The Results of a Complicated Tax System

The Obama Administration loves to sing the praises of "transparency," but finding such in any aspect of our government is difficult to say the least. Recently the Internal Revenue Service started to bang the drum on the importance of reducing errors and fraud by placing pressure on tax preparation services like H & R Block. These companies are taking the blame for poorly filling out forms that really need to be simplified. Steve Malanga, editor for Real Clear Markets and a senior fellow at the Manhattan Institute believes that the end of errors could be found in the act of simplicity.

There is, of course, the old joke where we get a two line tax form. The first line asks, "How much did you make last year?" Second line, "Send a check or money order for that amount." That would be simple, but it would also not work because we would all either stop working or become liars about how much we make. However, this joke does put us in the right direction, according to Malanga.

The vast majority of the modern economies are moving rapidly towards a "flat tax" as a way of guaranteeing a predictable amount of revenue coming in, avoiding the punishment of individuals for earning more income (with a flat tax people pay more if they make more, but it is not in punitive way), and to eliminate the problems of complexity.

How complex is our tax code? According to Malanga, some 80 percent of households now use tax preparers or software to complete their tax returns. Furthermore, we spend 7.6 billion hours on tax compliance, according to the IRS Taxpayer Advocate, which in turn costs nearly $200 billion a year.Over the past decade (since 2001), Washington initiated 3,125 changes to the tax code, or more than one a day. Malanga refers to one recent study that ranked the U.S. tax code 122nd in complexity among 175 nations worldwide. This happens because political forces have decided to use our tax code for social engineering rather than for raising revenue. Any time a politician says he or she wants to promote policies that encourage home ownership or energy savings, they want to do so in the context of changing the tax code to encourage such. This only makes the tax system more complicated.

The system is complex, both for the taxpayer and those who prepare forms for them. A flat tax would be an improvement, although it is still a tax on wealth creation, which makes no sense for any country interested in promoting opportunity and growth. A sales tax would be better still, because it would be a simple tax on consumption. If our government did the things it is allowed to do in Article I, Section 8 of the Constitution, a very modest tariff, like our Founders intended, would be sufficient. But simplicity with either a flat or sales tax would move us in the right direction.

Kevin Price is a syndicated columnist whose articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media. Kevin Price is Host of the Price of Business (M-F at 11 AM on CNN 650) and Publisher of the Houston Business Review. Hear the show live and online at PriceofBusiness.com. Visit the archive of past shows here.

VAT is neither fair nor responsible

It is interesting how the left will take a politically popular idea and pervert it into something that will only further destroy a country that is already well down the road to serfdom. The latest example is the Obama administration's repeated statements that it is looking into the possibility of a Value Added Tax (VAT). This comes after almost two decades of millions of Americans advocating a "Fair Tax" instead of the current income tax system. Obama's apologists will state that they both are, after all, taxes on consumption. The similarities after that, however, largely evaporate.

The Fair Tax is a system that has been promoted for years by individuals who support limited government and greater voter participation in the political process. Today, less than half of all Americans pay federal income taxes. This reality has been like a continuous cold shower on a population that should be on fire because government is out of control. A "Fair Tax" would be a national sales tax on every good and service. Everyone would know that cost of government at every transaction. Millions of Americans who have been sleeping politically, would come to an abrupt awakening. Centerpiece in this strategy would be that this tax would replace the very destructive and archaic income tax system, which wages a direct war on wealth and job creation.

In addition to waking up a sleeping public to the depth of our fiscal crisis, this law would also allow us to tax illegal aliens in our country and those who are committing illegal activities. Drug dealers, prostitutes, and others involved in illegal actions would now contribute to the government and help pay for the law enforcement designed to keep them in check. Who else should pay for these crimes? Remember, they are all involved in illegal activities; they have their income completely tax free. This reform would allow us to take a financial "bite out of crime."

Then there is the Value Added Tax. Like the Fair Tax, it would tax consumption. In fact, it would tax every single step of the production of every single good. Unlike the Fair Tax, VAT would be in addition to our current income tax system. Furthermore, it is a hidden tax that is included automatically in the price of goods. Where the tax begins and the real price ends, the typical consumer will be unsure.

The National Center for Policy Analysis notes that "The VAT has been in use in European countries since the late 1960s, and has had a strong, negative economic influence, says (Pete) du Pont (former governor of Delaware and current national policy chairman of the organization): Before the European VATs were put into effect, the average tax burden in the European Union (EU) was 28 percent of gross domestic product (GDP), compared with the 25 percent in the United States. By 2006, with the VATs, the EU average tax burden was 40 percent compared with 28 percent in America."

In addition to that,”Average European government spending was about 30 percent of GDP when the VATs were instituted in the late 1960s." Today we see that European "government spending has grown more than 50 percent and now hits 47 percent of GDP." Debt in European government in 2005 "was 50 percent of GDP, compared with under 40 percent in America." The biggest tax of all on Europeans has been on job creation, according to du Pont, "Between 1982 and 2007, Europe created fewer than 10 million new jobs versus 45 million in the United States. Our economic growth was more than one-third faster, says du Pont." That is, by the way, the entire continent of Europe.

Access to revenue does nothing in terms of providing fiscal restraint, as we have seen in the case of VAT or the many tax increases we regularly see in this country. In fact, new taxes and increases in old ones have encouraged governments to tax more. The answer to America's fiscal problems are found in less taxes and, more importantly, less government.

Kevin Price is a syndicated columnist whose articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media. Kevin Price is also host of the Price of Business (M-F at 11 AM on CNN radio). Hear the show live and online at PriceofBusiness.com. Visit the archive of past shows here.

Parents vs. Referees, Rangel vs. Fair Tax

Recently I received an email from a friend of mine who is involved in a group called FairTax.org. Simply put, this organization wishes to replace income tax with a sales tax because it is more efficient, moral, and would have a profoundly positive impact on the economy. It would eliminate tax on wealth creation, wipe out tax avoidance, and have everyone contributing to the government budget, regardless of their citizenship. Obviously I generally support this organization's objectives. However, I worry about it's future in light of the following post from a Fair Tax message board representing the leadership of the organization:

"Rep. Charles Rangel, the new Democratic chairman of the House Ways and Means Committee, has recently made media appearances where he has stated that under his leadership Congress will develop a tax policy that is "fair."

While not advocating the "Fair Tax," he has said it is important that our federal tax system be fair. As we all know, our reform proposal meets his definition and can appeal to the vast majority of taxpayers who know the income tax system is beyond mere "tinkering."

Here is our chance to powerfully make our views known to the new chairman of the tax writing Ways and Means Committee and to offer an important Democratic House leader the chance to fundamentally reform federal tax policy."

This is a nice sentiment, but here is the fundamental problem. Liberal Democrats have a completely different definition of "fairness" than the rest of the population. It is as different as a parent might sort out fairness compared to a referee in a sporting event.

Mom and dad tries hard to be fair, but invariably the little one will get more slack than the older one, or the parent might remember how one got something the other didn't receive and they will make up for it now. Fundamentally, most parents won't allow one child to have disproportionately more than another child. They would want to make things more "equal", not only in action, but results. Referees, on the other hand, could care less if a score is 110 to nothing, but whether each side was treated in a completely fair fashion in action. They are only looking for equal treatment, not results. Fair tax is looking for equal treatment, Rangel is looking for equal results. The two entities are essentially speaking different languages.

People like Charles Rangel essentially see government as the strong parent and we are the children. Those of us who have been successful, watch out.

I appreciate the efforts of groups like Fair Tax to frame the issue, which is what the post above is trying to do. But a better result would come if groups like Fair Tax committed resources educating potential supporters of the differences between conservatives and liberals when it comes to "fairness" and develop appropriate strategies that reflect such understanding. Other wise this organization and its members will face nothing other than frustration.

Libertarians on Sales Tax

I am involved in a group that advocates the elimination of an income tax to be replaced by a sales tax and recently they have gotten frustrated with the lack of support they have received from libertarians, and the Mises Institute in particular. Many libertarians are puritans when it comes to their approach to government and this is definitely the case when it comes to Mises.

I pointed out that terms like "realistic" and "Mises Institute" simply don't belong together. In the 1980s I was with the National Center for Public Policy Research, in the 90s I was the Executive Director of the Free Enterprise Institute, a Senior Fellow with the American Economic Foundation, and listed in the Heritage Foundation's Guide to Public Policy Experts. I dealt with the Mises Institute on several issues and found it very difficult to get any of them to be interested in any pragmatic approaches to solving our problems. I knew they were libertarians, but these people are real libertarians.

I believe they see their purpose is to set a philosophical benchmark of the right way of approaching government and a free society. They would argue that the bigger problem is spending and would be right. But we would also be right in saying that no one is going to want to eliminate income taxes without something to replace it. The policy will be changed in the real world and that world requires trade offs. Many strong libertarians have gotten very enthusiastic about sales taxes because it taxes consumption rather than investment and it gets government out of the social engineering business when it comes to taxes. Hopefully our friends at Mises will agree to wage this battle in a way where we can win. A sales tax instead of a tax on prosperity would be a huge victory on the side of liberty.

I'm glad there are people who think like those at Mises. I just wish they would be more willing to do what is necessary to move many of their sound principles into the public arena.

April 15: Countdown to T-Day

It is that time of the year again when business owners acquire ulcers, CPAs go underground, and all of us largely lose our cool. The reason for it is April 15th, which is tax day! The day that all our procrastination and failure to plan come back to haunt us. I have friends that I don't even talk to between now and around a week after the big day. They are either too miserable to deal with or are completely detached with what is going on around them. I'll wait until after the tax season for them to check back in.

Wouldn't it be great if April 15th was just another day? That is the exact objective of an organization called Americans for Fair Taxation, which wants to replace our current income tax system with a sales tax. Take note, the word is replace, not supplement. This is an idea that I have supported for quite some time and commented on it often in this blog. The advantages to it are numerous and significant:

* It would dramatically reduce the cost of doing business, making the US a magnet to attract companies from around the world that is comparable (or greater) than the affect that cheap labor has had on the world economy.

* It would greatly reduce tax fraud and would force criminals and illegal immigrants to contribute to our tax system through their purchases.

* It would get more Americans participating in the tax system than the current system that is punitive on those who are the most productive. However, it also has mechanisms to protect those who are truly poor.

* It curtails the abusive powers of the IRS.

* It would lead to enormous economic growth in virtually every area, including for those many believe would suffer if the income tax system was eliminated. Home building would explode and CPAs would be needed to plan business growth and expansion instead of mere defensive measures.

The time to change the system is now. The reasons to do so are really unlimited.

It is time for Economic Triage

You know medical triage, the idea of a procedure used in emergency rooms to determine who gets treated first. When Barack Obama was running for President and, shortly after he was elected, we were daily lectured about the urgency of the situation facing our economy.

What we have seen is a massive subsidy primarily benefitting the richest corporations in America passed first by Bush in the fall of last year and part 2 (arguably worse) in January of 2009. It was interesting that the very liberal and very conservative Members of Congress voted against this legislation. The left clearly saw the corporate welfare involved and the right saw both that and the obvious disregard of the Constitution. We were told that action was needed "now!" If not, we were looking at unemployment of around 8.5 percent in 2009. We have that unemployment rate and more with "stimulus" and the situation is getting worse.

There are several serious challenges facing Americans today:

• The largest unemployment rate in recent history. Forget about the 9.5 percent touted by the Obama Administration, economists on both the right and left say it is more, much more. Bill Clinton's former Secretary of Labor and a huge fan of Obama, Robert Reich, says the actual uemployment is closer to 15 percent.


• Excessive taxation of the job creators. The vast majority of jobs comes from people who make $250,000 a year or more, yet this group is being singled out to pay more taxes as a form of economic genocide. It has never been easier to move capital and with US tax rates the second highest among industrial countries in the world, you can expect a flight of capital and jobs that comes with such.


• Hyperinflation. On one day, the federal government pumped $1.4 trillion in the money supply in order to pay some of its recent bills and to "jump start" the economy. This type of policy leads to hyperinflation as too much money chases too few goods.

Obama should approach our situation with these realities in mind, and as a doctor in triage, he should be driven by the mandate to "do no harm."

• Eliminate barriers between people and jobs. This isn't through temporary government jobs that will run out with the subsidies, but through real jobs that create revenue for them to grow in number and in quality. The federal government should mandate the states to have a minimum wage law in each state of the union and allow them to set them based on the needs of the people and the cities. This would not cost the federal government a penny, but would spur economic activity immediately.


• Eliminate taxes on corporations because they do not pay taxes, they are tax collectors. Taxes are a fixed cost for doing business, plain and simple. If taxes are too high, businesses have no choice, but move to places where the rate is less so they can lower prices and be competitive. This would have a profound impact on high quality job creation. This policy would also encourage an increase in productivity and soften the blow of inflation.


• They should end taxes on wealth creation and replace income tax with a sales tax. This would eliminate the economic genocide against job creators and would more fairly spread the financial burden of government on all economic groups.

Our situation is dire, the answers to our problems are in the market place and not in the halls of government. These kind of actions would encourage problem solving where it belongs -- in the hands of the people.

Kevin Price is Host of the Price of Business, the longest running show on AM 650 (M-F at 11 am) in Houston, Texas and on AOL Radio. His articles often appear in Chicago Sun Times, Reuters, USA Today, and other national media. Steve Moore of the Wall Street Journal calls Price the “best business talk show host in the country.” Find out why and visit his blog at www.BizPlusBlog.com and his show site at www.PriceofBusiness.com. You can also find Price on Strategy Room at FoxNews.com.

What's "Down" with the Stock Market?

Wall Street is facing the biggest post election sell-off in US history. The big question, of course, is "why"? Clearly, there is no simple "cut and dry" answer to this question. It can't be attributed to any one thing, I'm sure. But one contributing factor that I think is being largely ignored by the mainstream media, is the election of Barack Obama.

Of course, we have always recognized the impact of a new President-elect on the market. Is the new President pro-business? Is he in the pocket of special interest? What about his relationship with labor? The positions the candidate had during the campaign, show up in the stock market's reaction shortly after elections.

With Obama, we have a new President that is hostile to wealth creation, saying in his nomination acceptance speech that he supports tax policies that helps work, but not wealth. In this country, the two have always been linked. Wall Street knows that, but it appears that Obama does not. Because the current Democratic controlled Congress did not renew the next year of the Bush tax cuts, Wall Street (and those of us on Main Street that own stock) know that we will currently make 100 percent of our stock sales if we do them by the end of the year, but only make 80 percent when the capital gains tax goes into effect.

Daily, our stock reduces in value because of that looming capital gains tax. Sellers know that reluctance is growing on a daily basis as we get to January 1, 2009 and the tax increase. As that reluctance grows daily, expect the market to grow south with it.

This, of course, is only one area of concern. Hours after Obama was declared President, Iran's radical leader called for the dropping of sanctions against that regime. Wall Street is concerned of how safe the world will be with Obama. Capital gains tax is only the beginning. Obama plans on dramatically raising the taxes of the most affluent. Obama has declared that he is going to try and regulate or tax some businesses into bankruptcy (e.g., coal). This too plays heavily on the minds of Wall Street. The point is, business has plenty to worry about and those jitters are showing up each day in the Dow Jones Industrial Averages.

The test for Obama is simple. Can you have policies that benefit Main Street, but are harmful to Wall Street, yet maintain a healthy economy? I have my doubts.

Kevin Price articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media.

Kevin Price is Host of the Price of Business (M-F at 11 AM on CNN 650) and Publisher of the Houston Business Review. Hear the show live and online at PriceofBusiness.com. Visit the archive of past shows here.

If Obama was serious about Unemployment...

Unemployment is devastating on both people and governments. Not only do people feel the stress of wondering how needs will be met, they often take serious efforts of curtailing spending ,which has a direct impact on consumer spending. Governments suffer too. Local, state, and federal governments find unemployment is a drain on them as they are often unable to collect as much revenue as they could in more prosperous economies and those who are unemployed will often depend on agencies to help through these difficult times.

With that, President Obama recently had a Job Summit and he told those in attendance if there is "anything" the government can do to help increase employment, let him know. With US unemployment at the highest levels in a quarter of a century, "anything" should be taken quite seriously. Our situation has become urgent and steps should be made to act quickly. These include:

• Eliminating barriers between people and jobs. This isn't through temporary government jobs that will run out with the recent bailouts, but through real jobs that create revenue for them to grow in number and in quality. Although I oppose a federal minimum wage, you are not going to make one go away. However, the federal government could mandate the states have a minimum wage law in each state of the union and allow them to set it based on the needs of the people and the cities. This would not cost the federal government a penny, but would spur economic activity immediately. Certain cities, such as Camden (New Jersey), East St. Louis (Illinois), and Detroit each suffer from an unemployment of around 20 percent. they need help like this immediately.


• Eliminating taxes on corporations because they do not pay taxes, they are only tax collectors (through higher prices). Taxes are simply a fixed cost for doing business, plain and simple. If taxes are too high, businesses have no choice, but move to other countries where the rate is less so they can lower prices and be more competitive. Businesses do not take this actions because they are not patriotic. In the words of The Godfather, "it isn't personal, it's just business." This action would have a profound impact on high quality job creation. This policy would also encourage an increase in productivity and soften the blow of inflation.


• Ending taxes on wealth creation and replace income tax with a sales tax. This would eliminate the economic genocide against job creators we are seeing today and would more fairly spread the financial burden of government on all economic groups. If every economic group shared the burden of funding the government, that would encourage all groups to make government fiscally accountable.

Our situation is dire, the answers to our problems are in the market place and not in the halls of government or in job creation summits. These type of actions would have the government give the type of "stimulus" the nation really needs.

Kevin Price is a syndicated columnist whose articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media. Kevin Price is Host of the Price of Business (M-F at 11 AM on CNN 650) and Publisher of the Houston Business Review. Hear the show live and online at PriceofBusiness.com. Visit the archive of past shows here.

Motown Singing the Blues

The home of soul is singing the blues and they are doing it at the White House. The execs of the so-called big three of automobiles -- GM, DaimlerChrysler, and Ford -- came to the President of the United States looking for help. This after a year of pursuing the President without response. The President finally allowed the big three to make a visit a week after the Democrats took over the Congress.

Like the sudden resignation of Donald Rumsfeld the day after the election, many view this move as another step by the President to show an interest in the Democrats' priorities. Ironically, those who believe that Republicans only represent the interests of big business should know that the automobile industry in the US (and not just the labor unions) generally support Democrats. The auto markers are salivating at the opportunity of having John Dingell Chair the important House Committee on Energy and Commerce.

Executives from the auto makers are arguing that foreign competition enjoys unfair advantages over "health care, trade and currency manipulation." Although they claim to be arguing that they don't need a bail out, they are seeking help in these specific areas.

On health care, many are asking for the government to actually provide a single pay system (in other words, socialized medicine) in order to make up for the high costs. Others are looking for huge tax credits to at least create more fairness. Either way, there will be a cost to taxpayers, although one (the latter) is clearly better than the other in terms of quality of care and costs.

On trade, they want foreign countries to stop using quotas or tariffs against US cars. Many are saying we should retaliate. The last time (back in the 1970s) we made it difficult for imports it led to a massive decline in our auto industry's quality. Further, consumers had to pay more for foreign cars. Again, punishing the rest of the country in higher costs and poorer quality.

Finally, currency manipulation. In other words, they are making their currency cheaper and it more affordable to buy there goods. Frankly, ever sense the Gold Standard came to an end in 1972, every country, including the US has manipulated its currency. Some times the government prints more money in order to pay government debts (it is politically easier than raising taxes, although it becomes a form of sales tax in higher prices), some times it loosens credit in order to encourage home buying. In any case it is manipulation and we are hypocrites to criticize other countries.

The Democrats and the industry's solution to the auto crisis constitutes a bailout, regardless of the euphemisms they use. Socialized medicine, limiting the number of imports, or charging a fee for those automobiles that come in will equal the taking of the money from taxpayers (or consumers) to benefit the big auto companies. And if they take measures that "protect" the auto industry, US companies will become less competitive in the long run.

There needs to be reforms to help the auto industry, in fact to help all industry, but those are in the area of regulation and taxation, not in subsidy. Hopefully we will avoid such dangerous and short sighted policies.

As Conservatives Ponder the Future of the GOP

There is a raging debate going on in conservative circles that the future of the Republican Party is doubtful, at best. After years of feeling left out in the cold, many are declaring the GOP is dead. For several years the Republican Party has chosen to be a "light" form of the Democrat Party. You might even call it a "diet" alternative. Like diet soda, nothing can beat the purest form. Sales are always higher for the original. The fact is, Democrats are not significant winners, but the GOP are serious losers.

Let's look at the Presidential races alone since Ronald Reagan. In 1988 a "converted" George HW Bush assured voters that he wasn't no longer calling for tax policies that encouraged economic growth "Voodoo Economics," he was committed to being responsible when it comes to regulations, and he had even "matured" when it came to the issue of abortion and declared himself "pro-life." In one of those rarely inspiring moments in his first campaign, Bush declared "Read my lips, no new taxes." By the end of that first term he had instituted a massive tax increase and made unreasonable regulations on the environment that wiped out mom and pop shops (e.g., the modification of gas pumps that cost over $10,000 each). The real Bush had stood up and the voters were ready to let him go.


Fast forward to the next GOP president, George W. Bush. He had something of a reputation as a moderate conservative in Texas, but said all the right things on the campaign trail in 2000. As President, his first term was noted for standing strong against terror, providing a massive supply-side oriented "tax cut" that allowed us to quickly recover from the stock market struggles at the beginning of the decade and to rebound from September 11th. By 2004, a fairly conservative candidate in a couple crucial areas that mattered, found himself as the first Presidential candidate to win by a true majority since 1988. He had won 2.5 (out of 3 million) square miles of ballot boxes around the country and proved that someone with a conservative message could win reelection.


Unfortunately, by 2006 Bush had largely abandoned that message and we had the Democrats taking over both Houses of Congress. When a moderate like John McCain got the nomination, he found himself forced to defend (and even agreeing) with a President who was actively and aggressively socializing the country in the name of TARP. Bush and company supported "consumer driven tax cuts" that did nothing to stimulate real job growth and contributed to a perfect stage for the slaughter of anyone affiliated with the GOP.

We are now quickly approaching the 2010 elections and there is a great deal of apprehension about the future of the Republican Party. Many are crying it is time to abandon it and are seriously discussing a third party alternative. The problem with that is that the GOP is little more than a vehicle, a "car" that needs to be fixed. As we get closer to 2012, the car that needs to be repaired has instant ballot approval in every state of the union, more dollars than all the other third parties combined, and a political structure through out the country. Those who are ready to abandon the GOP must weigh the obvious weaknesses in the party with the fact that starting from scratch or using a preexisting third party will take years to create a serious challenge against the left. I doubt the Republic has years. It is time to make that vehicle work for conservatives and Americans. Taking the GOP back is an important step in bringing the country back to the values that made it great.


Kevin Price is Host of the Price of Business, the longest running show on AM 650 (M-F at 11 am) in Houston, Texas and on AOL Radio. His articles often appear in Chicago Sun Times, Reuters, USA Today, and other national media. Steve Moore of the Wall Street Journal calls Price the “best business talk show host in the country.” Find out why and visit his blog at www.BizPlusBlog.com and his show site at www.PriceofBusiness.com. You can also find Price on Strategy Room at FoxNews.com.

The Rise of Pessimistic "Conservatives"

Having cut my political teeth on the philosophy of Ronald Reagan, I have a hard time seeing "pessimistic" and "conservative" in the same sentence, but such a group is quickly on the rise. What's most interesting about this group is that they claim Ronald Reagan as their philosophical ancestor. I think the former President would be rolling in his grave if he knew that those claiming his mantle have become xenophobic about immigration and anti-free trade. But those are the exact positions many on the Right are proclaiming.

Pat Buchanan was the first conservative to get on this bandwagon back in 1992 when he ran as an alternative to Bush I and in direct opposition to the North American Free Trade Agreement. At the time, only hard left, pro-labor, candidates (remember Dick Gephardt) adhered to such positions. Slowly, but surely, it is becoming conservative dogma. I'm afraid that, in another decade or two, it will be on the same level of common held Republican beliefs as tax cuts generally are. Unfortunately, undermining free trade has a very different result than cutting taxes.

The reason people are opposed to free trade is because other countries (whom we trade with) don't practice it and it results in the "exportation" of jobs. There is no doubt that other countries are protectionist, but those countries suffer from extremely high prices and fewer choices than we enjoy. Are you ready to pay multiples more for the type of goods we buy from China in order to artificially prop up the prices of goods from more friendly nations? Punishing our trade partners with tariffs or quotas, punishes our consumers more than it hurts competitive nations and it leads to a reduction in the quality of goods we produce while "enjoying" such "protection." People advocate eliminating free trade because of "jobs" being exported to these countries? What jobs? The unemployment is this country is 4.5 percent, which is considered almost zero (four percent is the actual number) by most economists when you factor in voluntary unemployment, illegal activity, seasonal unemployment, etc. Protectionism will not only fail to protect jobs, but destroy them; because so many jobs (sales, marketing, legal, import, etc.) are created by trade into this country. In the end, attacking free trade will attack our prosperity and our jobs.

Regarding immigration, I understand the concern of conservatives wanting to protect our country, but te populist view does nothing to help the problems coming from it. The problem is that the system doesn't offer hope to people who want to contribute to this nation of immigrants, much opportunity to do so legally. Rather, they force people underground and allows those of us who have been here longer to act holier than thou and call them criminals. I, in particular, find this offensive. My mother was born and raised in England, met my father during World War II and came to this country, eventually giving birth to me. I know I'm the child of an immigrant. It just happens I'm one that our country finds attractive. You, too, are a descendent of immigrants unless you are a Native American. It is by luck I'm a citizen of the greatest country of the world, not by any effort on my part. We must offer opportunities to others, but they must make sense. Here are a few ideas:

* Require people to be in this country for an extended period time (minimum of ten years) before they are allowed to become citizens. This, in my opinion, should be the case regardless of where they come from.

* Provide a fast track program for those from foreign countries willing to serve in our military. Over 60,000 people serve in the US military from foreign countries. That kind of sacrifice deserves special consideration. We should consider expanding this program, especially during these times.

* Allow a long term separate status of people who never get citizenship, but work, send some money home, and eventually return there. That is the desire of many, if not most of them.

* Curtail welfare programs for immigrants, placing severe restrictions.

* Move away from an income tax and go towards a consumption tax, to make sure everyone is paying for the blessings of liberty with every purchase they make.

These are just a few things we can do to keep valuable labor important to this country (again, at 4.5 percent unemployment, there are many jobs Americans don't want to do) here, without compromising our security. In fact, it will make us more secure than ever to know who these persons are, where they live, and what they are doing here. America is a nation of immigrants. Reforms like this will make them legal ones.

Lies, Damnable Lies, and the Growth of GDP

The 3.5 percent jump in the Gross Domestic Product (GDP) has many (particularly in government) declaring that "the recession is over!" Tell that to the 10 percent of the population that remains unemployed and to the thousands of small businesses limping along in an economy that is still flat, at best. There is an old saying, "any increase is significant when you are starting at zero." That is a fair summation of the "jump" in the GDP.

Many who are well versed on what is going on in the political and economic front are far more cautious than those in politics with an agenda and those in the media who are die hard fans of those with an agenda. Many economists are approaching this increase in the GDP with a healthy amount of cynicism, which may be why you are seeing little about their criticisms in the media. But there are many with serious business and economic credentials that are pleading for caution.

RDQ Economics states that "We need many quarters of GDP running at this pace (or faster) to make significant inroads into reducing unemployment." Great point, jumping to conclusions about the recession will have us making 10 percent unemployment a reasonable expectation for a healthy economy. I do not believe any of us are ready for that.

Stephen Stanley, RBS stated that consumption played a big role in getting the increase, but the "details look less promising. About 40% of the increase in consumer spending came from motor vehicles, reflecting the transitory boost from the cash-for-clunkers program. As auto sales recede in the fourth quarter, consumer spending is likely to grow much less rapidly. Similarly, state and local governments seem likely to face tougher cutbacks with no further boost from the fiscal stimulus while defense spending is likely to cool. Meanwhile, residential investment looks likely to keep growing but at a less vigorous pace while business investment spending growth looks unlikely to improve much more until a clearer picture on consumer demand emerges." The increase is caused by government, which can only be sustained by continued increases in spending, which will only further destabilize the long term economy. Our GDP is built on a house of cards and Stanley's suggestion that the fourth quarter will see another decline makes perfect sense.

Guy LeBas, Janney Montgomery Scott, note that "The final handful of dirt on the Great Recession's grave: today's data provides a needed psychological end to seven quarters of shrinking economic output. While there's a great deal of uncertainty as to conditions for the coming few quarters and years, at least we can say the last few months have been good ones for output. We remain very much concerned, however, that the pace of consumer activity will slow sharply now that government spending incentives are expiring." Bottom line is that there is a genuine concern that the increase is driven by government smoke and mirrors, and not in a real increase in consumer demand.

Paul Ashworth of Capital Economics stated that "Our concern, however, is that all those positive factors will fade badly in the second half of next year. If consumption growth remains unusually lackluster, then GDP growth would slow to a crawl again." Ashworth, like many economists, recognizes that this demand is artificial and driven by the government. When the government pressure subsides, the GDP will likely shrink.

Millan L. B. Mulraine of TD Securities suggests that "with the significant fiscal and monetary stimulus providing the main impetus for this sharp rebound, we expect GDP growth in the coming quarters to be less robust as their impact wanes..." Again, government created GDP.

Finally there is John Silvia of Wells Fargo who noted that "Big contributors were consumer spending on autos - cash for clunkers - federal government, inventories and housing - tax credit… Core issue: how much of this is sustainable without Fed programs?" What an excellent question, one I wish was asked by more people in politics and the media.

Kevin Price is Host of the Price of Business, the longest running show on AM 650 (M-F at 11 am) in Houston, Texas and on AOL Radio. His articles often appear in Chicago Sun Times, Reuters, USA Today, and other national media. Steve Moore of the Wall Street Journal calls Price the “best business talk show host in the country.” Find out why and visit his blog at www.BizPlusBlog.com and his show site at www.PriceofBusiness.com. You can also find Price on Strategy Room at FoxNews.com.

Forbes Thinks Highly of Texas

Forbes Magazine recently acknowledged in its first survey of best states for doing business what we here in Houston have known for years -- Texas remains a great place for business. The survey had Virginia as number 1, Texas at number 2, North Carolina at 3, Utah at 4, and Colorado (5) rounding up the top of the list. Why such a positive assessment?

According to the magazine "Texas was among the best when it came to population growth, transportation, tort climate and cost of living...The state also has the largest number of companies with $1 billion in sales at 110."

People continue to come to Texas in droves because of the economy's diversity in industries. Changes in the way people can sue (tort reform) has made Texas a less hostile place for people to conduct business. And although people remain in horror over our traffic situation, the state as a whole offers better roads than its neighbors and even its cities have less congestion than those in other parts of the country.

I use to live in Virginia and it is a truly great state, but when I think of its transportation problems, state income tax, and other issues, I think Forbes may have been off on its math a little. Texas' enormous room for population growth and, I hope, continued commitment to business friendly policies, will have it remain a great place for business. It is certainly number one with me.