Unleash the Producers, Not the Parasites

In his wonderful book, The Rational Optimist, Matt Ridley explores the ways in which trade and commerce have propelled innovation and well-being.  Ridley presents evidence that for the last 100,000 years, humans have engaged in trade and that the rise of complex civilizations can be tied to the exchange of ideas associated with trade.  So widespread and deep-seated is this instinct for exchange that, according to Ridley, it is evidence of a fundamental genetic propensity in Homo sapiens.  The human brain is hardwired to engage in all forms of exchange – commercial, social, and intellectual – and the result is an ever-improving quality of life.

Ridley is indeed an "optimist," but he is realistic enough to know that government can strangle innovation by preying upon private enterprise.  Human history is full of examples of great civilizations brought low by the parasitic inclinations of powerful rulers – the kind of rulers who now govern our nation by executive order rather than by the rule of law.  Under the weight of these parasites, as Ridley shows, civilization stagnates or regresses to earlier stages of development.

A simple count of U.S. patent awards confirms that the Obama era has not been good for innovation and exchange.  The percentage of U.S.-based patent awards is now at an all-time low, having continued its decades-long decline during Obama's presidency.  Instead of "saving the middle class," as he often boasts of doing, Obama has overseen further erosion of national innovation and prestige.

As for prosperity, recent data for U.S. family income has been dismal.  Median household income has never recovered the high of the Bush years, when it reached $57,357 in 2007.  In 2015, according to the U.S. census, it was $52,250.  And for workers in the lowest quintile, the very ones Obama and Hillary Clinton claim to champion, it was $11,676 (2014 figure).  One fifth of American families are living on less than $12,000 per year.  That is the shameful truth of the Obama years.

Yet in February, Hillary Clinton told voters that Obama hasn't received "the credit he deserves."  She has repeatedly stated that she intends to defend "Obama's legacy," but that is a legacy of poverty for most American workers.  The reason Obama has such an abominable record is that he has smothered innovation and investment under the weight of increased taxes and regulation.  And the intent and effect of new taxes and regulation are to transfer wealth and power to Washington.

Ridley's book helps us understand that the Obama stranglehold on business is nothing new.  For as long as innovation and exchange have existed, there have been kings, dictators, and democratic socialists eager to cash in.  In practically every great society, "governments gradually employ more and more ambitious elites who capture a greater and greater share of society's income by interfering more and more in people's lives as they give themselves more and more rules to enforce" (Ridley, p. 182).  Ultimately, the productive society stagnates and dies out, and innovation and commerce move elsewhere.

This is precisely the tipping point at which America now stands.  The evidence of business moving elsewhere is not hard to find.  Despite frantic attempts on the part of the Obama administration to prevent them, tax inversions are taking place with greater frequency and on a larger scale than before.  Treasury's new rules designed to block inversions will not be successful.  By making corporate inversions less desirable, they will only spur foreign buy-outs of American businesses by foreign firms.

Not only are new rules unsuccessful in preventing corporate inversions, but they impose a huge burden on businesses of all sizes.  According to the Wall Street Journal, the latest Treasury Department ban on "earnings stripping" "mainly punishes companies that aren't leaving the country."  And by weakening businesses, Treasury's new regulations further reduce wages for American workers.   

What's revealing is Secretary Lew's rationale for blocking tax inversions.  Lew has said nothing, so far as I know, about advancing productivity or promoting innovation.  What seems to worry the administration is loss of federal revenue.  The parasites in Washington truly believe that every dime produced by private enterprise belongs to government, to do with as it wills.  What really upsets them is the possibility that some portion of that money might escape their control.

The parasites are so numerous that a full list would include practically every prominent figure on the left working in government, media, and academe.  The Consumer Financial Protection Bureau was the brainchild of Elizabeth Warren, the progressive activist near the top of Hillary Clinton's V.P. list.  Even in its brief history, the CFPB has succeeded in imposing thousands of costly new regulations, including new rules that would provide consumers (and their lawyers) new avenues for suing banks and credit card companies by restricting arbitration clauses in financial contracts.  In 2015 alone, the CFPB doubled the number of prosecutions of businesses.  According to Tony Alexis, the CFPB's director of enforcement, the agency plans to be "particularly active" in 2016.  Is there a better example of government parasites run amuck? 

Well, yes, there is.  Eric Schneiderman's attempted shakedown of ExxonMobil may be the best example yet of the tendency of those in authority to parasitize the productive labor of others.  The New York attorney general, joined by A.G.s from Massachusetts, California, and the Virgin Islands, is seeking reams of documents (stretching back as far as 40 years) relating to Exxon's stance on global warming.  Exxon has pushed back on these demands, filing its own charges against Virgin Islands A.G. Claude Walker.  Apparently, these state A.G.s hope to catch the oil giant in an inadvertent misrepresentation and proceed to a lucrative settlement – while opening up the company for class action lawsuits on the part of "wronged" investors and other groups.  It's the same playbook that has fettered American banks, auto companies, pharmaceutical companies, and countless others ever since Obama took office.  Investigate without real proof, sue, settle, and transfer assets from investors to Washington.

In the face of such attacks, it is no wonder that the economy has stagnated throughout Obama's term.  Companies are now crushed with hundreds of thousands of rules, and they are deterred from new investments by the fear of lawsuits.  Under the weight of this government interference, as well as the highest corporate tax rate in the developed world, there are only three rational options for corporate leaders.  (1) Accept de facto nationalization and the restrictions that come with it; (2) defer investment and hiring, and return profits to investors by way of dividends and share buybacks; or (3) relocate to a less onerous environment via a corporate inversion or outright buyout by a foreign company.  For businesses that wish to expand, the third option is the obvious choice.

If we are not to suffer the fate of past civilizations, we must expel the parasites who now control our economy and who will continue controlling it if Hillary Clinton is elected.  The Washington elite are terrified by Donald Trump because he is serious about making America great again – and he knows that the only way to do so is the kick the parasites out.  Trump's announced policies on taxes and regulation make perfect sense.  They would free up American businesses to compete on a level playing field.  They appeal to one of the most basic human instincts: the desire to produce more and retain the proceeds.

For eight years, the Obama administration has undermined our nation's competitive instincts.  It's time to unleash them by putting producers first – and putting parasites in their place.  

Jeffrey Folks is the author of many books and articles on American culture, including Heartland of the Imagination (2011).

In his wonderful book, The Rational Optimist, Matt Ridley explores the ways in which trade and commerce have propelled innovation and well-being.  Ridley presents evidence that for the last 100,000 years, humans have engaged in trade and that the rise of complex civilizations can be tied to the exchange of ideas associated with trade.  So widespread and deep-seated is this instinct for exchange that, according to Ridley, it is evidence of a fundamental genetic propensity in Homo sapiens.  The human brain is hardwired to engage in all forms of exchange – commercial, social, and intellectual – and the result is an ever-improving quality of life.

Ridley is indeed an "optimist," but he is realistic enough to know that government can strangle innovation by preying upon private enterprise.  Human history is full of examples of great civilizations brought low by the parasitic inclinations of powerful rulers – the kind of rulers who now govern our nation by executive order rather than by the rule of law.  Under the weight of these parasites, as Ridley shows, civilization stagnates or regresses to earlier stages of development.

A simple count of U.S. patent awards confirms that the Obama era has not been good for innovation and exchange.  The percentage of U.S.-based patent awards is now at an all-time low, having continued its decades-long decline during Obama's presidency.  Instead of "saving the middle class," as he often boasts of doing, Obama has overseen further erosion of national innovation and prestige.

As for prosperity, recent data for U.S. family income has been dismal.  Median household income has never recovered the high of the Bush years, when it reached $57,357 in 2007.  In 2015, according to the U.S. census, it was $52,250.  And for workers in the lowest quintile, the very ones Obama and Hillary Clinton claim to champion, it was $11,676 (2014 figure).  One fifth of American families are living on less than $12,000 per year.  That is the shameful truth of the Obama years.

Yet in February, Hillary Clinton told voters that Obama hasn't received "the credit he deserves."  She has repeatedly stated that she intends to defend "Obama's legacy," but that is a legacy of poverty for most American workers.  The reason Obama has such an abominable record is that he has smothered innovation and investment under the weight of increased taxes and regulation.  And the intent and effect of new taxes and regulation are to transfer wealth and power to Washington.

Ridley's book helps us understand that the Obama stranglehold on business is nothing new.  For as long as innovation and exchange have existed, there have been kings, dictators, and democratic socialists eager to cash in.  In practically every great society, "governments gradually employ more and more ambitious elites who capture a greater and greater share of society's income by interfering more and more in people's lives as they give themselves more and more rules to enforce" (Ridley, p. 182).  Ultimately, the productive society stagnates and dies out, and innovation and commerce move elsewhere.

This is precisely the tipping point at which America now stands.  The evidence of business moving elsewhere is not hard to find.  Despite frantic attempts on the part of the Obama administration to prevent them, tax inversions are taking place with greater frequency and on a larger scale than before.  Treasury's new rules designed to block inversions will not be successful.  By making corporate inversions less desirable, they will only spur foreign buy-outs of American businesses by foreign firms.

Not only are new rules unsuccessful in preventing corporate inversions, but they impose a huge burden on businesses of all sizes.  According to the Wall Street Journal, the latest Treasury Department ban on "earnings stripping" "mainly punishes companies that aren't leaving the country."  And by weakening businesses, Treasury's new regulations further reduce wages for American workers.   

What's revealing is Secretary Lew's rationale for blocking tax inversions.  Lew has said nothing, so far as I know, about advancing productivity or promoting innovation.  What seems to worry the administration is loss of federal revenue.  The parasites in Washington truly believe that every dime produced by private enterprise belongs to government, to do with as it wills.  What really upsets them is the possibility that some portion of that money might escape their control.

The parasites are so numerous that a full list would include practically every prominent figure on the left working in government, media, and academe.  The Consumer Financial Protection Bureau was the brainchild of Elizabeth Warren, the progressive activist near the top of Hillary Clinton's V.P. list.  Even in its brief history, the CFPB has succeeded in imposing thousands of costly new regulations, including new rules that would provide consumers (and their lawyers) new avenues for suing banks and credit card companies by restricting arbitration clauses in financial contracts.  In 2015 alone, the CFPB doubled the number of prosecutions of businesses.  According to Tony Alexis, the CFPB's director of enforcement, the agency plans to be "particularly active" in 2016.  Is there a better example of government parasites run amuck? 

Well, yes, there is.  Eric Schneiderman's attempted shakedown of ExxonMobil may be the best example yet of the tendency of those in authority to parasitize the productive labor of others.  The New York attorney general, joined by A.G.s from Massachusetts, California, and the Virgin Islands, is seeking reams of documents (stretching back as far as 40 years) relating to Exxon's stance on global warming.  Exxon has pushed back on these demands, filing its own charges against Virgin Islands A.G. Claude Walker.  Apparently, these state A.G.s hope to catch the oil giant in an inadvertent misrepresentation and proceed to a lucrative settlement – while opening up the company for class action lawsuits on the part of "wronged" investors and other groups.  It's the same playbook that has fettered American banks, auto companies, pharmaceutical companies, and countless others ever since Obama took office.  Investigate without real proof, sue, settle, and transfer assets from investors to Washington.

In the face of such attacks, it is no wonder that the economy has stagnated throughout Obama's term.  Companies are now crushed with hundreds of thousands of rules, and they are deterred from new investments by the fear of lawsuits.  Under the weight of this government interference, as well as the highest corporate tax rate in the developed world, there are only three rational options for corporate leaders.  (1) Accept de facto nationalization and the restrictions that come with it; (2) defer investment and hiring, and return profits to investors by way of dividends and share buybacks; or (3) relocate to a less onerous environment via a corporate inversion or outright buyout by a foreign company.  For businesses that wish to expand, the third option is the obvious choice.

If we are not to suffer the fate of past civilizations, we must expel the parasites who now control our economy and who will continue controlling it if Hillary Clinton is elected.  The Washington elite are terrified by Donald Trump because he is serious about making America great again – and he knows that the only way to do so is the kick the parasites out.  Trump's announced policies on taxes and regulation make perfect sense.  They would free up American businesses to compete on a level playing field.  They appeal to one of the most basic human instincts: the desire to produce more and retain the proceeds.

For eight years, the Obama administration has undermined our nation's competitive instincts.  It's time to unleash them by putting producers first – and putting parasites in their place.  

Jeffrey Folks is the author of many books and articles on American culture, including Heartland of the Imagination (2011).