20 December 2000.


DUBYA has been elected Prez.    The world is about to change.

The most crucial agenda item is the proposed reduction in taxes.   "Liberal" journalists don't really understand taxes.  (If they understood, they wouldn't be liberal).  Typically they will explain:

When Bill was in power he got plenty of money (from your tax payments), & he spent it on the poor and became enormously popular and the stock market just kept going up!
Spin believes that Democrat politicians understand the negative effect of high taxes on the wealth and power of the USA, but suspects that they don't know any other way to get elected.  An improved education package could well destroy the Democrats.

To understand taxes, one must look at the US current account balance.  The graph is from "The Economist".
President Ronald Reagan (1980 - 1988) had a theory that a tax cut would stimulate the economy so much that the tax take would actually increase.  He was aware that the current account would go into deficit, but felt that there would be a J curve effect, that the economy would spurt and the deficit would come into surplus.  Of course the "liberal" press called him unintelligent, and rubbished his theories.   (Didn't I hear them say that about someone else recently?:).

From the graph we can see that Reagan was vindicated.  There was an increasing deficit for the six years after he was elected, then the low tax policies had the predicted effect and the deficit bottomed out.  Bush (1988 - 1992) kept Reagan's policies in place and the deficit vanished.

As a bonus the cold war ended when the burgeoning power of the USA convinced the USSR that capitalism might actually be the "way to go".  (Or was that the arms buildup?)

Then Clinton took over in 1992 and red ink from expenditure (as opposed to tax cuts) started to flow.  Circa 1997 the current account deficit went exponential.  For the last six months the US dollar and the stock market have been destabilized.   This week the US$ is falling.  Next month it could be rising again.  Stability is gone.


The Current Account Balance is one of the "fundamentals" of an economy.  Ask the Chancellor of the UK exchequer.  Britain's decline from it's position as the most powerful nation in the world started with deficit in the current account balance.

Another less well recognized economic fundamental is "liberty".   Liberty is what you get when Liberal politicians don't get their own way on social engineering legislation.   To reduce liberty, liberal legislators enact laws and regulations (supposedly for the good of society) whose principal effect is to stop you doing things because they are "dangerous" (e.g. restrict guns, seat belt laws) or force you to do things that are "uneconomic" such as not promote or educate the best person, but rather promote or educate the best woman or ethnic.  These laws rarely result in the desired outcome, rather they encourage bribery, baksheesh and other forms of government corruption.  And just incidentally, they increase the power and importance of legislators.  For an example of where the regulated welfare state terminates, look at Bill Clinton's big financial supporter, China.

Of course getting rich is only half of the equation.  The rulers of illiberal states can also get rich.  The other half of the liberty equation is being able to spend and enjoy your wealth, and be confident that you will be at liberty to do so when and as you retire.   That is why most overseas tyrants, looters & criminals who have accumulated cash move their money into the USA.  They prefer to live in a liberal country where the lifestyle benefits of wealth can be realized.   It would not be that much fun being rich in Iraq or North Korea.

Reducing taxes (another thing Liberal politicians hate) is the way to reduce the deficit.  It is hated because prima facie there will be less to spend on welfare.  It is also hated because, paradoxically, nearly everyone (except the lazy) gets richer.

Do I sound anti liberal?  Funny thing that.  I thought I was a libertarian.


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