- Some of my favorite words in the English language are
"collective nouns," the colorful names for groups of animals
going back to the 15th century that every kid had to know to go hunting
with his dad. Not knowing them was laughable ignorance.
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- We would laugh today if someone said a "herd of
fish" instead of a school, or a "flock of cattle," instead
of a herd or drove. We know it's a pride of lions, but it's a leap of leopards,
a crash of rhinos, a shrewdness of apes, a skulk of foxes. Perhaps you've
heard of a murder of crows or an exultation of larks, but it's an unkindness
of ravens, an ostentation of peacocks, a bouquet of pheasants, a parliament
of owls.
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- Collective nouns were applied to groups of people as
well. We still call it a congregation of churchgoers, but it's an impatience
of wives, a boast of soldiers, an impertinence of peddlers, an illusion
of painters. I love the one for prostitutes: a flourish of strumpets.
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- Thus I would like to offer a candidate to be added to
the venerable list of English collective nouns: a scum of politicians.
Which brings me to the orgy of anti-capitalism currently going on in Washington,
egged on by the media, with Enron as the excuse.
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- Endlessly we are subjected to revelations of venality
on the part of Enron execs or Arthur Andersen accountants, offered as final
proof that greedy capitalists are all Simon Legrees at heart. Supinely
the leaders of corporate America beg forgiveness from their attackers and
refuse to attack back.
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- What I'm waiting for is a businessman with balls enough
to explain to the American people that Congress is a Mafia running a protection
racket, and that the tax code bears a principal responsibility for business
failures.
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- Two distortions in the tax code stand out in particular
regarding Enron. The first is that dividends are taxed as regular income
and capital gains are not. You pay twice as much for the former at top
rates (39.5 percent) as you do for the latter (20 percent).
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- This is a gigantic incentive to put money into risky
investments ("growth stocks") to make money with capital gains,
and avoid stocks that only pay dividends.
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- Millions of investors, including Enron employees, were
sucked into the company's efforts to ramp up the stock because of the capital
gains distortion. The entire dot.bomb fiasco, with trillions of ephemeral
wealth created out of thin air and vanishing back into it, was in large
part due to the same distortion.
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- One hears calls for eliminating capital gains taxes.
That would be disastrous, leading to ever wilder speculative frenzies and
the destruction of value-based companies with normal P/Es, if taxes on
dividends were not also. A first step to bringing stability, trust and
value back into the market would be to lower taxes on dividends to the
same rate as capital gains: 20 percent.
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- Few things would also put an end to the current recession
,Äì except perhaps for the second great distortion that nailed
Enron, the depreciation schedule. Enron was once a solid company that owned
natural gas pipelines. To expand its business normally would mean building
more pipelines. But there is a 20-year depreciation for such an investment.
That's in effect lending money to the IRS with no interest for 20 years.
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- The rational thing to do is what Enron did: Minimize
investments with long-term depreciation, maximize instead investments with
short-term depreciation. So Enron got into energy trading ,Äì
which it made money on for a few years, but the low entry costs attracted
competition that eventually drove the company out of business.
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- It's the same old story that caused the S&L crisis
a decade or so ago. The media frenzied-out on crooks like Charles Keating
when the real cause was the Democrats in Congress raising the depreciation
schedule for commercial buildings from 16 percent to almost 40 percent.
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- Buildings which sold on the basis of deducting 1/16 of
the cost per year now could be sold only with a deduction of 1/40 of the
cost. Too many became simply unprofitable, the owners walked, the financing
S&Ls crashed and burned. Not a single politician took the rap.
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- The obvious solution is to eliminate the depreciation
schedule entirely and let a business deduct its expenses over whatever
period of time it chooses, including deducting as it spends.
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- The moral to all of this is not that there are cheaters
in the business world, or who will cheat and deceive when their back is
against a wall. Anyone with a three-digit IQ knows this. The real moral
is:
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- The U.S. tax code is purposefully not designed to maximize
economic prosperity. Its express purpose is to maximize politicians' power
,Äì power to extort contributions as protection money, and
power to make people dependent on government subsidies, thus gaining the
vote of those so dependent.
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- Actual tax reform in America doesn't have a ghost of
a chance until business leaders and those rare honest politicians clearly
explain this and the American voting public clearly understands it.
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- Until then, Congress will ceaselessly try to distract
us with shell game frauds like Campaign Finance Reform and anti-capitalist
scandals, and circus freaks like South Carolina's embarrassment, Fritz
Hollings, South Dakota's blemish, Tom Dash-hole, and West Virginia's epitome
of arrogant senility, Bobby Byrd.
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- It's these guys we should be outraged at, who are far
bigger crooks and thieves than Kenneth Lay ever will be.
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- Last month, Bobby Byrd ,Äì a man who has
never created wealth but has enormous power derived from stealing wealth
and dispensing it as largesse -- tried to intimidate and poor-mouth Treasury
Secretary and former ALCOA Chairman Paul O'Neill. As a pre-eminently successful
businessman, O'Neill's career has been creating wealth and prosperity.
He had the guts to stand up to Byrd and tell him off right at a Senate
hearing.
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- The recipe for prosperity is for people to pay more attention
and respect to those who create it, and less to scums of politicians.
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- http://www.newsmax.com/archives/articles/2002/2/20/142246.shtml
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