How are you going to get The Rich to pay their Fair Share?

The top 10% of wage earners pay 50% of taxes.  Almost half of the population doesn't pay any income tax.  What should be troubling is Hillary's sliding definition of "rich."  Ten years ago, $250k was rich.  Now, $150k is rich.  What's worse is that deficit spending is driving inflation, making it harder to make ends meet.  How much should we pay in taxes?  The politicians will always say "more."  It isn't enough that politicians decide how 1 in every 3 dollars is spent in this country.  They trust us enough to elect them, but they don't trust us enough to spend our own paychecks.  The real question isn't who pays for who, rather who spends for who?

Socialism is Seductive

It's easy to see why socialism is so appealing to so many people. It promises so much (even if it is short on delivery). It preaches that there are simple solutions to everything; all you have to do is pass a law and it will be so.

It can even point to localized successes. Afterall, if you take from the many and give to the few it is very easy to prove that the few have benefited. Because of this the socialist must constantly find small groups to enrich at the expense of their neighbors. This weaves a patchwork of special interest groups who may not defend every program but are united in their defense of the system.

Thus it becomes that “The state is that great fiction by which everyone tries to live at the expense of everyone else.”

How's that Inflation?

Although official numbers show the recession ended in 2009, 72% of consumers still feel like they're in a recession.

That's inflation folks. It fudges the numbers so you can tell everyone everything is fine, but even if they can't put their finger on it people know it just isn't true. Wages may be going up nominally but the price of goods is going up faster. Portions are getting smaller. Purchasing power is decreasing.  And wealth is systematically getting transferred to banks and political cronies.

Why? Because monetary inflation is caused by Uncle Sam deficit spending and printing money to "pay" for it. This money goes to government contractors and banks first, where they can spend it before the market prices adjust to accommodate the new money competing for the same amount of goods.  The price of goods increases and then wages gradually trail along behind.

But the banks and cronies have already gotten their share of the pie. They spent the money before prices went up; the workers are spending it after. It's traditional buy-low, sell-high and the banks are keeping the spread.

Why can they do that? Because the politicians continue to spend money we don't have by counterfeiting it out of thin air. They keep lying to us that this is making things better and helping the economy.

Somewhere deep inside 72% of people know something is not right. But we'll keep reelecting the same liars until enough of us can finally see through their tricks.

Tiger Woods Makes How Much??

“I can’t believe that America pays athletes and movie stars so much!”

The presumption in this statement is that “America” is some single entity that has decided it values athletes more than police or teachers and that if only “America” changed its mind, this could somehow be “fixed.” However the reality is that in economics, having an available substitute usually drives prices down. For example, despite the importance of Police Officer Smith’s job, he is far easier to replace than Michael Jordan. The same can be said for teachers, nurses, firemen and even soldiers. In most cases, there is no shortage of applicants possessing the necessary skills to fill these important roles.

The movie-star effect is also a product of mass media. There are two ways to get rich: bring a million dollars’ worth of value to one person, or bring a dollar’s worth of value to millions of people. When an actor’s effectiveness was limited to the number of people you could fit in a single theater, their economic position was similarly poorer. Once they were able to bring their performance to millions of people through movie reels, their value and wealth increased dramatically.

So, why are athletes paid so much? Because you, me and millions of other people are willing to pay a few dollars for their performance, and that adds up. But when someone complains about their salaries, what are they suggesting? Are they willing to launch a campaign to convince millions of people to stop paying to watch sporting events? Or are they suggesting that by fiat, dictate or some other law we should place a cap on how much we value those individuals?

I’m often torn on whether people who make such statements are simply ignorant of basic economics or truly desire to wield power over others to bring into existence their own world view. I’d prefer to think it’s the former.

Regression to Serfdom

The market has failed. That's a frequent justification for expanding the powers granted to politicians. But how has the market failed? By who's standards? When we miss a hole in one do we talk about "physics failure?" Or if we can't balance the checkbook is it a "failure of mathematics?" What it really means is that people's interactions haven't produced the results the speaker wanted. But how often do these same folks talk about legislative failure? About programs and politics that have unintended consequences?

These days it is rare that people seize power by force of arms. The people violently wrested power from the ruling class in a series of revolts over hundreds of years. Now, the approach of the ruling class is to convince the people to freely gift that power back to the government, where it can be conveniently bought and sold. As I've said before, when you hear "the free market has failed" just mentally substitute "freedom has failed" and you'll begin to see through the lies used to convince us to return to serfdom.

"Is not this simpler? Is this not your natural state? It's the unspoken truth of humanity, that you crave subjugation. The bright lure of freedom diminishes your life's joy in a mad scramble for power, for identity. You were made to be ruled." - Loki

Surplus Population

Catholic.org had an interesting article pointing out that Obamacare will pay for sterilizations of teens as young as 15 without parental consent (probably due to an unintentional combination of laws which simply proves the Law of Unintended Consequences).  Combine that with a Secretary of HHS who looks at abortion as a source of tax savings and you've got a pretty chilling worldview shaping up on the left: a worldview that simply doesn't value human life.

The House Noone Built

The apologists for the President are now coming out of the woodwork regarding his "You didn't build that" quip, saying he just meant everyone has gotten a little help from friends and family to get where they are. Obviously, framed this way, it is very difficult to argue with such a blanket and relatively vanilla observation. Of course, to believe that you have to ignore not only what he said, but also the context in which he said it. Frankly, he said that if you have a successful business, it's not because of your own effort or attributes, but because government programs and infrastructure made it all possible.

The problem with this line of thinking is that government is overhead. It's a cost center, not a profit center. As James Madison said, "If men were angels, no government would be necessary" and we could reduce this cost to zero. However, that's not the case. We need a certain minimum level of government in order to create an environment conducive to economic growth (as illustrated by the Armey Curve).

Allow me to illustrate. A manufacturing company has an HR department, to handle the various needs involved in managing their people. If the company wanted to increase its productivity, it would not double the staffing in its HR department. If anything, they would look for ways to cut the HR budget to the minimum necessary to still have a well-managed workforce.

If a farmer wants to grow wheat, he needs fertile soil to create the right environment for growth. But at some point he actually needs to sow and water and harvest. Beyond a certain point, more soil doesn't help.

If I open a business in a shopping complex, can the landlord claim that I didn't build my business? Can he claim that if it wasn't for him, I wouldn't have a business? Can he lay claim to a percentage of my profits above and beyond whatever rent I've agreed to pay him? Can the business next door to mine claim a percentage of my profits because his rent helps pay for the entire building? The landlord may have created the conditions, but without my efforts it would just be an empty building. Unfortunately, today's political climate has made that a very common sight.

So, although we may derive benefits from government infrastructure, it doesn't produce growth by itself and actually crowds out alternative investments . Although other people have paid for it, we've paid for it too in the same taxes and fees that everyone else has. What no one else has shared is the risk I've taken, the hard work and perseverance I've applied, or the vision and the will to build. For two hundred years we've been the freest nation in the world and as a result have experienced the greatest boom of economic growth and technological innovation. Politicians didn't build that; the People did.

Results Matter

In the Pixar movie Cars, the protagonist is told he must "turn right to go left." Needless to say, he ridicules the idea. It's absurd, goes against what he already "knows" to be true and is contrary to prevailing wisdom. However, he discovers that under certain conditions (a hard off-road turn) this is exactly what he has to do. The advice was counter-intuitive but the results proved it out in the end.

This is a remarkable analogy to the theme in Thomas Sowell's book The Vision of the Anointed. The planners, controllers, organizers and statists (ie: the anointed) have a prevailing vision whose rightness is its own justification, regardless of and often in spite of actual results. It represents a disconnect from reality and a denial of the fact that actions, not intentions, have consequences.

You can hear it today in the rhetoric that advocates more social programs and greater government spending, not because it works (it hasn't) but because "we know it's the right thing to do."
But just like Cars, sometimes ignoring world lessons in favor of what you "know" to be true just leads you to fly straight off a cliff.

Leviathan Unchained

"If Congress can do whatever in their discretion can be done by money, and will promote the General Welfare, the Government is no longer a limited one, possessing enumerated powers, but an indefinite one...." -- James Madison


Today's Supreme Court ruling on the Obamacare and the Individual Mandate marks a black day in our history.  The premise of the ruling is that Congress has essentially unlimited authority to levy taxes.  But when does a tax become a fine?  The ruling upholds the idea that Congress can fine you for failing to comply with any action they dictate.

Unfortunately, we started down this path a long time ago when we embraced tax exemptions for "good behavior."  By dressing it up and calling it an exemption (instead of a penalty for everyone else) we swallowed the poisoned pill and made it part of our tax code.

Our Founding Father recognized the threat posed by the power to tax, and placed limits on it to ensure it would be used soley to collect revenue, not to enslave the populace.  Direct taxes had to be uniformly distributed, without picking favorites: "No capitation, or other direct, Tax shall be laid, unless in Proportion to the Census."

That protection was struck down by the 16th Amendment, and the tax code has been a tool for social engineering and behavior modification ever since.

So now we face a future of fines whenever we fail to submit.  Life, Liberty or Property: Pick two.

The Laws of Supply and Demand

"Profits don't create jobs, demand creates jobs!" is the mantra I've been hearing lately to justify Keyensian intervention in the market. The flaw of course is that in a market free of political meddling, the two are inseperable.
Profits are the signal and incentive to increase production to meet demand. Profit indicates consumer preference for using scarce resources in one manner verses alternatives. People will enter or reinvest in a market so long as they see a profit opportunity. Eventually demand is met, prices and profits decrease and the niche stablizes (it matures from a "growth" industry to a "value" industry).
Interfering with those signals leads to distortions that hurt the consumer. If you artificially depress profits, there is no incentive to increase production and you end up with shortages, which then leads to calls for gov't incentives (witness the effect of Medicare price controls on people's willingness to become doctors).
If you artificially increase profits, you end up with surpluses of the wrong things, thus diverting scarce resources from other things that you or I would really want (for example, the Volt which was artificially incented yet isn't any better than other much more efficiently made and cheaper "green" cars; and now it looks like Uncle Sam will have to buy the excess with our taxes).
As Adam Smith pointed out, profits in a free market are transitory but vital hints about what to produce (or what degree to major in). Government depressing profits hurts us, and government protecting profits hurts us. As in many cases, the best approach would be one of laisse faire. You and I should make the decisions that affect our own lives, not politicians in Washington.

To Support and Defend

Justice Ruth Bader Ginsberg's recent commentary on the Constitution has some people questioning her ability to uphold her oath, and with good reason.  "I would not look to the U.S. Constitution, if I were drafting a constitution in the year 2012." Instead "I might look at the constitution of South Africa."

A quick glance at the South African Constitution highlights some glaring differences from our own Constitution; differences which also highlight Ginsberg's unabashed political leanings.  South Africa guarantees its people food, water, education, housing and healthcare (among other things).  South African politicians are then charted to achieve these goals using their available resources.

The South African Constitution holds to the idea of "positive rights" which the left embraces and which FDR pushed for without our own government.  The key problem of course is that the government itself has nothing which it hasn't first taken from someone else.  In order to guarantee something to someone, you must first be willing to force someone to provide it, without regard for their personal liberty.

Frederic Bastiat succinctly describes the conflict between our Bill of Rights and FDR's "2nd Bill of Rights":

"The second half of your program will destroy the first."

In fact, it is impossible for me to separate the word fraternity from the word voluntary. I cannot possibly understand how fraternity can be legally enforced without liberty being legally destroyed, and thus justice being legally trampled underfoot.

Legal plunder has two roots: One of them, as I have said before, is in human greed; the other is in false philanthropy.

In fact, in order to enforce any sort of positive rights, you must first strip one group of their rights in order to satisfy another group, thereby failing the test of universality and putting to lie the idea of Equality before the law.  In doing so, the left clearly presupposes that some people are more equal than others.

Our Founding Fathers wrote the Constitution with an eye towards limiting government's potential for abuse, and by safeguarding Liberty they ensured an abundance of prosperity to their decedents.  If however we choose to sacrifice Liberty in order to gain material security, we will lose both.

The Politics of Bribery

"Many states believe there is little choice involved when the federal government has the power to tax citizens in the states, returning that money only if states comply with ever-increasing... mandates."

And that right there is the problem in a nutshell.  The Founding Fathers were clear that the Federal government would only have the power to spend money on the common defense and the general welfare and that it would only be able to raise funds expressly to pay those bills.  "General welfare" meaning for the benefit of all; not the majority, not the special interests, but for all.

Unfortunately, the result has been a government of good intentions, spending money on whatever program will help a politician curry votes.  Ironically if everyone plays beggar-thy-neighbor politics, we all get equally robbed!  The only difference is that people tend to be irresponsible with "free" money, with the predictable result of blossoming Federal spending.

The State governments themselves are even worse about helping themselves to the public trough; they get to fund programs without appearing responsible for the taxes.

The 16th Amendment allowed the Federal government to reach past the States, directly into the pockets of the citizens and then use that money to bribe the States into compliance with any number of unconstitutional mandates claiming it was just using the authority to "tax."  Fortunately more and more States are realizing that there is no such things as a free lunch and that these dollars come at a cost; to our freedom and our sovereignty.  However many people are already hooked, and the withdrawel symptoms won't be painless.  Let's hope we have the fortitude to stick it out; otherwise the States will continue to be puppets of the Feds instead of the check-and-balance they were intended to be.

Taxation With Representation

“No Taxation without Representation!” is one of the commonly referred to causes of the War for Independence.  This cry was largely rooted in John Locke’s assertion that a government forfeited its legitimacy when “any one shall claim a power to lay and levy taxes on the people, by his own authority, and without such consent of the people, he thereby invades the fundamental law of property, and subverts the end of government."

The issue of taxes and spending remained central to the political discussion after the war.  The Articles of Confederacy were purposefully weak in their ability to raise funds, to the point where it was difficult to discharge the debts incurred by the war itself.  Even so, the Constitution originally stated that "No Capitation, or other direct, Tax shall be laid, unless in proportion to the Census" and even then the funds could only be spent "to pay the Debts and provide for the... general Welfare of the United States."

It stands that the best kind of government spending is that which is approved by the majority of the people, with the costs equally shouldered across the people, and the benefits borne by the general people as a whole.

Any time one of those three criteria is compromised, the authority to tax and spend becomes perverted.

Less preferred, but still acceptable is when the benefits are reaped by a few, but those few bear the lion’s share of the costs.  User pays.  This is rare, however, because why would someone who had the ability and desire to pay for something decide to launder their money through the bureaucracy to do so?

No, in most cases special interests want to reap the benefit while forcing others to shoulder the costs.  When the tax-and-spend power of government is no longer paid by the People on behalf of the People, it becomes tantamount to theft by majority (in the case of popular support) or theft by the powerful (in the case of a small but politically influential group).  If history is any indicator, abusing the power of taxation eventually stirs the ire of the populace and undermines the very legitimacy of the government.

You Gotta Live

The "cost of living increase" was a brilliant scam to disguise the insidious effects of inflation.  The powers that be convinced the masses that each year they had to work harder and get bigger raises just to maintain their standard of living.
That flies in the face of common sense. Every year we come up with more efficient ways to build better products. Technology improves, allowing us to make more goods more quickly while consuming fewer resources and taking less working hours. According to the laws of supply and demand that means the consumer should enjoy more and cheaper goods.
That was the result during the agricultural revolution and the industrial revolution, where food and goods became cheaper and more plentiful. Why is that not the case today? Because the government intercepts these gains.  By printing more money to finance deficit spending, they create inflationary pressure causing prices to rise.
In some cases like the tech field, the downward pressure of innovation is able to overcome inflationary pressures, but in other areas that are more stagnant (notably oil and food) we see prices continue to rise.
This is not the "cost of living" it is the cost of inflation created by government debt and the working class bears the burden most of all. The sooner people realize there is no free lunch the sooner we can work to change this pattern and return the fruits of progress to the People.

The Happy Fantasy

A common mantra that I’ve heard from my left-leaning friends is that a) everyone should be able to earn a “decent” living doing whatever they enjoy and b) that everyone deserves to have a “decent” car, house, clothes, vacation, etc.  Blame touchy-feely high school guidance counselors for the first fallacy, which has directly led to the disillusioned masses of psychology, fine arts and literature majors populating the Occupy Wall Street movement.

The hard facts of life are that not everyone can do what they enjoy most for a living.  Otherwise there would be far more rappers, football players and fly fishermen than we would know what to do with.  Meanwhile, sewers would go uninspected, crime scenes would go uncleaned and garbage would collect by curbside.  Seriously.  If it weren’t for an appealing paycheck (or a lack of other opportunities), who would wake up in the morning and say “Gee, I really want to muck through people’s feces today”?  Similarly, jobs that are stepping stones to bigger and better things would also be avoided entirely.  Intern?  Nope, I want to be CEO.  Apprentice?  Just let me rig that wiring.  Draftsman?  I’m ready to build skyscrapers.  If you enjoy your work, consider it a bonus.  Otherwise, many of us go to work each day at a job we don’t mind doing (too much) so that we can do the things we enjoy (such as fly fishing).

The second fallacy lies in the varying standards of what constitutes “decent.”  If you ask ten people to describe a decent car, you’re bound to get twelve answers.  And there are folks who are willing to trade a less than decent car in exchange for, say, vacationing in France every year.  As any marketing major will tell you, tastes vary widely across the spectrum, because value (like beauty) is truly in the eye of the beholder.  Systems that try to meet everyone’s needs with a one-size-fits-all approach generally do it badly, leaving no one satisfied.  As the saying goes Comrade, it comes in two sizes: too big or too small.

The endless summer, where everyone lives in a mansion and gets paid to surf and look good, exists only in imaginations and fantasies.

 

Faust's Bargain: Charity and Government

The latest edition of Columbia includes an article by Alton J. Pelowski entitled "In Defense of Life, Love and Freedom" describing the problems when a private charity becomes dependent on public funding.  Similarly, Catholic Charities in Illinois are closing their adoption services because of new requirements to change their screening criteria to accept gay couples in order to receive government funding.

Although I empathize with their distress, American Catholics who have traditionally supported government-sponsored social programs have only themselves to blame.  Non-profit organizations who have been happy to trade arduous fund-raising for siphoning tax revenues are likewise guilty.

"Free money" is always hard to resist, but there's always a catch.  Once you've accepted the money you lose the freedom to run your organization as you like (which is why some organizations like Hillsdale College eschew public funding).

Indeed, the Catholic charities are faced with a dilemma of their own making.  If they refuse to  compromise their principles for money, they must either close their doors or return to the days when they relied on their own voluntary fund-raising efforts.  The latter option is obviously more difficult; a consequence of diverting funds from private donations to publicly mandated tax revenue.

Instead it looks like they're taking the easy option: quitting.

Gift Cards and Federal Notes for the Holidays

With little fanfare in the US, another pair of countries have announced another move away from the dollar.  China and Japan will no longer use dollars to transact between the two countries.  This follows a similar agreement between China and Russia as well as talks developing with India and Brazil.  Smaller but still notable countries making noise along those lines also include Vietnam, Qatar and Iran.  So why should we care here in America?  To understand the problem, consider the sale of Holiday gift cards...

Gift cards (like rebates) work because the merchants that issue them expect a certain percentage to never be redeemed.  Thus, they can bring in cash and never worry about giving a portion of their customers anything in return.  To crunch the numbers, merchants have made $41 billion in "free money" by selling gift cards.

This is small potatoes though.  Uncle Sam has "sold" $4.45 TRILLION to foreign countries, in exchange for real goods and services, with the hope that they never redeem their gift certificates / Federal Reserve Notes.  Three of the biggest holders of those gift cards?  You guessed it: Brazil, China and Japan.

We're still pretty safe for the immediate future, but places that need dollars to do business are slowly becoming fewer.  Eventually places that *want* dollars will also diminish.  And when that happens, everyone who has dollars is going to come shopping at the US of A to redeem their coupons, competing with domestic demand and inflating prices through the roof.

Freedom in the Market

When people say “Capitalism has failed,” mentally replace “Capitalism” with “Freedom” and then consider what they’re saying. After all, capitalist was the label used by Marxists to describe those who believed in the free market. Even “free market” is a misleading term because it conjures up an image of some separate entity acting on its own without our involvement. It would be more accurate to describe it as the freedom to act within the market, i.e.: the principle of free exchange.

Capitalism is just another word for economic freedom.

Of course those calling for the eradication of capitalism aren’t asking to give up their own freedom. They still want the right to negotiate their wages and purchase (or not purchase) products as they see fit. What they really want is the ability to negotiate other peoples wages, force others to agree to their desires, and split the tab for things that they want to have but don’t want to pay for. They’re eager to see shackles placed on others, not realizing they may wind up wearing them in the end.

“He that would make his own liberty secure must guard even his enemy from oppression; for if he violates this duty he establishes a precedent that will reach to himself.” - Thomas Paine

Government Motors Wins Again

Let's recap, shall we?  Taxpayers were tapped to provide bailout money to cover for GM's poor decision making.  Then bondholders and pensioners were pinched to cover for GM's unsustainable union contracts (and potentially as a political "thank you" from the previous election).  Then taxpayers were hit up again to subsidize the Volt program specifically, whether they wanted to pay for an electric car or not.  After all of this, we wind up with a car that still costs about $10k more than its target market and randomly catches on fire.  Da Komrade, the system is working fine!

http://www.bloomberg.com/news/2011-11-29/gm-s-volt-battery-fires-threaten-to-knock-moon-shot-off-target.html

Freedom of Consent

We have to remember that the people in government are just like people in the corporate world.  They're ultimately self-interested.  They need to feel the connection between their actions and their consequences to make good decisions.  The difference is that we've entrusted them with coersive power; the authority to use force to compel us to do or not do certain things.  And power once ceded is rarely given back.  We really ought to remember that before inviting them into every aspect of our daily lives:

The problem... is that government is no different from any other organization in society -- it seeks its own aggrandizement. AT&T, General Motors, and Microsoft would love to have world monopolies, controlling all the resources and expanding into every corner of people's lives. But they are limited by competition, the dynamics of the marketplace, and the need to win people's consent in order to market their products.

Government is different. It expands by fiat, through legislation, through taking advantage of emergencies, and by declaring that private entities can't be trusted and government intervention is necessary. Most of all it grows by raising taxes and hiring more and more people so that soon its voter base approaches a majority of the electorate.
http://spectator.org/archives/2011/09/26/the-moochers-credo/

Let's face it.  It's easier to convince a majority of 435 people in Washington D.C. than it is to try to win the consent of millions of consumers exercising their freedom in the market.