LESSON: Stop believing or accepting government economic numbers, and even more so their rationalization of why today we are not growing 4-5-6% per year and creating incredible wealth for our citizens. It is so much simpler to understand if we just give it a little effort!
With the economy the #1 item on the minds of voters for the last few days until election, I wanted to help us all understand the true math of growth versus taxes. So, I pulled out a blog from years ago which hopefully helps us all understand how it really works in the United States of America.
One of the most frustrating economic fallacies is the recurring belief that raising taxes raises government revenue. Throughout history this belief has been proven false 100% of the time, yet a substantial number of politicians and everyday citizens continue to promote these terrible ideas.
Taxes and regulations deal with basic math (1+1 = 2), but people always have a difficult time understanding growth's escalating equations (1+1 = 3, 4, or 5). For instance, the Congressional Budget Office (CBO) easily calculates the federal revenue to be generated from a simple tax hike, but it is always billions, if not trillions, of dollars off calculating the actual results because they have no accurate models which project the effects on business, both positive and negative.
Remember the CBO is staffed with government economists and accountants who have never run a real company and who have never made a Friday payroll. As you notice a theme in JAM Views, we must realize the great majority of the people whom we blindly follow, because of their authoritarian position, likely have no idea what they are doing. They are, just like the rest of us, trying to figure it out one day at a time.
Here's one recent example from a few years back. The previous Administration's tax increases were projected by the CBO to increase federal revenue by $650 billion over the following ten years. Yet, because the increased taxes and regulations slammed the brakes on the economy, by the end of this Administration's term it was estimated that federal tax revenue would be CUT by $3 Trillion over the same ten years. That is a 5X error in the opposite direction! Now a trillion here and a trillion there, and soon we will be talking about real money!
America is about multipliers. If you prefer taxes and regulations, you should try opening a new business in France, and then enjoy even more trying to get the government to let you fire the employee who decided to never show up for work! We must understand growth and multipliers. One tax dollar redistributed into an entitlement program equals one dollar. But, one dollar spent on defense, on private companies rebuilding our nation's infrastructure, or on manufacturing jobs turns into three or four dollars in our economy.
And when we say manufacturing, most of us picture Rudy coming back to the steel mill in his blue hard hat to hand his dad the letter of acceptance to Notre Dame, but we need to also picture Intel engineers in their white clean room suits, biomedical scientists, and 3-D printing manufacturers.
Let's review a few numbers. An extra 1% growth in our country's Gross Domestic Product (GDP), which is our "country's total revenue," adds ANOTHER 1.2 million jobs. Higher taxes cut jobs 100% of the time. Increased taxes can only produce a fraction of the Government revenue that 1% growth creates.
Today, 2024, If you track unemployment to be anyone who wants a full-time job or who makes under $25k per year (unlivable) then the real unemployment number is 24.9%. And the true national debt if you include unfunded liabilities is north of $250 Trillion (not $35 Trillion they tell you). It’s all smoke and mirrors.
Here's another example. In the seven years prior to President Reagan entering office, GDP grew an average of +2.5% per year. President Reagan then cut taxes and regulations, and the GDP growth (your company/country’s growth rate) nearly doubled over the rest of his presidency, with government tax revenues growing double-digits in 4 of the last 6 years he was in office - huge numbers for Government receipts.
Unfortunately, for nearly 2.5 decades now we have been brainwashed to believe that growth is over and the "new normal" is under 2% growth. From 1947 to 2001 our GDP growth averaged +3.5% per year, but from 2002 to 2016 we averaged only +1.9% (a 45% drop). The C-Players have rolled out numerous excuses, to include aging baby boomers and lower labor force participation rates.
But these are only smoke screens meant to confuse and misdirect us. These excuses are analogous to the mediocre CEO telling shareholders that it's okay sales were down this year due to bad weather, fickled consumers, or supply chain hiccups. But the A-Player owners, you educated citizens, know that slow growth has a simple cause and effect relationship with raised taxes, regulations, huge debt service, and the refusal to reign in entitlements.
Econ 101 demands, "If you're not growing, you are dying." Or, as Red states in the movie Shawshank Redemption, "Get busy living, or get busy dying!" Raising taxes and creating more government bureaucracy in hopes of achieving a beautiful worldview always, always creates the opposite result. We must think growth. Teach your friends and neighbors about multipliers. Then very soon when someone recalls that ridiculous phrase new normal, we will all laugh, toast, and ask, "What were we thinking?!"
"Work only on things that will make a great deal of difference if you succeed."
- Peter Drucker
ps. Thank you so much to Austin and Molly with the Service Academies Global Entrepreneur Summit (SAGES) for asking me to speak as keynote on Thursday. What an incredible group of people! https://www.linkedin.com/posts/austinhunt11_publicspeaker-usairforce-usarmy-activity-7257092554184081408-1xuQ?utm_source=share&utm_medium=member_desktop
Order Amazon #1 Best Seller When Not If (Hardback, Kindle, Audio): https://www.amazon.com/When-Not-If-Overcoming-Adversity/dp/B0CKWTYSFF/r and on Audible https://www.audible.com/pd/B0D2LQ6QNC and Chirp When Not If by John Kador & Jeff Martinovich - Audiobook (chirpbooks.com).
Just One More: Just One More: The Wisdom of Bob Vukovich: Martinovich, Mr Jeffrey A: 9781790554850: Amazon.com: Books
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