Monday, February 07, 2011

Why the economy isn't recovering.....

.....take a look at John Lott's column about President Obama's castigation of companies for not hiring (in an uncertain tax and regulatory environment, and then at the latest proposal from the White House for "revitalizing" business.

Now from a Biblical perspective, the proposal to make interest payments taxable sounds reasonable--until you realize what it would do to certain businesses.  For example, banks live from interbank loans, and loans from the Fed--it would crush them.  In the same way, taxing the interest paid on corporate bonds would crush the bond market, and....ahem....tremendously favor "Government Motors" and Chrysler--whose "debt" is hidden in federal bailout money--over Ford Motor Company, which avoided bankruptcy with a massive bond sale. 

Consider also startups, very often founded with borrowed money.  One would figure that long time smokers like President Obama would want to encourage startups like "Genentech", makers of some of the best chemotherapy drugs in the world, but apparently not.

Not only is it an extremely bad idea from the prospect of what taxing interest payments would do to companies, his proposal would also make an already miserable accounting situation for companies worse.  Historically, interest expense is a legitimate accounting expenditure, so what the proposal would do would be to create yet another category where honest accounting contrasts with the accounting required by the government.

It's almost as bad as the failure to rein in the EPA's efforts to control non-pollutants via the Clean Air Act.  Let us pray that someday, men come to Washington, DC, who understand the principles of basic accounting.


W.B. Picklesworth said...

Or, to boil it down further, he's proposing another tax. Bad for the economy.

Bike Bubba said...

....and I don't even think he understands that he's actually increasing the tax burden.

Or, if he does, he's just plain evil, and we're supposed to assume stupidity until we can't explain things any other way than "malice," right?