Friday, November 30, 2001

Stimulus plan is actually a different form of taxation
Todd Stein is a columnist for the Daily Californian at the University of California-Berkeley.

Most Americans don’t realize that a major tax hike is about to be passed through both houses of congress. While the info-babes on MSNBC and CNN refer to the coming tax hike as a “stimulus” plan, it is actually a form of taxation.

Wait a minute! No politician, not even liberals like John Kerry or Dick Gephardt, have said anything about raising your taxes, so what is going on? First, we must remember that a tax is defined as someone giving up property or economic liberty for the support of a government or businesses within the domain of that government. No elected official is dumb enough to go on “Meet the Press” and push a tax-hike, (remember Walter Mondale?) so this must mean that your economic liberty is guaranteed. Au contraire mon ami.

Centuries ago, when the Romans wanted to finance their vast empire, they had to resort to heavy taxation. Eventually, citizens began to demand more social spending at home and refused to pay higher taxes (sound familiar?). Power seekers knew that demanding higher taxes or lowers pending was a political death wish, so they came up with a new idea to solve their problem — they just printed more money.

As the bubble economy of the 1990s deflates, government tax revenues will shrink in proportion. Meanwhile, politicians from both parties continue to spend our money in record amounts in order to secure votes for their re-election. The Democrats are returning to their traditional dogma of stimulating consumer demand through more government spending and the Republicans are back to preaching supply-side tax-cuts in order to create incentives for private investment. Chances are, both parties will get their way (after all, Daschle & Lott have Christmas plans) and the result will be huge deficits.

In the long run, the only way to pay off our government’s debts will be to do as the Romans did — print more money. In fact, this is what we did a generation ago resulting in double-digit inflation and the sacrifice of our economic freedom and purchasing power. But we can live with deficits, right?

After all, wasn’t the boom in the 1980s fueled by government and consumer debt? Hasn’t there always been a national debt? The answer to all these questions is a cautious “yes.” But keep in mind that we have been lucky over the last two generations.

During the Cold War, the dollar was always regarded as the world’s safest currency. Many consumer goods and commodities were traded in dollars, which created an artificial demand for the greenback. But this may end soon. In the 1970s and ‘80s, when Japan targeted our markets with their cars and electronics, the yen rose sharply in value. Many observers predicted that Japan was going to take over the world and the yen would become the global standard. In the early 1990s, the spendthrift Japanese government ended such talk and the dollar reassumed its position as the world’s leading currency.

A decade later, the dollar is teetering on the brink of collapse once again. Not only is the government about to spend its way into deficits, global investors are reexamining the safe-haven status the United States has held for the last half-century.

Fortunately, there are ways to avoid this new tax on anyone who owns dollars. Take some of your savings and invest in a diversified basket of metals and foreign currencies. Also, write your congressman and tell him not to pass an inflationary stimulus plan.

Todd Stein is a columnist for the Daily Californian at the University of California-Berkeley. This column was distributed by U-Wire.