Pournelle: Mourn the Republic

From Jerry Pournelle, via Instapundit:

Health Care Bill Day

Unemployment is over 10%. It wasn't supposed to get that high. TARP was supposed to fix that.

Meanwhile today may be the most important vote in Congress since the days of the New Deal. If the health care bill passes, it will fundamentally convert these United States into a different kind of popular democracy, which generally means rule by a unionized bureaucracy organized to vote. Once that much of the economy is run by government, economic recovery as many hope for will simply be impossible.

Permanent unemployment at 7% or so; median income perhaps 10% higher than it is now, but not much higher; and a long period of stagflation. Reluctance to take on new employees, and great incentive to export jobs. Is this a picture of the future? We will have to see, as Congress debates the health care and carbon tax bills.

One of the big debating points is over abortion. That is certainly in important moral point, but the creation of an enormous entitlement overshadows it. At least under this bill, illegal immigrants can't be jailed for not buying government approved health insurance. The rest of us can be. I have no idea what happens to those my age. I gather that it pretty well eliminates the Medicare Advantage that pays most of my Kaiser dues. This all promises to be interesting.

With Detroit a ruin and manufacturing industries on the ropes, small business is the only possible engine of recovery from what they don't call a Depression; so the Congress is going to add an 8% tax on employing people. We already have the longest period of increasing unemployment since the Great Depression; I presume we are going for a really big record setting period of increasing unemployment.

What incentives people have to invest and create new jobs in this environment is pretty murky now; with the health bill there will be fewer incentives to invest in new jobs in the US. The incentives are now to the job black market -- hire illegal immigrants who don't have to have health insurance -- or to export the job if that can possibly be done.

Meanwhile the credit index is way down: people aren't borrowing or lending, meaning investment is down. Moving money around in circles keeps Wall Street going, but next year the Bush tax cuts expire, meaning a new round of higher taxes to go with the new taxes of the health care and carbon taxes, and the new regulations. And with a trillion dollar deficit the incentive to add surtaxes is overwhelming, thus again confiscating money from the successful -- money that otherwise would have been invested. Perhaps the government can invest for us with a new TARP?

Parts of the economy will thrive, but then some made good money during the Great Depression. The incentive will be to tax those who continue to do well, meaning they won't invest either, and will spend more on tax avoidance rather than making more money. We have seen that spiral before; the remedy was to cut taxes, but that is not a politically viable incentive.

Without investment there isn't a lot of job creation. Companies thrive by getting more work from fewer workers. That's good for the productive (who will have to work harder to pay their increased taxes) but doesn't do much for those without jobs. Unemployment compensation and welfare do not create jobs nor do they get people employed. Government employees don't increase production and wealth, but they have to be paid for what they do; and that takes more out of the economy. The spiral continues. When we do recover we may consider getting where we are now to be a great thing.

In other words: Have we seen the end of the good times? Tax rates go up, but government revenues keep going down. And down. Raising tax rates doesn't seem to make the government much more money. And unemployment goes up. And the beat goes on.

A new Great Depression is not inevitable, but each time there is another transfer of resources to the government, it becomes more likely. The trick to survival is to find niches where one can thrive or at least hang on in the midst of the downward spiral. Who is succeeding in today's Detroit? It would be worth studying those survivalists...

It's also worth considering vegetable gardens. I wish I were kidding.

The other survival tool is to learn a lot more about the tax laws. The return on investment from knowing more about tax laws is probably higher than the return on investment from increasing productivity.

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I would have thought that the Obama administration is at least as responsible for the US response to the Swine Flu problem as the Bush administration ever was for the New Orleans response to Katrina, but the media are not reporting it that way. I wonder how those who stood in long lines for hours only to find that there is no vaccine feel about the government's coming takeover of the entire health care system? Will the new health care system work more smoothly than does, say, FEMA? Is there any reason to think so?

Still no vote as of 1650. The longer the vote is delayed, the more likely that it won't pass. But Nancy Pelosi is smiling, and claims to have 218 votes.

Mourn the Republic.

220-215