Power to the People - Tax Cuts as Stimulus

On Tuesday, January 27, 2009, Prime Minister Stephen Harper will have a rare opportunity to change the landscape of Canada’s finances. That is when Harper’s embattled government will present its budget to a skeptical and ambitious House of Commons. If he has the nerve and the will, the Prime Minister can reverse the way Canadians think about taxes and spending, to the betterment of the nation.

In these troubled times, citizens have taken it upon themselves to become more literate in the ways of the economy and government. One of the first terms they have acquired is “stimulus,” which is broadly defined as anything the government does to give the slumping economy a kick in the behonkus.

Most commonly, stimulus is thought of as the government spending money on various industries and projects. But if we unpack what stimulus is meant to mean – that is, government finding ways to get investment flowing among businesses and individuals – one of the best ways to do this is to allow folks to keep more of their own money in the first place. To wit, tax cuts are a kind of stimulus.

In order to embrace this concept, citizens first need to understand that the government doesn’t run the economy – private enterprise does. Governments establish and maintain the parameters within which businesses create jobs and investments. With the right regulations, structures and laws in place, the best thing government can do is empower people to spend their money, take risks and reap the rewards of a free market system.

A cut in personal and corporate taxes, as well as a holiday from the capital gains tax (which would be relatively painless, since not many Canadians are fretting about how to offset gains just now), would place billions of stimulus dollars in the hands of private citizens and go a long way toward helping our country through its economic troubles.

This mission, should the Prime Minister choose to accept it, will require a selling job, since it defies common wisdom as to the role of government and taxes.

Decent and otherwise intelligent people will say, “We have to raise taxes so the government can create jobs by hiring more people.” There are at least three things wrong with this simple statement. First, raising taxes doesn’t necessarily raise revenue; indeed, it can easily do just the opposite as investment and innovation are squelched and taxpayers find ways to stash earnings. Second, government does not create jobs, businesses do. Third, even if government did create jobs by hiring people, swelling the civil service ranks is no way to steer a country into the economic fast lane.

There is, of course, a role for government expenditure, and infrastructure spending is a concept many people have embraced. One of the best things that can be said about this form of stimulus is that, at the end of it, there is actually something tangible and useful, like a bridge or a highway. Compare this with stimulus spending on interminable programs that help no one and never die. One is reminded of Milton Friedman’s maxim that there is nothing so permanent as a temporary government program.

This is a risky proposition for the Prime Minister, make no mistake. Canada is only weeks removed from seeing opposition parties attempt to topple the government, ostensibly because of a lack of stimulus in Finance Minister Jim Flaherty’s November 27 fiscal update. Now, it is perfectly reasonable to believe that the entire coalition imbroglio was about one man’s ambition (Bob Rae, call your office) that ended up costing another his leadership (Stephane Dion, call a cab). But if the lack of economic stimulus were really the cause of the inchoate coup, then Harper can address that issue and help the country simply by redefining the terms.

Politicians win or lose on contrasts. In deciding how to stimulate the economy, Stephen Harper has the chance to give Canadians a contrast like they’ve never seen.

Sell it, Prime Minister. There are plenty of overtaxed Canadians who believe in the concept and will be glad to help you.



theo@theocaldwell.com

Theo Caldwell, President of Caldwell Asset Management, Inc., is an investment advisor in the United States and Canada.

We Wish You a Merry Euphemism

If you insist on saying “Happy Holidays” instead of “Merry Christmas,” it doesn’t mean you’re a bigot – but it helps. Whether you’re a government type who declares that the arboreal splendour in the public square is, in fact, a “Holiday Tree” or a corporate whiz who calculates that “Season’s Greetings” will offend the fewest number of customers, you know who you are and what you’re doing. It’s Christmas and you know it. Clap your hands.

In this cold world, a kind word is always welcome, so if one person genuinely hopes for another to enjoy his or her holiday, or wishes to greet that person in the spirit of the season, far be it from me to cast a stone. But, in the weeks leading up to December 25, if you make a conscious choice to avoid saying “Merry Christmas,” there’s a good chance you have decided that a divine gift that was meant for all mankind, and in which billions of people rejoice each year, is too offensive a notion to cross your lips.

Yes, yes, I know – folks say “Happy Holidays” and other insipid nonsense because not everyone is Christian, so this is a way to be inclusive. But there is no inclusion to be had by euphemising the warmest wish of a particular religion, presuming it to be objectionable to non-believers.

Of course, there are many different religions and faiths in the world. This is something folks are taught by the age of, say, 4 or 5. So, if you are older than this, yet you eschew “Merry Christmas,” what you are putting forward is that one of the world’s religions is uniquely unsuitable for public acknowledgement.

No one frets about being ‘inclusive’ during Passover or Ramadan, nor should they. Ironically, the purported inclusiveness of the “Season’s Greetings” Stasi is actually about exclusion. To wit, it’s about excluding just one religion, Christianity, from any rightful place in modern society.

Showerless know-nothings of the Left have long since extrapolated their vague, fashionable notions of history – from the horrors of the Crusades to the dull intolerance of the 1950s – to name Christianity the culprit for all the world’s evil. This is the stupidest concept to achieve mass acceptance since acid-wash jeans, but here we are.

And so, budding iconoclasts can tee off on the faith, or inflict their petty “Holiday Tree” policies with impunity. And well they might, for it is a riskless proposition. The worst that will happen is they may stumble across a column like this one, calling courage-free conformity by its name. Indeed, those politically correct storm troopers who browbeat Christians in movies and television, classrooms and print, would be much more credible if, just once, they decided to try their censorious tactics on one of those religions where the practitioners react, shall we say, stringently to being muzzled or criticized.

Christians, their antagonists point out, are in the majority, and so their holidays do not merit the same exclusive attention and protection as those of other religions. The reasonable reply to this, of course, is “So bloody what?” Is tolerance a numbers game? Is courtesy quantifiable? Is the respect a religion merits inversely proportional to its number of believers? If so, how do we tally just how blessed rude we can be to the faithful? Is it calculated like a marginal tax rate, off the last adherent rather than the last dollar earned?

Folks may say that a contentious column like this one is inconsistent with the Christmas spirit, and so detracts from its purpose. But Christmas is not just about hand-holding and bad sweaters. I will gamble the false comity of a Sears catalogue photo to stick up for my religion. Too often, folks assume turning the other cheek means rolling over.

Christmas is about Jesus Christ, Son of God, coming down to Earth to show us how a proper life should be lived, then dying unpleasantly for our sins. Believe it or don’t. I am arguably the worst Christian in the world, but we do one another no favours by pretending this Happiest of Holidays is about anything but Him.


theo@theocaldwell.com

Theo Caldwell, President of Caldwell Asset Management, Inc., is an investment advisor in the United States and Canada.

Bloodless Coup at Disneyland

Canadian politicians aren’t making history, they’re taking up space. In other countries, particularly the United States, the decade preceding 9/11 is often referred to as a “holiday from history,” wherein the population was benighted to the realities and dangers of the outside world. In Canada, that halcyon respite can be measured not in years, but generations.

As just one example, while the powerful play of history unfolded over the last 30 years, Canada’s political class subjected us to repeated, lugubrious exercises – complete with tears and tape measures applied to French lettering on business signs – to determine whether one of the most blessed nations God gave to man should even stay together. If Canadians truly understood the misery of much of the rest of the world, and how lucky we really are, such nonsense would never even come up.

And now, weeks after spending $300 million on a pointless election, our sheltered and shallow Parliamentarians are creating a trumped-up “crisis” and have the gall to insist it’s “historic.”

There’s making history, and there’s making noise. For example, whether one agrees with the Afghanistan mission or not, 2,500 Canadians are in that dangerous country making history right now – in practical, not political terms – and putting their lives on the line to make the world a better place.

Meanwhile, back at home, our lightweight politicians refer to proposed spending cuts as an “attack on women.” Those who hold such hysterical views of Canadian government budgetary policy should consult with an Afghanistan war veteran, or a survivor of the Taliban’s regime, to find out what a real “attack on women” consists of.

This is less a question of policy than of culture. Yes, the prescriptions put forward by opposition leaders who are striving to force their governance on a population that did not elect them are probably wrong. Opinions vary as to whether it was Prime Minister Stephen Harper’s cuts to social spending, or the elimination of taxpayers’ subsidies of political parties, or his lack of an economic stimulus package, or good old-fashioned political manoeuvring that prompted the Liberals, Bloc and NDP to cobble together their proposed coalition government – but none of it matters. The real question is, with the nation at war and a global economic crisis ongoing, should we be focused on the constitutionality of a hackneyed power-grab?

As this country and the world face extraordinary challenges, the events of this week remind us that some political cultures are too slow to move beyond the Mickey Mouse, navel-gazing mentality of fatter days. This is a bloodless coup at Disneyland.

In any photo of international heads of government, Canada's prime ministers invariably wear hopeful smiles that go unrecognized. Our politicians are hangers-on. Monday’s display of three electoral also-rans – Stephane Dion, Jack Layton and Gilles Duceppe – holding forth as if they were the victors at Yalta goes a long way to explaining why this is. They have no idea what’s important.

Canada could and should be one of the most significant, powerful nations on Earth. With our resources, developed capital markets, rule of law and entrenched freedoms, we have the tools to create the world’s most attractive environment for investment and skill. But our politicians’ priorities are too puny. Small dreams stir no hearts. Think bigger, sirs, and history will take care of itself.


theo@theocaldwell.com

Theo Caldwell, President of Caldwell Asset Management, Inc., is an investment advisor in the United States and Canada.

George W. Bush and the Legacy in Waiting

It is the easiest thing in the world to criticize President George W. Bush. So simple and widespread is condemnation of the man that, when one hears some concerned citizen spouting the usual lines about “lies,” “war for oil,” and the like, one wonders what that person thinks he or she is adding to the public discourse. It has all been said before, and it was dopey the first time.

What is far more difficult – harder, even, than finding someone to sing Bush’s praises – is to find intelligent analysis of Bush’s successes and failures as leader of the free world. His foreign policy forays, like the Iraq war, and his domestic policies, like the prescription drug benefit, bear serious scrutiny. But since folks start hyperventilating at the mere mention of Bush’s name, it seems sober discussion must wait until at least the end of his term.

It is often noted that while Presidents Lincoln and Truman were both reviled in their times, history has judged them to be among the strongest leaders in American history. This simply proves Fred Barnes’ formulation that in politics, as in life, the future is never a straight-line projection from the present. Also, it is fair to say that just because people hate you, that doesn’t make you Abraham Lincoln.

What, then, of Bush’s hordes of haters, who imagine him the cause of all the world’s evil? Bush’s legacy to them may be, “Get a life.” For eight years, Bush has been their Voldemort, and their antipathy toward him has defined their existence.

Moonbats have always been among us and their place in history is secure. The legacy of George W. Bush, meanwhile, is less certain. Angry mobs and conspiracy theorists have railed against leaders since time immemorial, and there is little to distinguish Bush's most venomous detractors from the wrathful wretches of centuries gone by. To wit, while his critics are not unique, perhaps Bush is.

Rarely, if ever, has a president left office with so much of his legacy up in the air. If, for example, Iraq and Afghanistan flourish into free and functioning nations, allies of the United States in difficult areas, Bush will rightly be remembered as the man who liberated over 50 million human beings while strengthening his own country in the process. Such success remains highly hypothetical, but it would be sufficient for future generations to relieve Bush of his contemporary moniker of History’s Greatest Monster.

Conversely, if these enterprises fail, or if Bush’s apparent coziness with Russia’s Vladimir Putin leads to a renewed twilight struggle with that increasingly aggressive nation, this president’s foreign policy must be judged a failure.

Domestically, while Bush’s growth-inducing tax cuts added hundreds of billions of dollars to the Treasury and increased the share of taxes paid by the highest earners, the nation is in the grips of its worst financial crisis in decades. In truth, the current debacle finds its roots in the misbegotten mortgages mandated by President Carter’s Community Reinvestment Act of 1977, if not President Roosevelt’s creation of Fannie Mae as part of the New Deal. But as the man at the top when the bad news came down, Bush bears much of the burden.

Will this president be recognized for his better economic moves or will historians pass him the buck for today’s meltdown? Will his foreign policy look like wisdom or folly to future generations?

In short, is Bush evil and unintelligent, as his enemies claim, or is he the most visionary president in American history? Neither.

Politics isn't binary, nor are people. Leadership requires choices, and the consequences are often long-term.

Why then has Bush, whose policies cannot yet be assessed in total, become the object of so much scorn? In large measure, Bush Derangement Syndrome began before the man was inaugurated and has less to do with his actions in office than his detractors insist. The Left’s shorthand is that after 9/11, the country and the world were united and Bush squandered that goodwill by invading Iraq. This is bollocks on stilts.

In reality, the 2000 Florida recount divided the country. 9/11 reunited the nation briefly, but folks were soon back to obsessing over the rancour and result of the presidential race. Bush’s majority-vote victory over Sen. John Kerry in 2004 simply added insult to injury for those who felt he never should have been president.

However he got the job, the scope of his actions ensure there is room for George W. Bush in the roll call of the best, and worst, American presidents.



Theo Caldwell, president of Caldwell Asset Management, Inc., is an investment advisor in the United States and Canada.

Good Luck, President Obama

Good luck, Mr. President. I am one of those Americans Barack Obama spoke to on election night, the ones who did not vote for him. He’s right – despite my loyal opposition, he will be my president.

Some other conservative commentators have said we should treat this new Democratic commander-in-chief with exactly the same respect they showed our outgoing Republican president. This is meant, of course, as a call to lambaste Obama from day one and never give the guy a break, as the Left has done to George W. Bush. I say no – our actions are not defined by those of our political adversaries.

I and others are fond of calling the GOP the party of grown-ups. Now, it’s time to act like it. We lost, fair and square. By all means, we should oppose ideas with which we disagree – this is a responsibility of citizenship. But it’s not personal – it’s just politics.

America is bigger than any election and the presidency is greater than any one man. After 16 years of anger (recall that Clinton Hatred preceded Bush Derangement Syndrome), it is time to differ as adults and let dissent end at the water’s edge.

Remember, also, that the presidency of the United States is often, and aptly, described as the toughest job in the world. Only the handful of fellows who have held the office can understand this fully. Mr. Obama, when they opened that massive file for your first intelligence briefing as president-elect, did its contents change your views? I have not read that file, nor have your breathless, face-painting supporters. Only you, sir, have the knowledge of its contents and the power to respond.

From your public pronouncements, I perceive weaknesses in your domestic and foreign policy agenda. But I am working with a bounded rationality and, to be a responsible citizen, I must give you some benefit of the doubt for the good of the nation. If you err, I will say so. Indeed, I have not been shy about criticising you before and, frankly, with all the rapturous adulation round about you, I should think you’d welcome some sober assessment. And sober it shall be, since I doubt any Republican touched a drop of Champagne on election night or since.

To be certain, most of the media will not only give Obama the benefit of the doubt, they will resist until the last possible moment the need to hold him responsible for his own mistakes – and even his most hysterical supporters must admit that he will make them. How long will President Bush be blamed for all that goes wrong? A year from now, a pipe could burst in the White House and the press will say, “See? Bush forgot to winterize the place.”

But, just as Republicans should not repay Democrats’ disrespect of our party’s president in kind, so responsible citizens are not beholden to the excesses of the news media. If NBC’s Chris Matthews wants to maintain his famous leg-thrill for four or eight years, so be it. The rest of us can keep our wits.

And so, President-Elect Obama, I wish you wisdom and Godspeed. If you falter in office, expect to hear about it but, if you outperform my expectations, I will be happy to say so.



Theo Caldwell, President of Caldwell Asset Management, Inc., is an investment advisor in the United States and Canada.

Once More, Without Feeling

Now that the election is over, might we at last have some civility – and some answers? “Hope” springs eternal.

The contest between Republican Sen. John McCain and Democratic Sen. Barack Obama for leadership of the free world was a visceral affair, wherein reason was often trumped by raw emotion. Obama’s supporters, in particular, were eager to overlook or suppress any inconvenient truth in their desperation to make history. The result was a hurricane of nonsense, with Democrats daring their fellow Americans to differ from destiny.

As just one example, author and noted silly person Erica Jong warned that Obama’s defeat would mean “blood in the streets” and precipitate “a second American Civil War.”

Tantrum is not policy. The terms are separated not only by several pages in the dictionary, but by the divide between sanity and madness. The expectation that a person will not throw a hairy fit if their candidate loses is one reason that voting is reserved for adults.

Since even before he secured the nomination, Obama’s supporters had the safety off and were ready to blast any critic of The One’s policies – no matter the substance – with the most scurrilous of charges.

To comprehend how objecting to a capital gains tax hike can make a person a bigot is to step inside the modern liberal mind. Conservatives and Republicans get used to this, sadly, since we know we cannot order a cheese sandwich without some open-minded agent of “hope” and “change” calling us racist.

But it was not just we misguided advocates of capitalism and clean coal who got smacked this time around. Ordinary citizens, journalists, plumbers and even liberal stalwarts were made to pay dearly for their insolence. One wonders where Geraldine Ferraro and Bill Clinton go to get their reputations back – that is, if they want them returned.

The same folks who tut-tutted that Obama’s 20-year relationship with the Rev. Jeremiah Wright should be off-limits were eager to root through the tax, divorce, custody, employment and licensing records of Joe “The Plumber” Wurzelbacher because when the man saw an apparition of Obama at the end of his driveway, he had the nerve to ask the Anointed a tough question.

There is a standing dare to call a Democrat "unpatriotic" and, wisely, Republicans usually avoid falling for that rhetorical trap (Republicans themselves, of course, can be called unpatriotic with impunity – Teresa Heinz Kerry, have your butler call your office). Usually, when challenged to knock that particular chip off a liberal's shoulder, a conservative demurs, saying "of course" the leftist loves his or her country, and the matter is dropped.

Obama may be patriotic, but his priority seems to be himself. Demonstrably, he can say the right things about helping others, but the path of his career and his lifelong choices of allies – Wright, domestic terrorist Bill Ayers, Michael Pfleger, Tony Rezko, Khalid Rhashidi, et al. – reveal the single-mindedness of a fellow who will do anything to win.

In the closing days of this presidential campaign, California Gov. Arnold Schwarzenegger noted that McCain spent more years serving his country in a POW camp than Obama has spent serving in the United States Senate. Some saw this as irrelevant or improper to point out – rather than a crucial distinction between the lives and careers of the candidates – revealing how skewed some voters’ priorities have become.

Beyond the vicissitudes of this campaign, blank spots remain regarding Obama’s alliances, actions and policies. Barack Obama has emerged from the past two years as the most remarkably unexamined candidate for the presidency in modern history. Now that asking questions cannot possibly endanger the most important election since a caveman first asked for a show of hands, as columnist Jonah Goldberg quipped, can we finally get some answers? Or must the truth remain on hold until 2012?



Theo Caldwell, president of Caldwell Asset Management, Inc., is an investment advisor in the United States and Canada.

How to Watch the Election

Ever since the Florida fiasco of 2000, every Tom, Dick and Hanging Chad is eager to point out that it is the Electoral College, not the popular vote, that determines the winner of the U.S. presidential election. These budding federalists often fail to note that unless the popular vote differential between the candidates is less than one percent, that total will reveal the victor, but they raise an important point.

Apart from the profound Constitutional significance of the Electoral College – to wit, each state is allotted votes equal to its number of Senators and Congressmen, plus 3 for D.C., for a total of 538, requiring 270 to win – it is extremely handy for those of us watching the election on television.

Since we cannot know the popular vote total until all ballots are counted nationwide, the state-by-state results, assuming proper restraint is used in projecting the winner (Tom Brokaw, call your office), can give us an early indication of who will be the next President of the United States. This year, we can divide states into three major categories.

First, there are “Go To Bed” states. That is, if Democratic Sen. Barack Obama wins any one of these, you can say goodnight to your loved ones (and perhaps to the North American Free Trade Agreement, but that’s another story) and get some sleep. This category includes Ohio, with 20 Electoral College votes, and Florida, with 27. These are points that Republican Sen. John McCain likely cannot make up elsewhere on his path to 270, so the loss of either state would signal the end of the election.

Also worthy of “GTB” status is Missouri. Although the Show-Me State has only 11 Electoral College votes, it is a bellwether, having backed the winner of every presidential election for the past 100 years, with the exception of 1956. And, not for nothing, if McCain cannot capture this mostly conservative state in the center of the country, it means he is having a really bad night.

Conversely, if McCain wins Pennsylvania, make popcorn – we might be up for awhile. With 21 Electoral College votes, this Democratic stronghold has been inching toward the GOP this season, aided by unkind remarks about its citizens from Obama and Rep. John Murtha. Another “Make Popcorn” state is Iowa, with 7 Electoral College votes. The Hawkeye State was supposed to be safe for Obama, but he has felt the need to campaign there in the closing days. The unexpected pick-up of either of these states would buffer McCain against losses elsewhere in the country.

Finally, there are “Put On Your Pyjamas” states (if people wear pyjamas anymore). If McCain loses one of these, things look grim, but hang in for a bit. These include Virginia (13 EC votes), Georgia (15), and North Carolina (15) in the South. Out west, as later polls come in, look at Colorado (9). As for Nevada (5), if McCain loses there, put on your pyjamas and drink some warm milk. But by that time, we will likely know what happened in Ohio, Pennsylvania and Florida, so we will either be snacking or snoring.

If the above analysis seems too tidy to be true, try this twist: Suppose McCain pulls an upset in Pennsylvania but loses Ohio? In that case, when you say your prayers before bed, thank the Good Lord that democracy can be so exciting.



Theo Caldwell, President of Caldwell Asset Management, Inc., is an investment advisor in the United States and Canada.