Zombies in suits! - The Daily Reckoning
The Daily Reckoning by Bill Bonner
On This Day - 3 January 2013
Zombies in suits! A  A  A

Baltimore, Maryland

Dow up more than 300 points yesterday. Why? Because the 'fiscal cliff' has been averted. That's what the papers say. But it just goes to show why it's a mistake to read the news, except for a cynical guffaw.

The real reason markets went up was because investors were reassured: Washington works in the same corrupt, self-serving and zombie-coddling way it always has. The politicians raised taxes...and put off worrying about spending cuts until sometime in the future. In other words, investors realized that they could trust the empty suits not to do anything different!

How much of the world's troubles are caused by guys with hammers or wrenches in their hands?

How many bakers cause depressions? How many masons are mass-murderers? How many steelworkers or cabinet makers...or delivery men...cause mass starvation?

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No, dear reader, the common working man may be a bumbler and a fool, but he is rarely responsible for anyone's troubles but his own.

The guy who causes real trouble is the fellow in a suit. Last week, we had a meeting with lawyers. Nice guys. Smart guys. Guys in suits. They were not so much causing trouble as reacting to it. Trouble caused by other guys in suits.

Many of the smartest people in the nation give up honest careers in mechanics, metallurgy and upholstery and put on suits. That is, they go to law school. Some cause trouble - such as lawyers for the SEC. Some shysters get rich - such as Orioles owner Peter Angelos, who made his money with jumped-up class action suits.

Others protect honest people from the attacks of the shysters and regulators. And a few actually help people beat DUI raps, dump their spouses and commit other acts of wanton humanity.

Together, the good lawyers, the bad lawyers, and the ugly suits absorb a substantial portion of the nation's resources...and contribute not a penny to its wealth.

The federal tax code rests largely upon the 16th amendment to the constitution, enacted in 1913 by men in suits, which tells us that "Congress shall have the power to lay and collect taxes on incomes, from whatever sources derived, without apportionment among the several states and without regard to any census or enumeration."

That gave the feds the authority. The following 100 years gave them the time to elaborate. Now the federal tax code contains 3.7 million words. It fills 20 fat volumes. If you want to read it ...there must be something wrong with you! It's available for $947.

In the final days of 2012, a lot of nice guys in suits were trying to keep other guys in suits from taking their money. Neither group was contributing to the real wealth of the nation (unless helping to keep one group of zombies from destroying wealth can be considered a contribution). But everyone knew the tax code was headed for emendation. And everyone knew those changes would mean higher taxes.

In the event, the Senate got together at the last hour and came up with a plan. That plan was a stopgap measure, everyone admitted. But it was better to fill the gap -- even with folderol - than to leave it open, they said. It would allow the feds to keep the lights on while they wrestled with the longer term problems - namely, the fact that they spend far more money than they take in -- later.

Inasmuch as Congress has spent too much for many years, it is hard to see how the pols will be any better at spending less in 2013 than they were in 2012. But that's just the point. They just proved that, driven to the edge of the cliff, they'll always agree on ways to keep spending! The system works!


And what does Congress spend money on? Zombies! It takes money from productive segments of the economy - the people who actually add goods and services that other people are willing to pay for - and gives the money to people on disability...people who make drones...and people who sit on their fat derrieres in cushy government office buildings. Zombies, in other words. Naturally, nobody would willingly pay for these things...so the feds have to take the money by force, threatening jail time to anyone who resists.

But wait. There's more. The Senate bill did not merely find a way to keep the known zombies feeding at the public trough, it also threw some meat to hidden zombies all over the country. David Malpass, former deputy assistant Treasury secretary, writes in the Wall Street Journal that the legislation extends 52 tax credits for one year. That will give the zombie beneficiaries plenty of time to work on their bribes and blandishments in time for the 2013 end-of-the-year legislation. Section 206, he points out, takes care of the environmentalists. Section 312 gives a break to those running "motorsports entertainment complexes." And section 317 is intended to keep Hollywood happy.

What we see in all this is a government of the zombies, run by the zombies, and for the zombies. The rich are taxed heavily...unless they've made major campaign contributions and gotten their lobbyists on the case. And no one is allowed to relax, plan for the future and invest calmly in long-term projects, not even the zombies themselves. The law steers the federal government towards a series of cliffs - one on March 1st, when spending cuts are supposed to kick in...another 'sequester' on March 27...and a March 30 limit on spending authority. Each one will require intense lobbying...brinksmanship...and dealmaking. Each one will end up by taking more resources from productive people and give it to the zombies. And so it goes on. And now the feds can keep borrowing, spending and printing...until they all go to Hell.

Bill Bonner is the President & Founder of Agora Inc, an international publisher of financial and special interest books and newsletters.

The views mentioned above are of the author only. Data and charts, if used, in the article have been sourced from available information and have not been authenticated by any statutory authority. The author and Equitymaster do not claim it to be accurate nor accept any responsibility for the same. The views constitute only the opinions and do not constitute any guidelines or recommendation on any course of action to be followed by the reader. Please read the detailed Terms of Use of the web site.

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