The fundamental difference between genuine conservatives and genuine liberals is this–liberals believe they can make people do what they, the liberals, conceive as the right thing by passing laws and imposing sanctions. See, liberals know what is best for others and do not trust people to choose for themselves to do the right thing. Genuine liberals believe in the power of the collective and see the individual as a mere cog in the wheel of state that must be made to do the right thing. Genuine conservatives, by contrast, believe that the person, not the state, is the highest value and strive to create opportunities for people to choose what to do with their life and property.

Let me give you a current example. In Colombia, traffic is terrible. Rather than build new roads and create incentives for people to use their cars more wisely, the liberal mind in Colombia decided to impose restrictions on who can drive on a particular day. Their solution? Only allow cars with license plates that end in an odd number to drive on odd number days and only allow cars with even number plates on the road on even days. Such is the naivete of the liberal mind.

Guess what average people, liberal and conservative do to circumvent this? They buy an extra car or they buy an extra license plate. As a result, you wind up with more cars on the street.

Raising taxes is another typical example of the liberal naiveté. They believe that if you raise the tax rate, people will pay more and the problem of deficit spending will be magically solved.

So what happens when investors and the wealthy face the certainty of higher taxes?

As lawmakers struggle to agree on a plan to avert the series of tax increases looming next year, many investors are taking preemptive action to get out of harm’s way.

Americans are moving to sell investment homes, off-load stocks, expand charitable donations and establish tax-sheltering gifts before the end of the year. Financial advisers and accountants say people are trying to avoid the higher taxes that will take effect in 2013 if Washington does not avert the “fiscal cliff.”

For the nation’s top earners, who as a group make a large share of their incomes through investment returns, those moves could have a major impact on their tax bills.

“We are seeing a lot of questions about what assets to sell,” said Debbie Haines, a partner at CST Group, a Reston accounting firm. “A lot of people are wanting to liquidate stocks that have a gain. A lot of people are harvesting their capital gains. There is also some concern that itemized deductions will be cut, and some people who are charitably inclined are thinking about making bigger donations this year.“

Also, with the tax laws covering gifts set to tighten significantly, several Washington area estate lawyers say they are facing a rush of people interested in establishing trusts that under current law allow a couple to protect more than $10 million in assets from the tax man. Impending changes in the law could reduce the gift exclusion to $1 million for an individual or $2 million for a couple.

Hell, even the liberal Washington Post acted like a conservative one per center. AP reported last Friday:

The Washington Post Co. will pay its 2013 dividends before the end of this year to try to spare investors from anticipated tax increases.

The media and education company said Friday that its dividend of $9.80 per share is payable Dec. 27 to shareholders of record as of Dec. 17. The payout is instead of regular quarterly dividends next year.

This means that the funds for investments will shrink in the coming year, not expand. That means a contraction of economic activity, not an expansion.

Those with money who can afford it will flee from high tax states and set up residency in lower tax states. There will be a tightening of belts across the land. Despite Obama’s silly, stupid promise that his Obamacare would reduce costs, the opposite is happening already. A tax on medical devices already is leading that part of the medical industry to lay off workers. It also means the price of those devices will go up. That means we will all pay more. This is basic economics–rising prices generally are accompanied by reduced demand.

Of course, there are some goods and services–e.g., food and fuel–that people must have. The price on those items is somewhat “inelastic.” That term simply means that people will continue to buy the items despite the rise in prices. However, the type of food purchased will shift. Folks accustomed to eating steak and pork on a regular basis will scale back and go for cheaper items.

One other thing happens in the face of higher taxes–people turn to the black market and the grey market. Folks will increasingly deal in cash transactions. Activity previously captured with credit cards will shrink. This means the government will actually wind up with less money and those groups most adept and meeting demand in the black market (i.e., the criminals) will prosper.

If Obama succeeds in raising the rates on the so-called 2%, he will have a pyrrhic victory. Any addition increase in revenue will be short-lived. The net effect will be to knee cap the already faltering economy. Unfortunately, most Americans must learn the hard way. Some tough lessons are coming. You can count on that.

Previous articleMob Protests in Lansing, Michigan Today
Next articleRed Line Syria
Larry C. Johnson is a former analyst at the U.S. Central Intelligence Agency, who moved subsequently in 1989 to the U.S. Department of State, where he served four years as the deputy director for transportation security, antiterrorism assistance training, and special operations in the State Department's Office of Counterterrorism. He left government service in October 1993 and set up a consulting business. He currently is the co-owner and CEO of BERG Associates, LLC (Business Exposure Reduction Group) and is an expert in the fields of terrorism, aviation security, and crisis and risk management, and money laundering investigations. Johnson is the founder and main author of No Quarter, a weblog that addresses issues of terrorism and intelligence and politics. NoQuarterUSA was nominated as Best Political Blog of 2008.