ny Mark Scheinbaum
Angel Fire, N.M.
August 8, 2011
MARKETS: WHAT NOW, MR. PRESIDENT?
BRADENTON, Fla, Aug. 8, 2011 -- The words of Section 4, Article 14 of the Constitution of the United States, which are, "The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned," are unique for two reasons.
First, because they are not a prohibition on the powers of the government, as in the Bill of Rights, but an express and implicit grant of power, albeit one never before used.
Second, they prohibit before the fact, or a priori a single element of speech, leaving all other responsible speech completely unfettered. Just as one cannot use the word "bomb" in an airport or on a plane - a prohibition which is loosely enforced but subject to harsh penalties - or cry "fire!" in a crowded theater to begin a panic, it is not permissible for anyone subject to our laws to publish in the United States a statement that questions the absolute creditworthiness of this nation's sovereign debt.
Most particularly, such a statement must not be predicated upon the vehemence and force of our open political debate, no matter how fractious, lest thereby that debate become limited and weakened by financial concerns that would undermine the vigor and will of Congress.
The Founding Fathers realized that the United States could not build the nation they envisioned if our own citizens were allowed to publish rumors or opinions to the world saying that our promises of payment for any debt we may obligate ourselves to pay are not genuine and cannot be relied upon.
When, on Friday last, the American-based credit rating agency Standard & Poor's, after consultation with European partners, questioned the credit of the United States by downgrading our lawfully authorized instruments of debt, that company betrayed the American people and committed a treacherous act for which it must be quickly and decisively punished. By whom and how must be left to the United States Congress and the President, whose members have each sworn to God to defend those words, even with their lives.
Let this be done.
If you give a young boy a dollar for his birthday, he'll make one of two choices - usually depending on what his parents teach. He'll put it in his piggy bank and save it, or spend it on candy and toys.
If you give a giant, publicly-traded corporation a dollar, they'll also do one of two things: they'll put it in the piggy bank, or they'll spend it on candy and toys - things like new hires and new acquisitions. Shareholders prefer the piggy bank, and that's why in times of high unemployment we should not give large corporations a tax cut but should increase their taxes as fast and as much as we can.
Tax increases mean corporations have to work harder to bring ther same amount of money to the bottom line. To make up for the money "lost" in paying taxes, they'll have to hire and innovate.
If they try to "cut the fat" when they're already the preferred "lean and mean," they may hamper marketing, production and profits from their fundamental revenue generators - food, transportation, manufacturing and energy, for example. That's because well-oiled, efficient and highly automated corporate money machines start to break down if they are not maintained in a consistent way due to budget cuts.
But if they use corporate savings to hire more people, put out better products and market them in new ways and new places, their revenues will grow to make up for the cost of the higher taxes. And with that occurring, the economy around them will grow.
Right now, corporations have higher profits and more savings, i.e., cash reserves, than ever before. Alan Greenspan said Sunday on Meet the Press that non-financial corporations are sitting on some $500 billion in liquid assets. Meanwhile, quite a few big companies pay no federal taxes at all, and when they do, they pay the lowest tax rates in history.
Meanwhile, the American economy is starving to death. Obviously, to us at least, the answer is to raise taxes on them, forcing them to hire, innovate and expand.
Raising taxes on ordinary people doesn't work the same way. For them, tax cuts mean more opportunities to save and spend. They are more likely to spend when unemployment is low and jobs are plentiful, education cheap and entrepreneurial opportunities abound. It is better that they save when times are tough and jobs are had to come by - and we are setting records in doing so right now - while prosperity means spending. That's just human nature.
These verities are challenged by American conservatives, who often are stand-ins for those giant corporations. They say higher taxes will inhibit U.S. exports by driving up the cost of American products, while enhancing imports because more goods will come from countries where taxes and wages are low.
But how does America benefit if lower taxes here also mean higher unemployment and a lower quality of life for all of us? If just one building in the Cayman Islands houses more than 18,500 corporations who legally pay no taxes while they do business in the United States, who will pay for roads, schools, defense and the rest? Pity the ordinary, middle-class, unincorporated American citizen!
Meanwhile, the Wall Street Journal is not headlining the dramatically reduced gasoline prices hundreds of millions of American drivers may soon enjoy as the price of a barrel of oil falls. This morning, on Asian markets, it has fallen more than $2 tonight as of 11 p.m. ET to $84.25.
That's only because the fall in stock prices means more to corporate financial officers who manage excess funds, insurance companies with giant pools of premium revenue and set-aside liability reserves, pension funds with mountains of retiree dollars and banks with trust accounts, savings and overnight cash - and those are the places where Journal readers work.
Your individual Keough and IRA plans are deeply affected by stock prices, too, yet not so much that saving a dollar a gallon is trivial. So while we celebrate the lower prices and increased mobility you enjoy, financial "experts" moan and groan like it's the end of the world.
In reality, cheaper oil means more freedom - more money to save or spend, to save our homes and livelihoods, to provide a personal safety net and to simply enjoy. It is an axiom of democracy, painfully formed, that freedom is never improved except by responsible use of its greater abundance.
Joe Shea is Editor-in-Chief of The American Reporter and the successful plaintiff in the 1997 U.S. Supreme Court case, Joe Shea on behalf of The American Reporter v Janet Reno, in which the rights of free speech in the new medium of the Internet were upheld.