Recently, a number of politicians have proposed "Stimulus Packages" which are meant to stimulate the economy in the short and/or long term, because each of them believe a recession is on the horizon.  Unemployment has recently increased and candidates are suddenly talking about the economy as if they are bonafide experts.

The difference in how the two political parties are seeking to address this upcoming problem is instructive. The Democrat Party, believing that government must be all things to all people and grousing about the outsourcing of jobs to India and other nations have proposed handouts that will do little other than make the public feel good for about one day if that.  The Republican Party however, to some extent is offering a combination of tax breaks and deregulations, so that businesses and investors can plan for the future and create jobs that will back fill whatever "government revenues" were sacrificed for future economic benefits. Needless to say the current bi-partisan package, which includes a little of both, will probably end up doing little if anything. This might be the best we can hope for given that the party of HillaryCare controls both houses of Congress. 

While many Republican politicians are not apt to connect job losses to increased costs of living and costs of doing business imposed by the government, their initial impulses in this direction are for the most part correct. Let me try to explain.

The costs business owners incur will always get passed onto their customers in the form of higher prices.  Increase the cost of complying with a regulation, add a new regulation to comply with, raise an existing tax or "fee", or add a new tax or "fee", and that cost will be figured into the price of the product a business owner sells.  A business owner must do this or cut costs to keep their doors open.  Now I am not saying all regulations are bad or unnecessary.  I am just saying they add to the cost of doing business which ends up increasing the cost of living and that such facts need to be factored in whenever any legislature seeks to mess with the economy.

If the cost of doing business increases too high at a present location, a business owner must decide whether to move to a lower costing location, raise their prices, lay off workers or some combination of all three.  If the costs go even higher then the business owner must consider whether to close their doors and do something else, maybe even somewhere else.

If too many business owners make the move then a city, state and/or nation will experience significant unemployment, which leads to lower tax revenues and increased costs for the government of the city, state, and/or nation as unemployed taxpayers don't shop as often as employed taxpayers and unemployed taxpayers consume more government services than employed taxpayers.  The more unemployed voters there are, the louder the call for increased government benefits gets. The louder the call for more government benefits gets the louder the call to raise taxes on the "rich".

Here is where we have a problem, because the taxes that are being called on to be raised are primarily paid by business owners and entreprenuers who have good year fiscal years.  The truly rich and some of the largest multinational corporations hide most of their funds behind charitable foundations and trusts, that on paper own most if not all the assets, receive most if not all profits and ironically provide the funding for the organizations that call on the government to raise taxes on the "rich". 

That is why in 2004, Teresa Heinz Kerry only paid around 11% on what she earned, because techincally her charitable foundations that she controlled earned that money.  Those foundations also owned her homes, bought the food she and her family ate, the clothes she and her family wore, the vehicles she and her family travelled in, etc... So when she reported to the IRS what she earned, she fell in one of the lower tax brackets. She only reported what she, her attorneys and her accountants believed was politically necessary. 

These charitable foundations are protected by some of the same laws that protect charities like World Vision, the Salvation Army, and various other charities, missions organizations and churchs.  Does anyone serious believe these laws will be touched without a huge out cry from the world of non-profit organizations?  Congress will never make a move to change these laws,  because no member of Congress wishes to be protrayed as the Grinch who stole from the charities. 

This is why we as a people need to take a long and serious look at which regulations are necessary and which are not, which regulations are overly complex and need to be simplified, how to lower the cost of compliance for businesses without sacrificing quality of life benefits, etc...  Establishing a commission pattern after the BRAC Commission for regulations, is one way to lower the costs of doing business in the United States. 

This reform and moving from the current property dominated tax system to a consumption dominated tax system will both simplify and probably lower both the cost of doing business and living.  Lowering the cost of doing business and living will keep jobs here, make life for us working folks a little easier and maybe even attract jobs back that had moved out years ago.

So it's not just the economy, as James Carville once said, it's the cost of doing business and the cost of living that affects the pocketbook issues more than anything else.