Washington -- Some money sages, witnessing the stock market's
decline, are heartened that Congress is promising to apply therapy.
They hear that Senator Tom Daschle and Congressman Richard Gephardt
are beating their hairy chests over accounting derelictions and
corporate chicanery, and they let out a shout of gratitude. Others
are lest sanguine. They attribute part of the market's decline to
Congress's promise to take action, a promise that the President
endorses.
The doubters believe that investors are actually made
apprehensive by Congress's promise to attend to corporate funny
business. I side with the doubters. What would Congress know about
accounting rectitude? Is it not Congress that has turned Social
Security accounting into a shell game? Is it not Congress that
conceals debt with off-the-books sleight-of hand? Jonathan Karl in
the Wall Street Journal the other day tells us that
Congress has exaggerated government revenue by juggling accounts
receivable. It has understated costs by "shifting employee pay
periods to the previous fiscal year." It has even raided pension
funds.
Now Congress is going to reform corporate accounting and ethical
lapses that began in the glorious 1990s, during the Clinton bubble
that Congress was not particularly concerned about. Moreover, the
congressional posse comitatus that is charging in is led by
politicians who have never had any experience in commerce
whatsoever. Such brave reformers as Daschle and Gephardt are as
innocent of business experience as they are innocent of investing
experience.
To be sure, part of the problem with Congress reforming business
is that it has so little experience in business. It has indulgently
sat back and watched companies such as Microsoft be walloped by
government for practices that have not only not hindered commerce
but have actually encouraged commerce. In the chaos of the tech
revolution Microsoft's Windows operating system has actually given
computers a standardization that enhances their ability to work
with others. Before the standardization of the railroad track bed,
railroad commerce was limited to whatever track one was on.
Computer use would be in the same fragmented condition without the
standardization Windows has allowed. So government is harassing
Microsoft with allegations of monopoly, notwithstanding the
evidence that technological advances are rendering the government
lawsuits irrelevant.
The problem with government reforming business ethics is that
government's ethics are so dubious. Take the harassment of tobacco.
If it is an evil it should be banned. Instead of treating it as
just another form of commerce or as an evil to be proscribed
government treats tobacco as an endless source of revenue,
notwithstanding the fact that the tax falls disproportionately on
the working classes. The federal tax on a pack of cigarettes is now
39 cents. In New Jersey a state tax of $1.50 is added. In New York
City a smoker is also clouted with a state tax of $1.50 and a
whopping city tax of $1.42. Sixteen states this year have burdened
the lowly tobacco smoker with the obligation of closing state
budget deficits. The consequence is to turn every smoker into an
unwitting tobacco bootlegger.
Then there are the multitudinous lawsuits initiated by state
attorneys general against the tobacco companies. They reveal the
states as little more than shakedown operations, and these
operations are aimed not only at the tobacco companies but at any
other industry that is exposed to our litigious masters, as
Microsoft has discovered.
There is a trend here. Government is ferreting out unpopular
pastimes and taxing them to pay for government's inability to live
within its means. In California there is a move afoot to tax junk
food and candy for the good of government spendthrifts. Throughout
the country alcohol is seen as a likely target for tax increases.
And in the end one has to ask, why? If the politicians see tobacco,
junk foods, and alcohol as public health problems why not put the
matter to the test? Ask the electorate if we should institute a new
Prohibition against these substances.
Yet the politicians are reluctant. Their ethical compasses are
not that precise. And so they live by their ethically dubious tax
increases and now promise to apply their superior judgment to
corporate ethics. Not surprisingly large numbers of investors are
calling their brokers and telling them to sell.
Clearly when the bear market began it was because the market was
untenably high. But today such economic sages as Arthur Laffer are
arguing that the market is as much as forty percent undervalued.
And why might that be? Well, one answer surely is that government
is riding to the rescue.
topics:
Business, Books, Law, NATO
