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October 2013

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Editor's Note Taxes, Twinkies and Train Wrecks U.S. Chamber's chief economist (and Summit keynoter) says tax reform will only be effective if paired with one important ingredient. By kIM pHELAN Lately, I've been reading a book by Arthur C. Brooks titled, "The Road to Freedom: How to Win the Fight for Free Enterprise." It's an excellent read because it equips the reader with something mere facts and figures about the economy don't – especially when you're confronted with someone making the emotional case for wealth distribution. Brooks argues that you just can't refute the emotionally charged reference to a woman living out of her car by citing economic drivel. Instead, he says, better to unapologetically communicate that free enterprise is the reason all people have more opportunity around the world; free enterprise, not big government programs, are the reason poverty has greatly declined by 80 percent globally over the last 40 years. Brooks is president of the American Enterprise Institute in Washington – you may have seen the entertaining illustrated and narrated YouTube video that has been circulating around this year, "Don't Eat Your Dog – The Moral Case for Free Enterprise." It was actually that eight-minute clip that caused me to order his book, so I'd recommend you just Google that and hear what he has to say. In the book, Brooks describes a cool classroom exercise he conducted when he was a professor at Syracuse University, which he created as a real-life application lesson for his "politically progressive," wealth-distributionfavoring students. Actually, he calls it a thought experiment, and it effectively tested their often-vocalized view that "it is not fair the rich in America have so much more than the poor. Fairness," says Brooks, "was their rationale for income redistribution." Halfway through the course, Brooks observed disparities, as most educators engaged in the conversation about tax likely do, among students who were reform, recognizing that the U.S. tax working hard, doing assignments and code's complexity and unpredictability studying, and those who weren't. Obviundermine economic growth. Regalia ously, the hard workers were rewarded couldn't agree more, but he takes it a with more points on quizzes, tests and bit further. papers, etc. Their less motivated peers, "Tax reform must be done in conjuncwell, not so much. tion with spending restraint," he adds. So here's what he did. Without both, I'd say that's like an He proposed the class skim off 25 hour on the treadmill followed by a diet percent of the points earned by the top of Twinkies. You want to lose weight? half of the class and distribute them Exercise and eat smart. And if you want among the students in the lower half to ignite economic growth, you have to of the grading spectrum. tax more rationally and spend less. So brilliant. Regalia is very concerned about the "The students were in unanimous ticking time bomb of America's entitleagreement that this was a stupid idea. ment spending, which, he says, is our Redistributing points earned on the "greatest driver of spending." He states basis of hard work and merit, simply so a chilling reality in one of his recent that students who didn't study could blogs: "These programs will be reget a higher grade, would be completely formed by design or by default." Either unfair. Even students at the bottom Congress can begin tapping the brakes thought the scheme was idiotic." on spending or do nothing and wait for the inevitable train wreck when Treadmills and Twinkies Social Security and Medicare run out of This anecdote was top of mind as I money. Those are the only choices. considered an article authored by U.S. Families and businesses understand Chamber of Commerce Chief Econothat when times are lean, they have to mist Martin Regalia on the Chamber's find ways to skinny down, even though freeenterprise.com website. Earlier it's hard. "It's time for Washington to this year, Regalia pointed out this painful follow suit," says Regalia. fact: "American families and employ I agree. ers are keenly award of the deep cut And just so you know, you'll have a chance to hear Martin Regalia in that the government is taking out their person at the AED Summit on Jan. household incomes and hard-earned 16 in Houston. Get a good seat that profits – especially during the slowest ecomorning – he's going to be terrific. By nomic recovery since the Great Depression." Regalia continued, "...when taxes the way, registration is now open at go up, the rate of economic growth aedsummit.com. goes down," but nevertheless "many in Thanks for reading. Washington are hungry for even more Kim Phelan (kphelan@aednet.org) tax revenue." is the executive editor of Construction "The truth is, we can't tax our way Equipment Distribution and director of out of our fiscal mess," says Regalia. AED's team in Washington is actively programs for AED. October 2013 | Construction Equipment Distribution | www.cedmag.com | 7 7_editors note_KP.indd 7 9/26/13 11:15 AM

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