CNBC had Rep. Eric Cantor of Virginia on as a guest this week. Very interesting to say the least. I know you have to separate substantive talk from political talk when having a conversation with most politicians. But why ? Why would an honest politician offer “political sound bites” , prepared for pliant and biased listeners or their “base” ; with proclamations that may be far removed from candor or accuracy ?
The conversation drifted into federal taxes. Taxes should not go up on anybody, according to Cantor. Really ? Is he implying we have a revenue-perfect tax code ? Does Cantor know that taxes as a per cent of GDP is at modern day lows; probably the lowest in Cantor’s lifetime. Does Cantor know about the national debt ? Now, approaching 16 trillion and counting. I hope Cantor don’t believe the rhetoric about growing our debt away. Furthermore, I hope he does not advocate inflating our debt away, as that is a brutal tax. I wonder if Cantor ever read about the highest top marginal rate of 91% in the Eisenhower and after, years. Back then the economy was clicking out growth of 5-6% a year.
Politicians see taxes as their contribution to the health of the economy, maybe even superseding or pre-empting the market dynamism. That is why we have a voluminous and even chaotic tax code. Politicians need to know that whatever they do with the tax code, other than confiscatory taxes, will be a minor contribution, and often a misplaced contribution to the economy. The material progress of a society is a deep, deep, cultural phenomenon. I remember hearing Warren Buffett discounting the tax element in business expansion. I don’t mean to say taxes are unimportant to business; it’s just they are down on the list. The corporate world would much prefer a good solid welfare program than tax accommodation.
There is a relationship between general freedom and wide-spread material advancement. I suppose you could argue that taxes, at some point, could impede all progress. But, we are not near that dark area.
It should always be remembered that politicians, many of them, may need some honor and above all, they need to be re-elected.
The best part of the interview was Cantor offering his advice on financial abuses and “legality”. Only legal behavior should be tolerated, he says ! If a lobbyist has a plan to give his client an advantage, the first thing he wants to do is make the advantage legal. The lottery is legal in many states. That’s about as abusive as it gets. It worries me a lot more about what is legal, than illegal.