Uncertainly Doesn't Matter?!

We've written occasionally about the importance of confidence and faith in economic affairs.  Our economy collapsed when people lost faith in it, and lack of confidence in the future makes taxpayers reluctant to have babies.

Paul Krugman, Nobel-winning Enron consultant and far-left New York Times blowhard, disagrees with us.  In "Phony Fear Factor," he asserts that the importance of confidence is vastly overrated:

And now the latest myth bites the dust: No, "economic policy uncertainty" created, it goes without saying, by "That Man in the White House" isn't holding back the recovery...

The truth is that we understand perfectly well why recovery has been slow, and confidence has nothing to do with it.  [emphasis added]

Mr. Krugman argues that measurements of uncertainty are flawed because they're based on public opinion and the rate at which uncertainty is mentioned in the press.  Since we don't know how much real uncertainty exists, we can't blame the Obama economy on it.

That's idiotic - it doesn't matter a whit what Mr. Krugman, or his friends in the media, or indeed most people think about uncertainty.

What defines a recovery to most people?  The availability of jobs, preferably good ones, both of which have been extremely rare during Mr. Obama's presidency.  How many jobs has Paul Krugman created?  Only a handful - his chauffeur, butler, valet, chef, upstairs maid, downstairs maid, gardener, and poolboy.  Are these the good jobs he's been talking about?

How many jobs have the media created in recent years?  They've been destroying jobs at a rapid rate: there are fewer journalists making a living every year.

Very few people are able to create jobs, so for the most important factor in a real recovery, their perceptions are the only perceptions that matter.  What do our job creators think?

A VC Who Pulled the Plug

During his first presidential campaign, Mr. Obama said he planned to increase capital gains taxes in the name of fairness even if that would reduce overall government revenue.  One of our guest writers was working for a start-up.  When Mr. Obama won, the investor pulled the plug.  He didn't think he'd be allowed to keep the profits, so why invest?

Did this VC talk about uncertainty?  Did he respond to a poll?  Of course not; he has better things to do than waste a half-hour answering silly questions over the phone.

No, he let his feelings be known by his actions: he abandoned his investment, grabbed his wallet, and ran.  That's uncertainty.

Politicians can bring about job-destroying uncertainty just by running their mouths.

An Executive Who Matters

You might say, that was a few years ago, haven't things changed?  Let's talk about Tom Cook, Steve Jobs' successor at Apple Computer.

Apple is one of the largest firms in the world based on market value.  It pays billions in corporate taxes.  Its employees pay billions more in income taxes.  All its stores collect billions in sales taxes.  All their facilities pay millions if not billions in real estate taxes.

Apple has been so profitable that it has accumulated billions in cash.  Mr. Cook could most certainly create jobs by making investments.  He has the world's largest pot of cash ready to be invested; his opinion on uncertainty matters, by definition, more than anyone else in the world.

You'd think that our government would appreciate all the revenue Apple pours into various federal, state, and local treasuries, but you'd be wrong.  Mr. Cook was summoned to Washington and lectured on Apple not paying its "fair share" of taxes on sales, not in the US, but on sales made overseas!  Our elected leaders made it clear that they plan to change the tax laws to go after yet more of Apple's profits.

Psychologists say that people work harder to protect what they already have than to pursue possible future gain.  Is Mr. Cook going to invest his creativity trying to protect the billions he has, or is he going to invest in trying to generate future billions which our government has promised to take away?  Our unemployment statistics express Mr. Cook's feelings loud and clear.

An Entrepreneur Crushed

No less an authority that President Obama disagrees with Mr. Krugman:

No business wants to invest in a place where the government skims 20 percent off the top, or the head of the port authority is corrupt.  No person wants to live in a society where the rule of law gives way to the rule of brutality and bribery.  That is not democracy, that is tyranny, and now is the time for it to end. 

- President Barack Hussein Obama, on the need for reform in Africa, New York Times quote of the day, July 12, 2009

Government skim and regulatory abuse are other names for uncertainty.

In "Licensing to Kill," the Journal reports a Pakistani immigrant who saved money working in restaurants and sold his wife's wedding jewelry to open a hot dog stand in a "fixer-upper" building in downtown Milwaukee.

Despite following all the rules, his food license was retracted at the request of Alderman Robert Bauman, who suggested he would rather see a place "with a little class" in the location, instead of Mr. Khan's restaurant.  Reopening Judy's Red Hots, he argued, would somehow encourage crime and disorder and stall the redevelopment of the community.

Mr. Khan followed all the rules and was awarded a license, yet the government took away his food service license after he'd spent all his investment money and was about to open his store.  Talk about job-killing uncertainty!  How many entrepreneurs haven't started because of fear of such government thuggery?  How can Mr. Krugman claim that uncertainty has nothing to do with our stalled economy?

Vladimir Putin Gets It

On the same day as Mr. Krugman's piece, the Times announced that the President of Russia has decided to stimulate his economy by letting businessmen out of jail.

Russian protesters are a lot smarter than the American Occupy movement.  Russian youth know they're unemployed because the business climate imposed by the Russian government is so awful.  They've been urging Mr. Putin's ouster or overthrow.

Unlike President Obama, President Putin can't finance his government's lavish lifestyle by borrowing from the Chinese.  The only way his government can get money is by taxing the private sector, which means there has to be a viable private sector to tax.

The Times explains:

A business owner in Russia has a better chance of ending up in the penal colony system once known as the gulag than a common burglar does.

That's because most business owners aren't enthusiastic about Mr. Putin's taxes or regulations; he considers them to be his enemies.  Like Mr. Obama, Mr. Putin uses government agencies to harass his political opponents.  There are some 110,000 businessmen in jail for economic crimes.

But with the Russian economy languishing, President Vladimir Putin has devised a plan for turning things around: offer amnesty to some of the imprisoned business people...

The amnesty is needed, he said, because the government had "overreacted" to the threat of organized crime and the inequities of privatization and over-prosecuted entrepreneurs during Mr. Putin's first 12 years in power as president and prime minister.

The Times says that the Russian government "overreacted," just like our IRS and our SEC "overreacted."

... in Russia, the police benefit from arrests.  They profit by soliciting a bribe from a rival to remove competition, by taking money from the family for release, or by selling seized goods.

Russian police seize goods and property on suspicion, just as our drug enforcement officials seize property on suspicion.

At least Mr. Putin "gets it."  He needs businessmen to earn profits he can tax.  What about Mr. Obama?

The Obama Administration Economic Stimulus

Our government merrily revs its job-destruction machine.  The Wall Street Journal reports:

Thousands of small-business owners have received letters from the Internal Revenue Service questioning whether they are underreporting their business income.

Dodd-Frank required credit card processors to report how much money they collect for each merchant.  The IRS is matching these data with tax returns and grilling business owners about discrepancies.

One retailer reported sales of $243,462 while the credit card company reported $249,994.  After a lot of expensive head-scratching, the difference turned out to be sales tax.

The credit card processor has no more hope of figuring out how much sales tax each merchant has to collect than any other Internet merchant; they reported total revenues, including sales taxes collected on behalf of local authorities, to the IRS.  The merchant, of course, didn't report sales tax as income - because it's not - and got a nasty letter.

Uncertainty has become so bad that taxpayers are giving up US citizenship at a record pace:

The number of U.S. taxpayers renouncing citizenship or permanent-resident status surged to a record high in the second quarter, as new laws aimed at cracking down on overseas assets increase the cost of complying and the risk of a taxpayer misstep.

A total of 1,130 names appeared on the latest list of renunciations from the Internal Revenue Service, according to Andrew Mitchel, a tax lawyer in Centerbrook, Conn., who tracks the data. That is far above the previous high of 679, set in the first quarter, and more than were reported in all of 2012...

Carol Tapanila, who moved to Canada more than 40 years ago and is now retired, renounced her citizenship in November and appeared on the current list. She says her U.S. taxes amounted to about $250 last year and she didn't take the step to avoid paying them.

Legal and accounting fees and other costs of making sure she was in compliance in recent years have added up to nearly $40,000, says Ms. Tapanila. "It is nothing but stress."  [emphasis added]

The IRS declined comment.

"Stress" is how Ms. Tapanila describes "uncertainty."

It's really too bad that Mr. Obama canceled his summit with Mr. Putin.  Mr. Putin, that lifelong thug and corruptocrat, could have given Mr. Obama a lesson in creating jobs and increasing tax revenue simply by treating businessmen better.