"Freedom is never more than one generation away from
extinction. We didn't pass it to our children in the bloodstream. It
must be fought for, protected, and handed on for them to do the same." - Ronald Reagan
Have you ever had one of those dreams where you knew somebody you love was going to experience some major calamity, but you were unable to warn him or her about it, no matter how much you wanted to or how much you tried?
Usually it starts off innocuously enough, with only a minor sense that something is wrong. But as the dream progresses, your heart rate elevates as the events unfold, and by the end you're yelling and screaming but unable to touch or convince your loved one that they're in danger. You wake up, breathing heavily for a few minutes before your heart and breathing calm down, grateful that the dream is over, and go back to sleep.
I feel like I've been living that dream for the past decade or so. Only recently have I gotten to the part of the dream where my heart rate begins to elevate.
The problem has been two types of events that we should have predicted:
- Past events with consequences we should have seen coming
- Current events with consequences we should see coming
What's got me so worried? Let's take a look at some recent stories.
IRS Revenue Down 34%
The U.S. gets a good portion of its revenue by taxing a percentage of income and wealth. When income and wealth decrease, there is less to take. Therefore, tax revenues decrease.
x% of y-1 < x% of y, where x and y are real numbers.
In order for government to be able to collect revenue, it must have wealth and income to tax. The way to increase wealth is only to invest it. If they have less to invest, they cannot increase wealth. If they cannot increase wealth, the government has less to take.
x% of y+1 > x% of y
When people or companies have money to invest, they typically, in some form or fashion, transfer it to another, in the hopes (but not the promise) that they will be better off for what they get in return. They are free to succeed and they are free to fail.
They will have decreased, on their own accord, how much money they have at any given moment, and someone else will have taken possession of it.
With safeguards against fraud and the protection of private property, that process increases wealth, generates jobs, and is completely consistent with the free choices of the entities who earned it.
Rather than encouraging this sort of behavior that tends to increase wealth, our government has deemed it necessary to use a different equation. Instead of increasing wealth, they are working toward a mechanism to increase the percentage of the income they take from the people who are increasing it through a form of national sales tax called a VAT on TOP of all other sources of revenue.
The thinking goes that this will increase tax receipts.
x+2% of y > x% of y
However, this fails to account for the fact that people will have less to invest on their own, thereby hampering their ability to generate wealth. Initially, tax receipts will increase, but at the expense of the system's efficiency.
x+2% of y-1 ~ x% of y
The government gives very little consideration to the idea that they should spend less during these times, in spite of massive debt they accrue, which increases the interest their posterity will need to account for in the future, as demonstrated by its recent bailout of just-about-everything, including the U.S. automobile industry, which has been languishing for decades because of problems the government helped to create.
Government Will Now Own 72.5% of 'New GM'
Back in December 2008, GM's president Fritz Henderson claimed that GM was too big to be allowed to fail. Showing a remarkable amount of chutzpa, Henderson went as far to say that bankruptcy was not an option and that the government had a moral imperative to inject GM with a ton of taxpayer money to keep it from filing bankruptcy.
What could he possibly have meant by that? Because now it looks like bankruptcy is indeed on the table.
Constitutional issues aside (and there are many of them), the problem with nationalization of enterprise is that it creates a monopoly, drags down innovation borne of market necessity, does not rely on profits or losses to determine its fate (see the Post Office vs UPS or FedEx for an example), which further decreases the efficiency of the system.
(Though I'm not addressing the constitutional issues here, that is not to suggest they are less important than the economic ones. In fact, the two are so intertwined that it's very difficult to leave one aside to talk about the other.)
What's more, since the government doesn't have the money to make the purchase, it must either borrow or print the money to do it. An excess of either tends to cause inflation, which requires the government collect more revenue to both:
- Service the increased debt
- Buy products and services
Even still, if the increased debt lowers the country's credit rating, it increases the interest rate the taxpayers must pay on that increased debt.
Faber: Inflation to 'Approach Zimbabwe Level'
Inflation under these conditions is unavoidable. Whether we will reach hyperinflation seems likely, but I don't know if investor Mark Faber is correct when he says it is a 100% certainty (If you don't know what hyperinflation is, or if you need a reminder, click the link above, but only if you don't mind that it will scare the Hell out of you). I hope he's wrong, but I'm not smart enough to know for certain.
In either event, inflation decreases the value of money generally. It destroys wealth, which decreases the amount that individuals are able to freely invest on their own accord.
As we've already shown, when wealth decreases, so does the value of what the the government is able to collect, even further exacerbating the problem.
This is true whether we get hyperinflation, garden-variety inflation, or something in between. One of them is certain.
What is the consequence of all of this? And what does it have to do with marketing?
With a growing appetite and fewer resources to satisfy it, there is little that is out of our government's reach. Rather than curbing its diet, to satisfy this appetite, the it takes more from you and your clients.
- This means you have less work.
- This means you collect less revenue.
- This leads to being able to hire fewer people.
- This leads to higher unemployment rates.
- This leads to diminishing tax receipts and, in the current environment, more government spending.
If you think a government can control everything and you can remain free, I'd like to know what you're smoking.
We've already seen that, with respect to the functional nationalization of the auto industry, the government can now determine who is allowed to run the company, how much they're allowed to pay their executive employees, and how much they're allowed to advertise.
If you're a marketer -- if you're human -- showing how this applies to you is as easy as drawing a short, straight line between A and B.
And unless we act, the worst is still ahead.
"Government is like a baby. An alimentary canal with a big appetite at one end and no sense of responsibility at the other." - Ronald Reagan
What do you do when you see that a building is on fire? Do you sit back and watch it happen? Do you call 911? Or do you rush in to save anyone who might be trapped inside?
If you're stuck inside a burning building, do you resent the one who comes in to rescue you? The one who shouts from the ground to warn you to get out?
Nothing would please me more than to not feel this way, to go about my life as if nothing is wrong.
But the fire is burning. The effects are as predictable as the sunrise. And before I accept this fate as inevitable, I feel a growing sense of responsibility to at least say something. To convince one person.
Powerful and selfish people will tell you differently, and many people will believe them because either they have something to gain from what they say being true (after all, the consequent sure does seem painful) or they're just easily influenced by powerful people. No amount of logic or reasoning will dissuade them. They resent the bell ringer who warns them that their building is on fire.
But the fire does not depend on one's belief. It either is or it isn't.
Let's just keep our eyes open and not be afraid to see what we see. As long as we do, assuming we catch it early enough, we can correct the problem.
But first we have to be willing. - Cam Beck