Quote of the Day: "Today's political candidates are proposing a new fiscal spending stimulus, when what we really need is a "deregulatory stimulus." We need to roll back the regulatory state and free up the wealth-creating sector. We cannot afford today's bull market in government regulations." -- Clyde Wayne Crews & Ryan Young
Subject: They could do this instead
The Big Three automakers came to Washington last week, begging for $25 billion in loans.
The Detroit automakers can't say why they need so much, how they would spend it, or that they won't be back again, asking for more. After the bungled handling of the banking bailout many lawmakers are reluctant to give the automakers what they want. As of now, there's no deal, but the danger hasn't passed.
Proponents of a bailout argue that without it the money will instead be spent on unemployment checks and income tax losses when one or more of the Detroit 3 file for reorganization under the bankruptcy laws. So why not just go ahead and do the bailout?
We need to push our own counter-arguments. Let's start with a few startling facts . . .
- The U.S. has the second-highest corporate tax rate in in the developed world. We're losing the world-wide tax-rate competition. With lower corporate taxes we could attract businesses and create jobs.
- U.S. businesses spent $148 billion in 2005 complying with a complicated and inefficient tax code. Meanwhile, revenue from the corporate tax was only $272 billion.
- Some companies spend millions trying to find tax loopholes. This is money that could go to create products, services, and jobs. In 2008, the combined cost of corporate taxes and tax compliance is likely to be about half a trillion dollars.
Why should the politicians . . .
- Impose $500 billion dollars in costs on businesses to raise only about $300 billion in tax revenue
- Spend $1 trillion or more propping up companies
When instead, they could . . .
- Allow Chapter 11 bankruptcy to turn inefficient firms into reorganized, rejuvenated, productive businesses
- Eliminate the corporate tax and thereby pump $500 billion a year back into the economy
Bankruptcy isn't the end of the world. Many large businesses, from retailers to airlines to steel companies, have gone bankrupt, but are still in business through reorganization and consolidation. Bankruptcy actually saves many businesses.
The Big Three's problems are self-inflicted, from signing extravagant union contracts to building gas-guzzling SUV's. Foreign-owned automakers who build cars in the U.S. aren't facing the same difficulties. So why should taxpayers have to subsidize the incompetence of the Big Three, when reorganization under the bankruptcy laws would allow them to correct their errors at little cost to innocent bystanders?
Let's propose an alternative to another Big Bailout: Downsize DC! Send Congress another message opposing the automaker bailout.
Use your personal comments to urge Congress to completely eliminate the corporate tax and all of the complicated tax regulations that go with it. Tell your elected representatives that this would . . .
- Inject half a trillion dollars a year into the productive economy
- Lower the costs of good and services, since many economists agree that the corporate tax is just passed onto consumers in the prices we pay
- Make the U.S. the most attractive business environment in the entire world
- Create huge numbers of new jobs, and save many old ones
- Cost much less, to the government, than their boondoggle bailouts
And magnify your voice by sending this Dispatch to others, by reprinting it on your blog, and by "Digging" it on our blog.
Thank you for being a DC Downsizer.
Assistant to the President