Economic Intelligence: Politicans Lack it

Its occurred to me on multiple occasions that politicians seem to lack any sort of intelligence in regards to economics. My last post was a heated detest of Trump’s printing money comments. I scathingly scold him for being so stupid about messing with our currency and debt. Trump’s comment literally make me think that candidates running for President think that money grows on trees. In some magical way their tax plans and spending outlays will work out in some kind of utopian dream. Let’s be honest though, its not just Trump, its Bernie Sanders, Hillary Clinton, even recently dropped out Ted Cruz and John Kaisch. I think for me, the biggest weight of decision on who to vote for is through economic policy.

As I usually do, I want to pose a question then slowly answer using historical and modern references. This time instead of posing any real question I just want to review a little historical background on who made our economy because its the subject this great biography on Alexander Hamilton. Then I want to review why the policies of both democrats and republicans alike are misguided. I may also dive into the problems with our economic system. The best starting point on a such a broad topic is to actually narrow it. More specifically, I want to discuss the taxation throughout American history. Then I want to get into the federal budget and debt.

On the subject of taxation, there is famous saying from the Revolutionary War that was a common rallying cry for independence from Great Britain. You may even remember this saying from middle school history: No Taxation without Representation!  The British heavily taxed the colonies to pay for their ever-growing debt. The monarch, King George III had many foreign wars and colonies to protect. As a result, high taxes were levied on the American colonies. The problem was that colonists had no representation in the British constitutional monarchy. When the colonist tried to gain influence and resisted the taxes, the British responded with even harsher taxes. In a simplified version, this lead to the Revolution and ended with the American colonist winning the war.

After the war, the issues of taxes came up again. The main proponent of America’s future financial stability was Alexander Hamilton, first secretary of Treasury. Hamilton wrote and pushed through many of today’s financial laws in government. Hamilton was able to establish excellent credit through the payment of debts. He was able to consolidate state debt and federal debt because each state held its own debt before the constitution was created. In order to make sure that the federal power came before the state’s power, Hamilton pushed for the consolidation. Hamilton also created bonds to help pay for the war debt. The main form of income in the early 1790s was import duties. Hamilton revamped the customs, invented the coast guard and cut down on the smuggling. (Smuggling was popular during the Revolution against the British.)

As the United States grew bigger its need for government revenue increased. Obviously this meant an tax on actual citizens. While Hamilton was still alive there was no such support for an income or land tax. Part of the reason that many rich landowners were against it, the same ones that were also in government. It was not until the Civil War that an actual income tax was passed.  The government also tried varies taxes on goods like alcohols. This only resulted in rebellions. These measures were never popular. Of course as we progress to the early 20th century we can see that taxes increase by each decade. One of main sources of income by the federal government was through bonds especially during the World Wars. If you don’t know how bonds work then its basically a government backed loan. You pay 100 dollars for a bond slip. In a certain period of time your able to cash it in with an interest rate.

In modern times, by this I mean post WW2, taxes are generally considered to be fairly certain like death. Taxes have always fluctuated, such as during the 1950s into the late 1960s with the Vietnam War saw taxes go high. Then in the 1980s, Ronald Reagan cut taxes and the trend of lower taxes continue up until about the early 2000s. Of course, our tax code is very complicated due to politicians messing with it. Many former presidential  candidates wanted to scrap this tax code. I feel like I’m beating a dead horse because I have talked about tax plans numerous times. To save my word count, I will just generally say that all three current candidates tax plans are either very wrong or very misguided or both. (scroll through my blog to find their tax plans)

Alexander Hamilton did a ton of good for America’s financial system. He also held the opinion that being in debt was a good thing. I honestly think that if he knew that we have accumulated 20 trillion dollars in debt, he would roll in his grave. America has always been in and out of debt through our history. You can typically identify times of debt with wars. I have also noticed that following a war, the debt will vanish due to economic dominance. The best example is probably World War 2. The post-war period saw America as the world’s number one creditor and business leader. This is mainly due to the fact that most of Europe and Asia had been destroyed. I believe that and many economists believe that our debt is way too big. It will nearly impossible to pay it off. Not to mention that people like Donald Trump and Bernie Sanders want to wreck havoc with insane policies like printing money and spending as much as 10 trillion!

***

So your probably wondering where exactly I’m going with all this history and modern references. (to the bank, of course!) First, I think that Economic Intelligence is more than just an understanding of economics. Economic Intelligence is knowing when your policy is working or not working. Its knowing that printing money will surly ruin us, DONALD TRUMP! Economic Intelligence is being smart about money, its being similar to Alexander Hamilton. I’m not saying that Hamilton is the end all–be all, but his wisdom on economics has endured over 200 years. The fact is that I could take any of the three clowns running for president and poke holes in their economic and tax plans. The problem is that really don’t understand how economics works. Repentantly, they haven’t been paying attention because the last 75 years have shown that their methods won’t work.

For example, Hillary and Bernie plans to raise minimum wage and use a democratic socialism platform has been tried before by countries of similar or larger size. Let’s take Russia for example under the Bolsheviks, Lenin, Stalin. All these communism leaders installed a socialist economic system or state run economy. The Russians faced problems of shortages, starvation and to add insult to injury, genocide. In a similar fashion to what Sanders wants to do, Stalin also wanted to take down the rich people. Guess what happened, he certain took them out by killing them. State run economies just don’t work. You need capitalism because the market should decide. I think economically speaking, I would rather have some poor and disadvantaged over having many poor and disadvantaged.

Unfortunately, economics dictates that re-distribution through unnatural means leads to more distress and poor. In addition, the biggest and most irritating issue that of spending and debt. I would love to understand how printing money won’t lead to disaster. Also how will spending MONEY decrease our debt that was created by SPENDING money? In conclusion, I want to underline the point that economic intelligence is necessary in a good presidential candidate. History has shown us both good and bad ways to make an nation economically viable. We need to choose carefully otherwise face consequences not unlike economic unintelligent nations before us.

Thanks for reading! Sorry it was so long!

 

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