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Generation Cliff

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"To tax and to please, no more than to love and be wise, is not given to men."
Edmund Burke

There was more bleak news from Europe yesterday where the jobs crisis is more daunting than any of the soap opera stuff conjured up in Washington DC. European Union unemployment has reached 11.8%, increasing from 10.6% a year earlier and prompting Irish Prime Minister and current E.U. President Enda Kenny to remark it is "unacceptably high." The implications are for a powder keg that could eventually create the continent's version of an Arab Spring.

This is something I've thought about for a long time. At some point even a coddled population, in which its youth has been so demoralized that their big crime is pick-pocketing, will look for more violent ways to seek economic justice. For now, however, they are being sold the notion that such justice has been in the works, and somehow it's only a matter of time before the big payoff. Their economic justice always dovetails with so-called social justice and this just so happens to be the path America is traveling.

You see, for all the hype and all the attention our series of cliffs (fiscal, debt, sequester, continuing resolution) are receiving, the real cliff comes when kids realize the solution meted out on their behalf is actually a cure far worse than the disease. In fact, it's actually part of the disease. I'm talking high taxes and other punitive action taken in the name of income redistribution and leveling the playing field. This script began in the 1970's in Europe when taxes began climbing in the name of equality.

Coincidently, the glory of Europe also peaked in the 1970s as those taxes came on and increased and sucked up resources, incentive, and opportunities.

Amazingly, higher taxes continue to be the centerpiece of plans to revive those economies in Europe that continue to slump. Some are arguing for more government spending, saying "austerity" hasn't worked, but it's free wielding spending coupled with an array of high taxes that doom these nations in the first place. Next on the table are taxes on gas emissions, which recently took the place of greater worker contributions to their own social security insurance in Portugal. Then there are food taxes.

First broached at a meeting at the World Health Organization in December 2003, taxing food has been sold as a way to force people into healthier diets. Such taxes on salty and sugary snacks exist in Norway and Finland and go even further in Denmark where the list includes everything on the Atkins's diet: saturated fats, meat, cheese, butter and margarine. This is how all taxes begin. First there is a noble cause that only serves as a Trojan Horse.
The teen unemployment powder keg in Europe has built in the face of a tidal wave of taxes. Yes, Germany has similar taxes as its neighbors, but a better educated work force and lower personal income tax. America is on the path-not quite there yet-but moving at the speed of light.

California Dreamin'

All the leaves are brown and the sky is grey
I've been for a walk on a winters day
I'd be safe and warm if I was in LA
California dreaming on such a winter's day
-Mamas & Papas

While we look to Europe to avoid the road to serfdom, California continues to be the canary in America, warning about economic policies based on envy, environment, and the myth of income inequality. Not only does high tax mean an exodus of successful businesses and innovating people, but it seems to play a role in that dreaded income inequality that somehow is all that's ailing the western world. But it's not just California but other big-spending, heavily indebted states with high unemployment that seem to suffer as they layer on more taxes.

Since 1989 states with the highest tax burdens all have experienced higher poverty rates and wider income equality as measured by the GINI co-efficient.

On the other hand Louisiana, which has a less educated populace, has seen median income increase to $41,734 from $38,440 while the poverty rate decreased to 20% from 24% all while its tax burden is only 7.8%. This year California added 800 new laws and will also see three new upper income tax brackets as well as an increase in the state sales tax to 7.50% from 7.25%. Toss in things like the new tax on lumber and wood that's to be passed onto consumers and the economic suicide of California is something to behold and avoid.

Still, higher taxes remain the key focus of President Obama's economic agenda. The administration, taking its cue from Europe, understands it can sell higher taxes as some kind of equalizer that not only makes life fairer for the unfortunate but also provides a comeuppance for those dastardly rich bastards. For now the game is to sell higher taxes in such a pleasing way that it satisfies a certain kind of lust, even as it erodes the foundations of the nation.

A lot of people in this country are stewing enough to miss the destructive aspect of higher taxes but the stock market is very aware of additional tax hikes and limited spending cuts.

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