Berry: For want of a nailWritten by Thomas Berry | | email@example.com
With the decision of a slim majority of voters to re-elect President Obama and preserve the status quo in Congress, it is much more likely that the numerous tax increases Obama and his fellow progressives are proposing will become law. Although said tax increases may make those who demand them feel smug, the damage they will do is far-reaching.
For example, construction is very largely seasonal and the profits a contractor earns during the working season are put to work in the business during the winter slowdown. Besides covering overhead expenses during the slowdown, they are invested in repairs and upgrades to existing machinery and the purchase of new equipment.
But imposing massive tax increases, to the tune of tens or hundreds of thousands of dollars, on construction companies robs them of the ability to do any of this.
If operating expenses can’t be paid after taxes, the business has to downsize or close because no private enterprise can operate indefinitely while expenses exceed income. Only the government can do that, and Obama’s evident notion that businesses follow the government’s example of sustained fiscal irresponsibility exposes his utter ignorance of sound business practices.
Moreover, if a business cannot afford to make improvements to its operations, such as a contractor repairing, upgrading or replacing its equipment, the business will again mimic government by operating less and less efficiently. Operating costs incurred by obsolete and worn-out machinery increase and if the government has robbed the business of its capital, shutdown becomes more likely.
Therefore, when the government saps a company of its profits through significantly higher taxes, said company has to raise prices and/or cut expenses, or otherwise downsize or close.
Higher prices make a company less competitive, thereby potentially reducing income — a parallel to why higher taxes ultimately generate less revenue for the government. If the contractor obtains work through competitive bidding, as is standard practice for most government projects, then profit margins shrink and less operating capital is generated, while the taxpayers foot the bill for the higher prices being charged.
(Which is not to mention that the president’s party is largely bought and paid for by hardcore environmental lobbies that would put the kabosh on all construction, competitively bid or otherwise.)
If expenses are cut, then the contractor must choose where to apply the ax. Wages and benefits may have to be reduced. If work is lost because of having to charge higher prices, jobs are lost. If equipment is not purchased and repairs aren’t made because there’s no money available, then the employees of the contractors’ suppliers suffer the same fate, and the effect spreads up to the employees of the manufacturers of the equipment, parts and supplies that will now not be purchased.
Many contractors have been quite active in supporting charities of various sorts. That support will be among the first things to be reduced or eliminated if the government seizes the profits that would have been shared with them; not only will the employees of these charities also face layoff or reduced wages and benefits when support evaporates, but the people helped by the charities also are denied service that can no longer be funded.
So why did so many construction unions demand that their members re-elect Obama? Because the union bosses know that he will help them preserve and expand their own power, regardless of the reality of his policies’ impact on their members.
This divorce from reality is endemic within both progressive politics and labor. Witness AFL-CIO president Richard Trumka’s repetition of Obama’s lie about Bain Capital in his asinine claim that Hostess Brands shut down because investors bled it dry. In fact, Hostess failed because of a combination of product obsolescence, crushing debt due to poor management decisions and, by the way, inefficient work rules demanded by and unaffordable wages and benefits given to its unions.
If Mr. Trumka is so incensed over businesses being bled dry, then where is his outcry over the government bleeding employers dry through higher taxes, Obamacare fines and over-regulation? He will be silent on that, because the Obamacracy gives him power.
I’d love to hear union bosses like Trumka explain to construction workers who continue to suffer unemployment double what it was in the George W. Bush presidency why it is so great for them that Obama was re-elected. Maybe he can also make that pitch to the tens of thousands of unionized coal miners and power plant workers who also face unemployment because of Obama’s eagerness to strangle coal-fired power generation.
A famous parable tells of the long-ranging consequences of a missing horseshoe nail. For want of a majority vote for lower taxes, less government and more freedom, jobs, prosperity and liberty are lost.
Thomas Berry is a member of the Children of Liberty.