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The Persistence of Memory

For years, I used to think that John Kennedy was just this interim President who really didn’t have enough time to do anything great. After a little bit of study relative to crisis management, I have gradually come to shift my viewpoint. I have realized that his handling of the Cuban missile crisis was timely and brilliant. I have also realized that this was an intelligent man who liked to surround himself with intelligent people. It’s no mistake that, early in his administration, he chose to provide tax cuts as incentives for companies and individuals to encourage the growth of a sluggish economy.

The problem with the current Administration is simply in their understanding of mathematics. Here, this will exemplify the point: Yesterday, President Obama gave a speech in Las Vegas. He mentioned how the last 10 years of the Republican administration had left him with a car driven into a ditch that he had to get out of the ditch. Now, I’ll abandon the analogy of the car in the ditch and just stick with the numbers. First of all, President Bush wasn’t President for 10 years. Terms are for four years each. The Democrats were in complete control of both houses of Congress for the last two of those years. So the President seems to have been under the impression that a decade is 6 years.

Since then, the Current administration has been in control for an additional year and a half. From an economic standpoint, the market jobs and GDP, the best portion of the ‘Bush Decade’ was the time period when Bush actually was the President, and the Republicans actually controlled Congress. I would tend to agree with President Obama, that the last three and a half years of the Bush decade, especially those that have been governed by President Obama, have been rough.

This doesn’t exemplify the real math problem. Here’s the interesting part. Here’s where the math gets a little trickier, with the concept of the stimulus. This is why Kennedy, and Presidents after him wisely chose to provide tax cuts to encourage growth rather than driving down the street in the Brink’s truck throwing cash out the window, hoping it would take root and grow. I will illustrate:
If you consider on a graph, with X and Y axes that X, the horizontal Axis is time, you will realize that both Tax Cuts and Stimuli are limited, or finite in terms of time. Arguably stimuli are more finite because there is only so much money to go around, but we won’t argue that point right now. It’s the vertical axis we are concerned about. If you are already bored and confused, close the window, accept a grim economic future and vote for an administration that has more than quadrupled our debt. If not, here’s the point. Vertically, the only economic gain that a stimulus can hope to achieve is the graphing of X number of Newly employed Government Employees purchasing N number of appliances, vehicles, etcetera. The number of additional Government employees, and the objects they can or will buy is finite.
Now consider the Tax Cut scenario: Businesses hope to sell not only to however many people are benefitted by a tax cut (still finite but much larger than the number of people added to the government payroll), times a percentage gain of all income taken in, which any organization that hopes to grow would have to regard as infinite the tax break, or savings, or, in real DOLLARS, EARNINGS, generated by sales, not only to a finite added work force, but more significantly to a global population which is of potential consumers which is massively larger than that temporarily enlarged workforce, and growing, (since man first walked the earth), infinitely. In other words, the tax cuts the corporation or small business can receive to increase real capital growth is only limited by their product line, imagination, desire to sell, all of the things that really drive business growth anyway.

It’s real simple math. Kennedy understood it. Regan may not have understood it, but he appreciated it. George Bush did it, probably had no concept of why it would work and probably didn’t care, but, despite current claims, an honest look at GDP and the market reveals that it did work.

We are about to give up that sound mathematics to go into a new realm, a strange new Daliesque physics, the realm of expired tax cuts, huge debt compounded by stimulus spending, a world where 6 years is a decade, a surrealistic world where a finite number of jobs and a finite amount of money parsed to each person suddenly becomes an infinite potential market boom! a world where job creating companies drape like melted watches over immovable regulatory rocks, a world where 2 + 2 equals five.

Copyright July 10th By Juan Zapatero



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