novatownhall blog

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Browsing Posts in Economics

It’s getting a bit stale now, having been released in January of 2015, but I am sure they will come out with a new steaming pile soon. Anyway, allow me to present Who Pays? (5th Edition) A Distributional Analysis of the Tax Systems in All Fifty States. Even the title is wrong, since they include the District of Columbia, but I digress.

While complaining, as progs are wont to do, that the State tax systems are not “fair,” they never actually bother to define the word FAIR. Be that as it may, when we get down to the section on real estate taxes, we have this:

Renters do not escape property taxes. A portion of the property tax on rental property is passed through to renters in the form of higher rent — and these taxes represent a much larger share of income for poor families than for the wealthy. This adds to the regressivity of the property tax.

This is quite reasonable. If the property-owner is to make a profit, he needs to pass his tax burden on to his renters. But the authors then follow up with this:

The business tax component reduces the regressivity of the property tax as it generally falls on owners of capital….

That’s right. Somehow, one type of business (rental property) is able to pass the cost of taxes to its customers (renters), but other types, such as retailers and manufacturers, cannot. This simply makes no sense.

The authors want to emphasize their assertion that lower-income people pay a higher percentage of their income to State and local taxes than higher-income people do. To do that, they say that property taxes on rental property are passed through to the renters. However, if they admit that retail and manufacturing business can do the same, and pass their property taxes on to their customers, then they must also admit that businesses can also pass on to their customers the cost of corporate income taxes, and thus the corporate income taxes are as regressive as sales taxes are. This they cannot do.

This really is one of the dumbest articles I’ve ever seen from “The Economist”, and that includes the one where they neglected the fact that twice a year one gets THREE bi-weekly paychecks in a month!

Germany has a trade surplus, and according to “The Economist”, this is a Bad Thing:

For a large economy at full employment to run a current-account surplus in excess of 8% of GDP puts unreasonable strain on the global trading system. To offset such surpluses and sustain enough aggregate demand to keep people in work, the rest of the world must borrow and spend with equal abandon. In some countries, notably Italy, Greece and Spain, persistent deficits eventually led to crises. Their subsequent shift towards surplus came at a heavy cost. The enduring savings glut in northern Europe has made the adjustment needlessly painful.

Germany did not force Italy, Greece, and Spain to spend more than they made. Germany did not force Italy, Greece, and Spain to borrow money to buy what they could not afford. They chose to do that all on their own. If one group of people, collectively, spend more than they make, then some other group must make more than they spend.

Progs like to push the Minimum Wage as a way to reduce income inequality:

“It will reduce inequality. The question is how much and for whom. It’s not going to have a huge impact, but that’s because there’s no politically feasible policy that would have a big impact,” said poverty and fiscal expert Isabel Sawhill, co-director of the Center on Children and Families at the Brookings Institution.

As the above article points out, increasing the Minimum Wage would not narrow the gap between the “one-percenters” and those making the Minimum Wage:

Consider the 5-figure paycheck of a janitor versus the 8-figure salary of a CEO. Raising the minimum wage to $10.10 from $7.25, as a leading proposal in Congress would do, wouldn’t narrow that chasm.

There’s also a big gap between those making 6-figures and the bazillionaires at the very top. A higher minimum wage can’t touch that.

What a higher Minimum Wage will do is tilt the balance between labor and automation in favor of automation. If the cost of hiring a teenager to sweep the floor gets too high, the owner will just buy a Roomba. On larger scales, except for Oregon and New Jersey, you just don’t see full-service gasoline stations any more. The Minimum Wage is too high to hire grease-monkeys. There are self-checkouts now in major grocery stores. Baggers? Fuggetaboutit.

The paradox is, the higher Minimum Wage goes, the higher productivity goes. Machines replace manual labor, so the productivity per remaining worker increases. Of course, the remaining workers do not see any commensurate increase in their wages. Why should he? He’s not the one putting his money down to buy the machines. The owners are. If a plowman could plow one acre a day walking behind a mule, and his employer buys a tractor with which he can plow ten acres a day sitting down, will his employer pay him ten times as much? Of course not. He might even pay less, because the work is not as difficult.

The result of a higher Minimum Wage, then, is fewer people employed and higher productivity, with the benefits of the higher productivity going to the owners.

Who are the owners?

The one-percenters.

French Economist Thomas Picketty has published a new tome touted by the left entitled Capital in the Twenty-First Century.  I picked up this book (downloaded the Kindle version, actually) because I simply could not believe what the progs were saying about it, which is that Picketty claims that, if the average return on capital (r) exceeds the rate of growth of the economy (g), then wealth inequality increases.

I read this and said to myself, “Self, these fool progs obviously cannot understand what this man is talking about.  It is obvious that he must mean the growth in the valuation of the economy; that is, of all the capital goods in the economy.”  This is, of course, quite obvious.  If the average annual return on capital investments is 5%, but the total valuation of the capital of the economy increases 6% per year, then someone besides the original investors must own that newly created 1%.  And if the total valuation of all the goods in the economy only goes up 4%, then the investors must be getting their extra 1% from someone else, and wealth inequality will increase.

Alas, the progs were right, and Picketty’s hypothesis, which they swallowed hook, line, and sinker, is a total dud.  He really is using the wrong growth rate for comparison.

A simple example can illustrate the problem.  Let us assume that economic output (GDP) does not grow from one year to the next.  But the economy does still have output.  It is still producing durable goods — cars, televisions, houses, etc.  If the production of those goods is greater than the depreciation of existing goods (cars, televisions, and houses eventually wear out and are replaced), then the total valuation of the goods in the country increases.  If that valuation increases more than the return on the capital invested to create them, then wealth inequality must decrease, even with no growth in output.

Still, Picketty’s tome is valuable for the data it presents.  It will also be used as a tool for the progs to argue for a wealth tax (as Picketty recommends).  Thus, the work is important because one must understand its premise, the data it presents, and the flaw in Picketty’s logic, so that one can successfully counter the arguments the progs will make based on this work.  Thus, I will endeavor to write several posts on this book, one section at a time.

A government “fix” is like “fixing” a cat — it’s never quite right afterwards.

Well, the bean-counters at the Social Security Administration decided it was time for a Cost-of-Living adjustment (COLA) for beneficiaries.  There wasn’t one last year.  No inflation, they said.  So the great adjustment for this year is 0.3% — about $4 per month for the average recipient.  That’s one extra Big Mac per month.

Meanwhile, the Social Security Wage Base will go up 7.34%, from $118,500 to $127,200.  How does that work?

Simple — they just use different calculations.  The benefits are increased by the inflation rate, and the wage base (when there is a COLA) is increased based on the Average Wage Index.  Isn’t that cute?

Well, it turns out that the Wage Base has increased 35% over the last twelve years, but the Cost-of-Living Adjustment has only given beneficiaries a 22% increase.

Does the word BOHICA mean anything to you?

Let me just put a few things out there. We have 3 candidates on the Dem side running for President: an old “white” socialist, an old “white” criminal hag, and an aging “white” shirtless liberal. First off, where are there any candidates of “color”? This party touts that they are for those of “color” (being the racists that they are) yet they don’t have any candidates to stand for their own “race”. Oh, that’s right. They already burnt that candle on the present guy. Yeah, that worked out well. Anyway, why is there any following for a corrupt, traitorous, incompetent criminal as Clinton? By the same token, how can a socialist, which is a theology entirely opposite of our capitalist system, garner so much support? And a tax and spend liberal that has had most signed bills on taxes reversed in his state because it hurt the state and its people. Young, ignorant voters is why. I will say no more than it is a failing of the public education system that either teaches the Constitution incorrectly or not at all. If we require aliens to have a working knowledge of our Constitution to become citizens, why don’t we absolutely require it of our own citizens? Despicable.

We have a rouge President and government that has done everything possible to circumvent their duties to uphold the Constitution of the United States. The citizens are upset and we are seeing many converts (usually happens when you hit people in their wallets or take away their livelihoods). On top of that you have an unwilling Congress that throws up it hands and says “what can we do?”. First the GOP needed the House and they got that. Nothing happened because they said they needed the Senate. So then they got that but still nothing happened and the next excuse was “we need the Presidency”. The GOP is scared. They laid on their backs and said no impeachment. The laid on their backs and said no government shutdown. They never held back monies for egregious executive orders or even healthcare that they never got a say-so in. Rather, they gave all the monies requested for this rogue government, biding their time for a sunnier sky. These clowns are as bad as what the Dems are and, as the Dems have shown the way to be corrupt, so goes these “establishment” types.

And the citizens are pissed. At least the ones that are astute to how this government should run, knowledge of the Constitution, and an understanding that they are being lied to at every turn. This is what I would consider the “perfect storm” for a conservative candidate and we have many in the race. The GOP used to be the party of conservatism but it has been continually corrupted for decades and those that are conservative are scorned at every turn. We have true conservatives (or the best we have seen in a very long time) yet there is a wild card……Trump. I stated before that I like what Trump was doing in “playing” on those issues that strike a chord with the people. But Trump is no conservative and never will be. The National Review Gave that a spin but this was nothing new to anyone that could see through this carney barker. He and Ted Cruz have been civil when Trump has been trashing all the other candidates until, of course, Trump was taking “second place” in the Iowa caucus, the first caucus to come. In an interview with CNN Trump talks about how nasty Cruz is and that no one likes him or can get along with him. Trump is barking and his lead soars past Cruz. Why? The same reason that anyone wants to vote for the idiots on the Dem side. People just refuse to do their homework. The first and BEST chance in a long, long time to take the Presidency and, possibly, get the GOP back to its roots and Trump is the leader. Imagine that. And he can deal with anyone and he can deal with the Dems cause Pelosi and Reid (who won’t be around, thank goodness) and Schumar and others like him, and he can get deals done. What deals? If the GOP has majority in the House, the Senate and take the Presidency, the Dems are no longer a factor. There are NO DEALS TO MAKE! So is he going to deal with foreign governments? What deals can he make? Yes, I consider the government as a business; a non-profit business. It needs to run as efficiently at with the least amount of people as possible. A business savvy individual would do alright I guess but isn’t that what picking the right people in the cabinet are for? Isn’t it better to have an individual who knows law and the Constitution (not some fraud from Harvard who says he teaches Constitutional law and then circumvents those laws) rather than someone who knows how to make a buck and screw people? I feel that this opportunity to change America back to a nation of values and principles will be lost on nothing more than people being sheep going to the slaughter yet once again. All I can hope is that people get there heads out of their ass so that they may see the “epiphany” necessary to keep from going down the whirlpool of another toilet flush.

In today’s world, a mob of outraged “social justice warriors” can get a person fired for the most inane of statements. The latest pound of flesh came from the President of ‘Mizzou’. However, his resignation is not enough. They are also demanding that he admit his “white privilege”. They also demand MORE black students – in spite of the fact that blacks score lowest on SAT/ACT.

As a nation, we have spent billions of dollars trying to help blacks erase the “education gap”, yet we reach this nadir of social justice mobs where everyone says that we are “racist”.

We spent billions on Head Start. It didn’t work.

Schools were integrated. That didn’t work.

Black schools with white teachers didn’t work.

Black schools with black teachers didn’t work.

Free computers and iPads didn’t work.

Huge private grants/gifts (e.g., Mark Zuckerberg, Bill Gates) didn’t work.

Entire school systems of blacks run by blacks and given MORE money per student than any other system didn’t work (see: Washington, DC).

So, it must be “white privilege” and racism! Tests are biased. Detroit and Baltimore are crime ridden and largely illiterate because of white privilege and the legacy of slavery! So let’s teach them to resent whites. Let’s teach that to young people! Yes, let’s teach that looting and rioting are “rebellion”. Let’s transform world class universities from centers of learning into “social justice” mad houses that preach myth and debauchery. There were students holding signs stating that they were “liberating” the campus – as if the campus were under military occupation. All would be good and right, if only more people like Sharpton were running the nation! For crying out loud, we actually have Presidential candidates pandering to the hooligans of the “Black Lives Matter” movement!

On top of that, we are being flooded with people from third world nations, and this is further changing the nature of our nation. Social atomization has encouraged short term time orientation, distrust, and corruption, which lead to social decay. And while this immigration flood is happening, jobs are being eliminated by automation. So we are importing MORE labor while simultaneously eliminating jobs. In what world does this make sense?

The ‘barbarians’ are not at the gate. They are in the town center!

How long can we hold the lid on this before it completely explodes? Another decade? 15 years?

Are we to continue to tolerate this social deterioration and intermittent rioting as preferable in attempts to appease them? Are we to continue to temporize, hold the lid on, and let our children worry about the larger ramifications later. Meanwhile, no one ever tells them the truth. Heck, telling the truth is all but banned in the mainstream. All the problems I listed above are blamed on “white privilege” as a given. So, the younger generations of blacks get angrier and more entitled, because they are taught to be angry and entitled. Young blacks feel they have the moral right to intimidate whites. They are taught that they can do no wrong and that whites can do nothing right. Heck, they are taught that “they” built this country. And they are taught this by leftist whites!

See this article by Thomas Sowell for more good reading on this topic:

Black Mobs and the Coming Race War by Thomas Sowell