matter since spending, not matter if you pay for it with borrowed money or current tax revenues has to be repaid with future taxes. I've mentioned this before, but for all practical purposes, the US and Canada have the same effective tax rates, both roughly 39%. At least in Canada you get "free" health care (and I know how weak that argument is, but just to goad the left).

PLUS: C'Mon, Move To Canada

"A Free Market Could Have Prevented This"

The most disgusting and disheartening aspect of the current financial crisis has been the false accusations lobbied at the innocent free market in efforts to assign political blame. American Democrats especially have been guilty of this misdirection, using it to push for massive intervention in the economy which is precisely what we're seeing in their constantly-expanding pork-laden stimulus package.

Frustratingly, many defenders of capitalism appear to concede the point in their arguments. They argue for limited government and free markets without understanding or explaining what would separate those policies from the ones that got us into this mess. What's worse, these arguments are now frequently heard being spouted by CEOs and business executives. If you can't count on big business to defend capitalism, who is there left?

Luckily, there are still a few rational businessmen remaining, foremost among them John Allison, former CEO of BB&T Corp, which has been one of the few large banks capable of turning a major profit in recent years:

"[A] lot of financial institutions did dumb stuff," says Allison. "[B]ut they did it in the context of a government system that was misleading. I mean, probably all of us were misled." "Once you had this government -- through the Federal Reserve, through the [Federal Deposit Insurance Corp.], through Freddie Mac -- supporting this expansion of housing, it's easy to believe that housing prices won't ever fall," he says. "That was the context in [which] very poor decisions were made."

Allison puts this point quite clearly. Yes, poor business decision were made but they would not have occurred - at least, not for very long - had the state not encouraged short-sighted business policies through government intervention. The free market demands honesty from corporations whereas the government demands only a decent lobby group. In a free market, your decisions are either based in reality and so will prove to be profitable or they are based in self-deception or altruism and so your company will fail. This equation changes, however, once you introduce the element of government. What is sensible is no longer the ultimate standard for earning a profit and this fundamental shift reverberates through every corner of the market. We have witnessed the effects of this distortion since the 1990s.

Unlike many alleged capitalists, Mr. Allison is unwilling to let the free market take the fall for something that should clearly be laid at the feet of the government.

On the TARP bailout:

As the financial crisis takes its toll on both healthy and troubled institutions, Allison is highly critical of what he suggests is an overregulated banking industry. He says mistakes made by the Clinton and Bush administrations led to an inevitable crash in the sector. More recently, the Treasury's bailout efforts though the Troubled Assets Relief Program, or TARP, has been misguided in its approach to the problem, he says.

"This is potentially the worst economic correction that I experienced in my career," he says. "What's unique in this correction was the panic created unfortunately by the Treasury, the Fed and [former President Bush] in October."

On the "bailout & pray" approach to the state's business policy:

Allison takes issue with the government's ability to produce -- "out of the blue" -- $700 billion for the bailout package; the "incredible arbitrariness" of saving some banks and letting others fail; and the lack of consistency within the plan so far, he says.

"Markets hate that kind of stuff," Allison says.

On where this recession started:

Allison says the roots of this downturn were laid out by years of easy credit and misguided policies from the Fed and Republican and Democratic administrations.

For one, the aggressively low interest-rate management by former Fed Alan Greenspan created the "illusion of low risk" in the economy that caused consumers and investors to "save less" and "make more risky investments," he says. From the early 1990s through 2007, "we didn't have a meaningful correction," he says.

"Every time there was a bump, the Fed did everything they could to smooth that bump out," he says. "[W]hat they did was defer the problems and create a much bigger problem."

...

Most importantly, he took issue with the Clinton administration's affordable housing policy objectives, which ultimately led to the solidification of government-sponsored enterprises Fannie Mae and Freddie Mac as major players in the mortgage market.

"Homeownership is a good thing in a broad context, but encouraging people to buy homes they can't afford is not a good thing," he says. "If you want to look at the proximate cause for this mess you got to focus on Fannie Mae and Freddie Mac. They would have never existed in the free market. They drove the mortgage market."

This is a crucial point. As Kevin Gaudet from the Canadian Taxpayers Federation pointed out in a previous video, the government has begun picking and choosing which banks and institutions are worthy of saving and which ones can be allowed to burn. Unsurprisingly, the banks that they are anointing as "Too Big To Fail" are for the most part the profoundly inefficient ones.

Allison has a practical suggestion for the President:

He suggests that the government offer homebuyers a 10% tax credit to encourage consumers to purchase homes that are already built or in the process of being built in order to clear the excessive inventory. The tax credit would "create a floor on the housing market," he says.

"That's very important ... to the capital markets," he says. "... So even if it meant house prices were going to go down another 10%, but you knew that's where they were going to stop, then you could re-price the capital markets and value all this stuff."

If most business executives had Mr. Allison's integrity, the government would have never been allowed to get away with the wholesale distortion of market forces that it did and we would not be looking at one of the worst recessions in the history of the global economy.

As Allison puts it, "A free market could have prevented this."

Chilling Question Of The Day: Is China More Capitalist Than The US?

AP:

While China improves its business climate by lowering the burden of state confiscation, the US plans to increase it, and in some cases by a significant amount. Meanwhile, the House last night voted 237-170 to sink $15 billion into the American auto industry, with government officially owning part of three private auto makers in order to dictate to management how to run their businesses. Management welcomed the move, and in fact wanted Congress to buy an even bigger stake in these companies.

[...]

When one looks to Beijing for rational tax policies … well, that’s just a sad day for Americans, even if it does portend a brighter future for China.

I recall a day when 'grace under fire' was considered a supreme virtue in business and inviting government into the management of your company an unthinkable ignominy. The American response to the current financial crisis, and particularly the clambering of the corporate community for government handouts, suggests just how far America has strayed from this vision of honourable conduct in business. Is China actually more capitalist than America? Of course not. But when the question can be asked without the intention of provoking laughter, something is rotten in the state of Denmark.