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Keeping Atlas from Shrugging -- Or Has He Already Shrugged?

by John F. Tamburo, Editor in Chief, Publisher
Originally Posted: 9/15/2010 8:05:41 PM

In her 1957 novel Atlas Shrugged, Ayn Rand excoriated socialism, statism and communism as gigantic evils.  Her novel criticizes those who would interfere with the rights of people to make a living, and extols the rights of those who have succeeded to keep the fruits of their labors.  In the novel, the hero, John Galt, is rebelling against increased governmental controls and tyranny by leading a strike of the most productive members of society -- those who the current President of the United States viciously demonizes, by stating the evil notion that there is a point where someone has made enough money.  The result of Mr. Galt’s strike is the collapse of the statist regime.  From the ruins of the big-government horror, Mr. Galt emerges to create a society where individual achievement will be cherished and collectivism rightfully placed on the trash heap of history.

Was Ayn Rand simply analyzing America’s path and predicting its ultimate destination if things were not to change? Or was she something of a prophet of doom for America?  As a Christian, I am not big into labeling atheists like Ms. Rand as prophetic.  Therefore, I credit her with superb analytical skills.  The question now is where America is at with respect to Ms. Rand’s analysis.

The economy is in dire shape.  The real estate market is in a triple-dip recession,  Unemployment hovers at about 10% by the government numbers; however if you look at the more accurate "U6" unemployment rate, it stands at a depression-level 16.7 percent as of August, 2010.  This maelstrom is due entirely to the Democrats in the Congress.  Before the economic collapse commenced, they pressured Fannie Maw and Freddie Mac to grant trillions of dollars in mortgage loans to people who simply could not pay for the homes.  This created an unworkable demand for housing that drove prices to stratospheric levels, and drew in speculators who would "flip" homes by purchasing at low prices, rehab them and sell them at the hyper-inflated "market value."  This lasted until the unqualified buyers could no longer make payments, and the foreclosures started to mount up.

Mortgage lenders knew that they were making loans to people who lied about income or could not pay.  Like a bookie who takes risky bets, they "laid off" their risk by packaging the mortgages into securities and selling those securities to investors.  Some of these loans, in order to attract investors were insured with PMI (Primary Mortgage Insurance).  When these loans failed, the investors were covered by the PMI and walked away with principal intact.  AIG Insurance nearly failed but the government bailed it out.  The same thing happened to several banks and investment houses.  Nearly $800 billion in bailouts were authorized in TARP.  Barack Obama masqueraded as a moderate and was elected.  His response was to create another $800 billion in "stimulus," and to take over two of the big three automakers.  He then, with the aid of a supermajority in both houses of Congress, rammed through statist legislation such as America has never before seen.  Health care "reform" designed to destroy private healthcare and render it a government program, financial regulation designed to make it impossible to conduct business at all but the largest levels, and left-wing activists in agencies who implemented the most extreme of the Democrat/Socialist ideology without a hint of concealment.

Then Mr. Obama declared his intent to slap more taxes on the "rich" -- defined as income starting at $250,001 per year.  That’s not "rich", that is merely productive.  The "rich" have amassed their fortunes, and income taxes don’t tax what you already have in the bank.  They tax what you earn.  No matter what the statist radicals claim, income taxes are a governmental punishment for earning a living.  It is already well-documented that higher marginal tax rates always generate lower total governmental revenues in the end.  Furthermore, it is not as if productive Americans pay too small a share of the tax bill. 

According to the IRS, 86% of all taxes paid are paid by the top 25% of income earners.  The top 1% of all income earners pay 40.4% of all taxes.  Ironically, when the tax rate on top earners was 70%, the richest 1% of all Americans paid 19% of the tax bill. Here is the Atlas Shrugged effect shown statistically.  The higher the marginal tax rate, the more likely high income earners are to find legal (and some, illegal) ways to not pay taxes.  The best way for the high income earners to do this is to stop earning anything.  They have fortunes that are not subject to re-taxation, and likely could not be Constitutionally confiscated.  These people can stop earning altogether, pay no taxes except on property and sales tax on purchases, and still live well. 

When small businessmen who risk everything are not rewarded (actually, have their reward stolen from them under color of law), but instead viciously punished, for productivity, the end result will be that the risk is no longer worth taking.  The businessmen will live off the country.

America is in one of two places:

Atlas Has Shrugged:  Capital is unavailable.  The government, in an effort to strong-arm the banks into both cutting executive pay and into making risky loans, won’t let the banks repay bailout loans.  Why?  Control.  "You borrowed Federal money, do what we say."  The refusal to permit repayment is an effort to force the banks to be governmental puppets.  No capital equals no new business.  Existing companies hold on to capital and don’t invest, because new regulations are impossible to understand.  They don’t want to destroy shareholder value, because the statists are in league with litigators who penalize audacious business leadership in the courts.

The end of this is that Atlas has shrugged.  Innovation is dying; the government is on a path to collapse under the weight of its collectivist / socialist / statist policies, which were unworkable in the first instance.

The heroes come to take the Globe from Atlas:  The doom may be averted.  The Tea Party Express elected good people in GOP primaries in New York’s gubernatorial Primary and Delaware’s Senate Primary.  Of course, the Democrats in Delaware declared Christine O’Donnell unelectable, and Democrate operatives at PPP released a poll showing her 13 points behind as of a few days ago.  However, Scott Brown was further behind Martha Coakley with the same number of days to go, and he is the sitting junior senator from Massachusetts.

The heroes recognize the correct action:  Dismantle the statist system, carefully and methodically, but completely.  Keep those who cannot survive because of the evil socialist machinators on the dole for as log as it takes; put new people into private plans where they are not the victims of state-incited theft.  Dismantle government agencies, and rid the system of Midas-dwarfing salary and pension plans and overpaid people.

The primary season shows the heroic uprising beginning.  If the heroes of the Tea Party movement are able to dismantle the globe, then Atlas will have no need to shrug.  I hope and pray that they succeed, and join their efforts.