Governments Die, Countries Live On .....

As this chart shows, the lessons of the rise of the American economy in the 20th century have finally been learned by the rest of the world. If the top corporate tax rate of 40%, which includes a 5% state tax on top of the 35% federal rate, remains much longer, American companies will find themselves on the short end of the stick thanks to their competitive disadvantage.

That means more people will lose their jobs. That means less wealth for all. _Heritage

Never mistake the government for the country. They are two distinctly different things. And while governments can easily die, countries are a bit tougher. The graph on the left shows the declining global trend for taxing corporations. Corporations naturally go to the countries that tax them the least, all other things being equal. If a government taxes corporations more than it is worth to the corporation to locate there, the corporation will go elsewhere and take its jobs with it.

California, New York, Massachussetts, and several other states are getting caught up in the "tax 'em high" fever emanating out of Obama et Pelosi's DC. But as you can see, the global trend has been in the other direction. Corporations are leaving California etc. and new startups are hesitating to locate there. The same phenomena is beginning to show on the global scale.

The US government is heading down the road of fiscal and budgetary suicide with a lethal combination of new, non-productive spending plus punitive taxation on productive entities and employers. Add to that devastating new regulations and taxes on energy and industry plus a growing stranglehold by trial lawyers and labour unions over business, and one can see how easily the US can go from being a good place for corporations to locate to being a losing proposition.

Corrupt high roller state governments such as California, New York, Illinois, Massachussetts, and Michigan are living well beyond their incomes -- and running to the new Obama / Pelosi reich for multi-billion dollar welfare for the states. Although the federal government is in no condition to be handing out goodies to corrupt state cronies, that is exactly what is happening with the O / P "stimulus bill." And they are just getting started.

Anyone who took the trouble to watch the 30 minute IOUSA film clip should have at least a vague idea of the coming budget disruption. You need to know how a responsible government would deal with such a problem in order to understand how badly our current government is focquing up. Rapidly failing state governments are a microcosm of the larger problem at the federal level.

The federal government can print money, it can sell notes, bonds, influence interest rates etc. as long as it has some degree of fiscal credibility. When it loses that credibility it will be stressed to the breaking point. Looking into the future, there is no sign that either the governing or the governed have an understanding of the problem, nor the will to deal with it. Demographic implosion plus government fiscal suicide plus cultural and educational decadency. Not a pretty combination, although quite common in western Europe also. In fact, most European nations have a bit of a head start. A few countries may even be starting to wake up.

What happens to the country after the government falls? What do you think happens?