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Providing a predictable and stable legal order
A government with moral and legal authority promulgates written rules and universally, impartially and uniformly enforces the rules, which provides a predictable and stable legal order on which to base economic and personal decisions. The law prevails, not the proclamation or arbitrary decision of a ruler, government bureaucrat, the enforcer (e.g., policeman) or judge.A Predictable and Stable Legal Order
Our prosperity has faded because policies have moved away from those that have proven to work. Here are the priorities that should guide policy makers as they seek to restore more rapid growth.
In the Wall Street Journal, George Shultz, Michael Boskin, John Cogan, Allan Meltzer and John Taylor fault the short-sighted and short-term economic policies made by recent federal politicians – Republicans and Democrats. These five academics with extensive government experience are critical of numerous government failures: artificially low interest rates, Fannie and Freddie’s inadequate collateral, banks required to make risky loans, ad-hoc bailouts of banks, insurance and auto companies, the 2008 tax rebates, 2009 stimulus, cash for clunkers, first-time home buyers tax credit and many more incompetent government policies.
Their first guideline:
Long-lasting economic policies based on a long-term strategy work; temporary policies don’t. The difference between the effect of permanent tax rate cuts and one-time temporary tax rebates is also well-documented. The former creates a sustainable increase in economic output, the latter at best only a transitory blip. Temporary policies create uncertainty that dampen economic output as market participants, unsure about whether and how policies might change, delay their decisions.
Shultz, et al, are in fact pleading for a predictable and stable legal order: …. Universally, impartially and uniformly enforces the rules, which provides a predictable and stable legal order on which to base economic and personal decisions.
Their first policy recommendation:
First, take tax increases off the table. Higher tax rates are destructive to growth and would ratify the recent spending excesses. Our complex tax code is badly in need of overhaul to make America more competitive. For example, the U.S. corporate tax is one of the highest in the world. …
But in the current climate, with the very credit-worthiness of the United States at stake, our program keeps the present tax regime in place while avoiding the severe economic drag of higher tax rates.
How does America implement a stable and predictable tax policy? For sure you cannot rely on the politicians. They got America in this ugly mess. Presently, the Republicans want to extend tax rates to all Americans, the Democrats have a least six different proposals, the President is vacillating, and time is of the essence. If Congress fails to act every American will have a tax increase.
This uncertainty is a major cause of the terrible economy. Everyone – individuals, small businesses and giant corporations - cannot reasonably predict the future – short or long term. Thus, they make no decision. Everybody is hording their money.
Beyond a stable legal order, tax policy is directly related to personal freedom. The more a person retains the fruit of his labor, the freer the individual. The coming tax battle is very important. It will define America’s future.
It is time the hundreds of thousands of people associated with FreedomWorks and the Contract From America to call their Members of Congress and Senators, demanding the permanent repeal of all tax hikes.
Vividly, "We the People have just repudiated the incompetent decisions of many of our elected representatives. Hence, thousands of calls demanding the permanent extension to tax rates will put heat on every elected official. As the late Senator Dirksen said, “When I feel the heat, I see the light.”
Alas, the reality politicians most fear is losing their positions of power. See The Contract From America.