- Posted by Jeff Carter
- on May 13th, 2011
In the beginning the founding father’s created the Constitution, and then the Bill of Rights. Being children of the Enlightenment, they deliberately created a system whereby human beings had the rights, and were protected by a system of laws, checks and balances.
They fully understood the power of capricious, encroaching government. When a government gets crazy, it doesn’t just infringe on the rights of people, but it infringes on the rights of businesses too. Big government effects corporate profitability, and thus affects the stock market, futures market and the ability to build wealth.
We arrived at the day where government was too big a while ago, but since 2001, it’s been in overdrive. Within the states themselves, the founders made it so states had sovereignty apart from the over riding federal govt. Originally Senators were elected by their states governments to be in a position to advocate for states’ rights. What ended up happening is that individual states became laboratories. What works in one state might not work in the next.
Steven Moore and Arthur Laffer penned an excellent column illustrating the economic effects of having that laboratory. In the last 8 years, 4.8 million Americans have moved from pro-union states to right to work states. That’s not because of the weather, but because of economic incentive.
Here are the economic facts from the article: “As of today there are 22 right-to-work states and 28 union-shop states. Over the past decade (2000-09) the right-to-work states grew faster in nearly every respect than their union-shop counterparts: 54.6% versus 41.1% in gross state product, 53.3% versus 40.6% in personal income, 11.9% versus 6.1% in population, and 4.1% versus -0.6% in payrolls.”
And this, “While there are only six right-to-work states that also have a zero earned income tax rate and three zero earned income tax rate states that have forced- union shops, their performance differences over the past decade (2000-09) are revealing. Of the nine zero income tax rate states, those six that are also right-to-work have grown a lot faster than the three with forced-union shops: 64.9% versus 53.8% in gross state product, 59.0% versus 46.8% in personal income, 15.5% versus 10.3% in population and 8.2% versus 6.9% in payrolls.”
In the past two years, try and think of all the crony capitalism that has gone on. I can think of a few things off the top of my head without doing a lot of research.
1. Boeing vs NLRB
2. Health care waivers
3. Tax breaks for companies that toe the line
4. Getting programs through the bureaucracy for companies that toe the line
5. Hedge funds and investing.
Think of some of your own. The list is long.
Now, the Obama administration wants to see political donations of individual employees of corporations so that they can go deeper and increase the power of the tentacles of crony capitalism.
At a speech I heard by Speaker Boehner Wednesday, he said this, “the past two years have not only been about the expansion of government, but in the background they have rewritten the rules of the bureaucracy. The bureaucracy is now poised to pounce.”
An example of that is Dodd-Frank. Did you know that the government can now go to an individual citizen and ask to see all their receipts, bank statement, credit card statements and virtually anything else and go over it line by line if they think you are a risk to the financial system? You may think that they’ll only go after hedge funds and banks-but don’t discount the will of government. Especially if you are on the wrong side of the political fence and one party uses the power of government to go after their rivals.
tip of the hat to CNN/Money
The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.
Jeffrey Carter is an angel investor and independent trader. He specializes in turning concepts into profits. He co-founded Hyde Park Angels one of the most active angel groups in the United States in April of 2007. He previously served on the Chicago Mercantile Exchange Board of Directors. He has done market commentary for (More...)