The Secrets of Economics

Let me ask you something. If you had a choice between buying a toaster over that cost $29.95 and a second toaster over with identical features that cost $38.00, which one would you buy? Obviously, other than the perverse few who take joy in spending more to get the same thing, everyone would buy the less expensive toaster oven. It is a basic rule of economics. People want to spend the least amount possible to buy the things that they need.

Now let me ask you a second question. If you were a business making toaster ovens and you could locate in two different locations, which would you choose? A) A place where the total cost of labor, energy and raw materials to make the toaster oven was $14.00, or B)A place where the total cost of labor, energy and raw materials to make the toaster oven was $9.00? Again, this is not rocket science. A business would choose to locate in place B since it could save $5.00 per toaster oven in manufacturing costs. This too is a basic rule of economics; businesses try to maximize the amount of profit that they make.

Here is the final question. If you were a business making toaster ovens and you could locate in two different locations where the costs of manufacture were exactly the same, which would you choose? A) A place where the tax on the profits that you earned is 35% or B) A place where the tax on the profits that you earned is 15%? Another simple question! Each business would locate in the place where the taxes are lower. Businesses, you see, not only try to maximize their profits, they also try to maximize the amount of those profits that they get to keep after taxes.

This may all seem quite simple, but apparently, it is way beyond the understanding of president Obama and the Obamacrats. Clearly, the way to boost the American economy is to keep the costs of manufacturing in the USA as low as possible so as to attract more manufacturing to this country. We need to be able to sell American goods at prices that are competitive with those made in China and elsewhere; that requires that the cost of energy, raw materials and labor be kept down in order to compete. We need businesses to understand that they can make profits just as large here in the USA as they could elsewhere. And we need to lower the tax rates in the USA so that they too are competitive with those of other countries.

Since he took office, however, Obama has been doing things that push the balance the other way; Obama has been pushing jobs out of the USA rather than attracting any new ones. Look at costs. Obama has forced up energy costs in a major way. A huge chunk of the electric energy in America comes from coal. Obama has introduced regulations that make it extremely expensive to burn coal, indeed, so expensive that many coal fired plants are now closing. Each time one of these plants closes, the cost of energy in the USA rises and makes the cost to make goods here just that much more. Each time one of these plants closes, it is the signal that more jobs will soon go to India, China or somewhere other than here. Then there is natural gas. Because of fracking, there has been a boom in natural gas production and the price has become lower here than anywhere else in the world. This should be great news for our economy, but the response from the Obamacrats is actually quite bad news. Even though the EPA has finally admitted that there is no proof at all of a link between fracking and contamination of the water supplies, EPA is preparing to announce new regulations at the end of this year. Those regulations, according to Investor's Business Daily, will mean the end of fracking in America. Just to be clear, what that means is that the price of natural gas will probably go up five fold in a year or so as supplies of gas run out. Since natural gas is the second biggest source of electrical energy in the USA now, these new Obama regulations will mean another big increase in the cost to do business in the USA. It will also mean that millions of jobs will soon depart the USA for elsewhere.

Obama has also taken steps like the drilling moratorium on federal lands and the slowdown in the issuance of drilling permits for offshore lands which have driven the price of oil higher here. This too means higher costs for American businesses and more jobs going overseas.

Even when it comes to taxes, Obama has worked to keep the US tax rate as high as possible. Indeed, Obama wants to raise the tax rate that is paid by over half of all the small businesses in the country. Remember that third question above. The USA has the world's highest business tax rate and Obama wants to make it higher. It does not take a genius to understand that this will force more and more businesses to relocate abroad.

Again, these are not difficult concepts. The problem is that Obama and his Obamacrat colleagues have been taught over the years that the private sector has an inexhaustible supply of cash that can be taken to run government handout programs. The private sector will take care of itself, they believe. Sadly, this is not true. The president and Congress need to understand that they can undertake policies that will help or hurt the private sector. And the private sector is in danger of failing at the moment. We are a month or two away from falling back into recession unless something is done to take the extra burdens off the back of business.

I sometimes marvel when I hear the pundits on television tell us how Mitt Romney has not given us enough details about his economic plans. What utter nonsense. These pundits just do not understand. Romney wants to lower the business tax rates. Romney wants to encourage energy production through more drilling and full production of natural gas and coal. Romney wants to remove the regulations and laws that drive up the cost of doing business in the USA. Just removing Obamacare alone will save most American businesses a fortune. Getting rid of Dodd Frank will reduce the cost of credit and increase its availability at once. All of these moves will promote the growth of the American economy.

There are more steps than these which must be taken, and Romney has spoken of many of them. The key point to remember, however, is that Romney's plan is to help businesses grow so that they will stay in America and create more jobs. On the other hand, Obama's plan is to tax businesses more and raise their costs through energy policies and regulatory controls. Obama's policies will discourage the formation of new businesses and will drive many American firms to move overseas. In other words, Romney's policies will grow the economy while Obama's will shrink it. You don't need to be on TV to understand that.