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economics Archive

Wednesday

8

September 2010

0

COMMENTS

How Far They've Come

Written by , Posted in Economics & the Economy, Taxes

This video by the Winston Group contrasting JFK’s rather sound economic understanding with President Obama’s sophomoric demagoguery really highlights just how far the Democratic party has lurched to the left.  All the old 60’s radicals and democratic socialists have worked their way up through the party structure, and now have control of the Democratic agenda.

Tuesday

10

August 2010

0

COMMENTS

When Soaking The Rich Doesn’t Sell, Soak The Super-Rich Instead

Written by , Posted in Economics & the Economy, Taxes

With the public unconvinced of the wisdom of soaking the rich, the latest hot idea floating around in statist circles is not to soak the rich, but rather the really, super-duper, ultra rich.

In a class-warfare filled screed, James Surowiecki wrote in the New Yorker on the need to “Soak the Very, Very Rich.”

A better tax system would have more brackets, so that the super-rich pay higher rates. (The most obvious bracket to add would be a higher rate at a million dollars a year, but there’s no reason to stop there.) This would make the system fairer, since it would reflect the real stratification among high-income earners…

Ezra Klein then blogged at the Washington Post that he is “very sympathetic to the idea that there should be more tax brackets,” reasoning that  “It would be a lot easier to fight the super-rich than to fight the super-rich, the really rich, the pretty rich, and well-off.” If there was a bracket just for the super-duper-really rich, you see, it could be more easily raised to unconscionable and economy killing levels without public objection.

Adding more tax brackets would complicate an already inexcusably incomprehensible tax code, resulting in increased economic waste and compliance costs, more expenditures on lobbying and even greater uncertainty than is currently holding down economic growth.

Furthermore, tax policy should not be decided based on which group is easiest to demagogue and demonize. Nor is it the purpose of the tax code to enshrine into law a particular view of economic fairness, which in the case of Surowiecki and Klein, means redistribution.

There is one legitimate reason and one legitimate reason only for taxes, and that’s to raise the funds necessary for the limited functions of constitutional government and rule of law. There is no honest assessment of those functions as enshrined in the US Constitution which can find that the present revenues received by the state are insufficient to provide for those functions.

I’m sure it’s too much to ask, but rather than ruminate on which of its citizens the government and its statist boosters should declare war on next, the Ezra Klein’s of the world should think about how government spending can be reduced, and our federal government brought back into the bounds of legitimate, constitutional governance.

Wednesday

4

August 2010

0

COMMENTS

A Simple Choice

Written by , Posted in Economics & the Economy, Taxes

Sometimes economic battles are fought by theorists without any strong empirical evidence existing on either side.  Today’s battle, with Obama administration tax-and-spend Keynesians on one side, and supply-side economists on the other, is not such a case.  As Richard Rahn shows in his Washington Times column, the evidence is really quite clear.  Reagan’s supply-side cuts produced a strong recovery by the same point in time where Obama’s Keynesian “stimulating” has not.

Our choice now is simple.  We can follow an economic model which has no empirical evidence suggesting it will work by allowing the taxes on capital gains, dividends and death to rise as planned at the end of the year. Or, we can keep those rates low – better yet still, we can reduce them – and get the results for which supply-side economics has already proven capable.

Cross-posted at Double Taxed.

Tuesday

3

August 2010

0

COMMENTS

Tuesday

20

July 2010

0

COMMENTS

Wherein I Agree With The Statists: Don't Let BP Win

Written by , Posted in Economics & the Economy, Energy and the Environment, Free Markets

Iain Murray writes at the Washington Examiner that advocacy groups Change.org and the Alliance for Climate Protection are arguing – in an email entitled, “Don’t Let BP Win!” – that “Stalling climate and energy legislation would be a big win for oil companies like BP, but a huge loss for the rest of us.”  Someone must have forgot to tell the lobbyists at BP, because as I previously noted, they have endorsed the Kerry-Lieberman cap-and-trade bill.  BP and other big corporations understand what the statists that routinely push for government intervention in the market do not: big government policy ultimately benefits big business the most.

The first responsibility of a corporation is to their shareholders, and contrary to popular belief, they are not dependable advocates of capitalism.  Given half a chance, they will gladly use the power of government to their own benefit by restricting competition.  They always have the greater means and motivation to capture federal regulator agencies, and deploy the force of government to benefit their special interest, than do the high-minded reform groups that often called for intervention in the first place.  If Change.org really wanted to ensure that BP does not “win,” they would fight against big government interventionism, thus denying BP and other corporations the ability to manipulate government force for their own benefit.

Tuesday

13

July 2010

1

COMMENTS

“Price Gouging” Laws Compound Natural Disasters with Political Disaster

Written by , Posted in Economics & the Economy, Energy and the Environment, Government Meddling, The Nanny State & A Regulated Society

Florida Senator Bill Nelson is seizing on the BP oil spill as an excuse to pass federal “price-gouging” legislation.  It’s certainly nothing new to see anti-market politicians stirring up populist rage with these so-called “price gouging” laws.  Many states already have them on the books, and politicians are quick to warn greedy capitalists against “exploiting” disasters by raising prices.  But these laws are really nothing more than price controls and, like all price controls, they distort markets and harm consumers.

“Price-gouging” laws generally prohibit “excessive” or “unconscionable” prices – both unconstitutionally vague concepts –   immediately following disaster declarations.  Prosecutions typically follow hurricanes, floods or other major events that knock out power and stress the availability of goods like ice and power generators.

Under normal circumstances, sudden increases in demand result in similarly sudden spikes in prices.  As prices go up, entrepreneurs in nearby areas are motivated to buy goods at their cheaper local prices, transport them into the disaster area, and then sell them for a handsome profit.  This is how price signals work to indicate where goods are most needed.  The entrepreneurs make enough money to justify their efforts, and people in the disaster area are able to get the extra supplies they need.  Yet despite the fact that everyone wins, many politicians have criminalized this behavior.  Rather than cheering the entrepreneurs for bringing relief  supplies that would not otherwise arrive to post-disaster areas, state government officials often prosecute, fine and even jail them.

Not satisfied with the fact that a majority of states already have these misguided price controls on the books, federal politicians have repeatedly tried to have them enacted nationally.  A bill that would have criminalized charging market prices for needed goods passed the House in 2007, but failed to get the 2/3rd votes necessary to override President Bush’s threatened veto.  Now, with a more sympathetic President Obama in office, such legislation could potentially return, and pass.

Bill Nelson’s state of Florida already unnecessarily perpetuates shortages after hurricanes and other disasters with misguided price controls.  He shouldn’t force similar pain on the 20 or so states without price gouging laws.

Monday

12

July 2010

2

COMMENTS

LeBron's Migration Mirrors That Of The Broader Public

Written by , Posted in Economics & the Economy, Taxes

Basketball is not my sport of choice, so I had no vested interest in the outcome of the recent drama surrounding LeBron James.  Even though I still consider Florida my home state, I don’t care that he’s chosen to play in Miami.  I am, however, struck by the degree to which LeBron’s decision mirrors that of so many ordinary Americans and businesses.  Namely, I note that he’s spurned high tax jurisdictions for income-tax free Florida.

Obviously, LeBron made his decision on more than just economic factors, though it’s fair to say that pay and other monetary factors mattered to some degree.  Although the sports community narrative involves James joining basketball super stars Wayne and Bosh – as well as some cries about the fairness of this team construction – the fact that all came together in Florida shouldn’t come as any surprise.  From 1999-2008, more Americans have migrated to the zero-income-tax-having Sunshine State than any other.  Meanwhile, the other states involved in the LeBron saga – Ohio, Illinois and New York – are 3 of the bottom 6 in net migration, with more Americans fleeing New York than any other state in the union.

These patterns should not come as any surprise when you contrast Florida’s lack of an income tax with the top marginal rates of Ohio (7.93%), Illinois (3.0%) and New York (12.62%).  But perhaps more importantly is the degree to which businesses are motivated by the same considerations.  Corporate taxes and regulatory environments shape corporate decisions every day, with states like New York and California increasingly driving businesses away as they look for more favorable environments.  This kind of tax competition is an important check on bad government policy, but it can be painful when you’re in one of the states being driven into the ground by short-sighted politicians.  While LeBron James just might have considered these factors in his decision, that ordinary Americans and businesses do is without question – and the consequences for high tax jurisdictions are as clear as Cleveland’s outrage.

Wednesday

7

July 2010

0

COMMENTS

Death And Taxes Don’t Have To Go Together

Written by , Posted in Economics & the Economy, Liberty & Limited Government, Taxes

Ray D. Madoff writes in the LA Times that failing to confiscate the acquired wealth of individuals when they pass away will “harm our democracy.”  She reaches this odd conclusion primarily by arguing that, absent an intrusive government willing to pick the pockets of the deceased, our democracy would be harmed by “concentrations of wealth.” She buttresses this argument with the factually incorrect claim that, while “few Americans own an enormous amount … a large number of Americans own hardly anything at all.”

This is simply untrue. Owning a small percentage of American wealth is not the same thing as owning hardly anything.  Madoff ignores that owning a small, or even “unequal,” share of the American pie is still much better than having a large, “equal” or “fair” portion of almost any other, for the simple reason that America creates far more wealth to go around in the first place. This is because America has historically rewarded risk-taking and innovation, while other countries have been more concerned with Madoff’s brand of fairness. The consequence today is that even our poor are better off than the middle and upper classes of other countries.  To understand the backwardness of her agenda, just look at the year she cites as the pinnacle of redistributive fairness, 1976, which was also the heyday of stagflation and malaise.

She also attempts to wave away concerns about double-taxation by arguing that “there is no general principle that says income or property gets taxed only once.”  She supports this claim by saying that the same money is often taxed multiple times as it is earned, spent and passed along.  But each of these activities is economic in nature and represents a separate action.  Paying sales tax while spending the same money one has payed income tax on is not the same as having one’s estate pillaged by the state upon death. Death is not an economic activity.

Contrary to her claims, death taxes are harmful to the economy.  They discourage savings and investment by encouraging people to spend money before it is taxed away, leading to job loss and slower economic growth. Death taxes also hit hard small, family businesses, or those with significant assets tied up in land, like farms.  Would anyone expect major corporations to stay competitive if they had to liquidate and sell off half their assets every few generations?

Madoff’s biggest failure, however, is that she completely ignores the important role of the family unit in economic life.  Households have always been recognized as an economic entity because of the manner in which families work together to advance their economic condition.  To say that a parent has no right to pass on the fruits of their labor to their children and grandchildren is to completely ignore the unique role of the family in economic life.  There’s no more moral justification for taxing estates after death than there is for taxing the allowance a parent might give to a child.  Death and taxes are both be said to be inevitable, but there’s no reason they have to come together.

Tuesday

6

July 2010

0

COMMENTS

Public Knows Better Than Congress

Written by , Posted in Economics & the Economy

The statists in Congress are enamored with Keynesian big government policies and profligate spending as a means of “stimulus.”  But while they travel the country to tout so-called “stimulus success,” the public displays a far better understanding of the underlying economics.  Not only does a plurality find that the stimulus bill actually hurt – rather than helped – the economy, according to a recent Rasmussen Reports survey, but an overwhelming majority of 69% to 15% said that cutting taxes is a better way to create jobs than government spending.

Friday

2

July 2010

0

COMMENTS

Pelosi: Paying People Not To Work Creates Jobs

Written by , Posted in Economics & the Economy, Health Care, Welfare & Entitlements, The Nanny State & A Regulated Society

I’ve heard a few economic whoppers in my time, especially from the mouths of politicians, but this statement by Speaker Pelosi has got to be one of the most foolish yet.

Talking to reporters, the House speaker was defending a jobless benefits extension against those who say it gives recipients little incentive to work. By her reasoning, those checks are helping give somebody a job.

“It injects demand into the economy,” Pelosi said, arguing that when families have money to spend it keeps the economy churning. “It creates jobs faster than almost any other initiative you can name.”

This is the same Keynesian clap-trap that claims you can “stimulate” the economy through government spending.  It’s the same theory that created a “lost decade” in Japan as they tried one Keynesian stimulus after another throughout the 1990’s.  It’s the same theory behind the 2008 Bush rebate checks, which did not spur growth, and the Obama stimulus, which did not spur growth.

You don’t have to be completely against some degree of unemployment insurance, as a cushion against economic hardship, to recognize that there has to be a balance between safety nets and the danger of creating a disincentive for work. When you subsidize something, you get more of it.  When you pay people not to work, you’re going to have more people not working.  Jobless benefits have to be finite; they can’t simply go on forever.

The length of the unemployment benefits granted so far is already unprecedented, so it’s not surprising that we’ve seen evidence that people are choosing to stay on the dole rather than to take work.  It is ludicrous for Speaker Pelosi to now argue that further encouraging such mooching is actually creating jobs.  The only real job she’s interested in creating (or saving in this case) is her own.  She clearly thinks that continuing to handout other people’s money is the best way for her and her party to stay in power.  Only time well tell whether she is right on that account.