Redistribution Doesn't Reduce Causes of Poverty

Harvard University Professor Jeffrey Miron: "The poverty rate declined significantly between 1959 and 1964 as the overall economy grew, but this was before the launch of President Lyndon Johnson's War on Poverty (and therefore before the enactment of Medicaid and Medicare, two of the largest anti-poverty programs in existence today)..."

Miron continues: "Between 1966 and 2009, the poverty rate fluctuated with the business cycle but showed little downward trend, even as anti-poverty spending grew by a factor of six in real terms. In other words, our anti-poverty programs have been implemented at enormous and ever-increasing cost — and it is not clear that they have done much to reduce the rate of poverty."

The Progressive Obsession with Lording over Us

Below is a version of Donald J. Boudreaux's response to a NY Times book review that I modified to reflect my personal view on progressive elitism and authoritarianism. It differs slightly from the original authored by Mr. Boudreaux, but he articulates it very well.

A popular theme among progressives is that they, in contrast to their mindless Cro-Magnon opposites, overflow with ideas. Progressives see their theories and insights as highly intellectual and enlightened.

But these ideas are almost exclusively about how other people should live their lives. These are ideas about how one group of people (the politically successful) should engineer everyone else’s contracts, social relations, diets, habits, and even moral sentiments.

Put differently, modern progressive ideas are about replacing an unimaginably large multitude of diverse and competing ideas – each one individually chosen, practiced, assessed, and modified in light of what F.A. Hayek called “the particular circumstances of time and place” – with a relatively paltry set of ‘Big Ideas’ that are politically selected, centrally imposed, and enforced not by the natural give, take, and compromise of the everyday interactions of millions of people but, rather, by the simple notion that those with the power of government are anointed to lord over the rest of us.

Growth in Government Spending & Debt Fueled "Recovery"

In Why the Depression is Ongoing, we see charts showing the huge growth in government spending due to the Great Society welfare state programs. We also see that any economic "recovery" being claimed in the mainstream media news sources is due mostly to government spending with borrowed money.

It's The Social Programs, Not Military, That's Bankrupting Us

Gee, where do you think politicians started the US down the road to bankruptcy?

Five Decades of Federal Spending

The chart below shows federal spending in three component parts over the last five decades.

Did FDR Save Capitalism?

Fans of Franklin D. Rooselvelt claim that big government was needed during the Great Depression to save capitalism. That's analogous to the fire department setting your house ablaze, then claiming they saved half of it.

The economy of the late 1920s had its share of speculation, market bubbles, and other problems, as economies have had since the dawn of civilization. But let's see what the Hoover and FDR governments did about it:

They started a trade war with Smoot-Hawley (Hoover), raised the lowest income tax rate from 0.5% to 4%, raised the highest income tax rate from 25% to 63% (Hoover) then 79% (FDR), raised the corporate tax from 11% to 15%, added a 27% tax on undistributed profits, raised numerous excise taxes, raised the inheritance/estate tax from 20% to 70%, instituted a new 2% employer/employee payroll tax, and much, much more. The effect of the economy was crushing.

The Fed manipulated the money, causing deflation, then later imposed increased reserve requirements on banks leading to lower lending. FDR screwed up markets through his disastrous agricultural policies and subsidies, and his government-imposed industry cartels. FDR also gave unions way too much power and forced up wages, making unemployment worse. Other policies forced up prices, which is the opposite of what's needed in a downturn.

And don't forget the mindlessly idiotic pig slaughter, which has parallels to Cash for Clunkers. Destroy things to artificially create demand. Let's pay half of Americans to dig holes with spoons, and the other half to fill in the holes with spoons. Full employment! Zero productivity! Totally progressive!

All those GOVERNMENT actions are big downers for the economy. Thus the government came in to fix a major problem resulting from their idiotic attempts to fix a much smaller problem. Then we're supposed to believe we needed them. Hah! This is a classic case of a government manufactured crisis.

The Nobel Peace Prize

This years Nobel Peace Prize was awarded to a teleprompter.

The New American Dream

Any able-bodied American can get good quality food, shelter, healthcare, and pocket money, without ever working, all at taxpayer expense. 

What a country!

The Great Depression and Now

There's a recent WSJ article, Taxes, Depression, and Our Current Troubles, which has some interesting parallels between now and the 1930s.  Excerpts and my commentary:

In 1930-31, during the Hoover administration and in the midst of an economic collapse, there was a very slight increase in tax rates on personal income at both the lowest and highest brackets. The corporate tax rate was also slightly increased to 12% from 11%. But beginning in 1932 the lowest personal income tax rate was raised to 4% from less than one-half of 1% while the highest rate was raised to 63% from 25%. (That's not a misprint!) The corporate rate was raised to 13.75% from 12%. All sorts of Federal excise taxes too numerous to list were raised as well. The highest inheritance tax rate was also raised in 1932 to 45% from 20% and the gift tax was reinstituted with the highest rate set at 33.5%.

But FDR did even worse:

But the tax hikes didn't stop there. In 1934, during the Roosevelt administration, the highest estate tax rate was raised to 60% from 45% and raised again to 70% in 1935. The highest gift tax rate was raised to 45% in 1934 from 33.5% in 1933 and raised again to 52.5% in 1935. The highest corporate tax rate was raised to 15% in 1936 with a surtax on undistributed profits up to 27%. In 1936 the highest personal income tax rate was raised yet again to 79% from 63%—a stifling 216% increase in four years. Finally, in 1937 a 1% employer and a 1% employee tax was placed on all wages up to $3,000.

States added to the huge tax increases.  The economic effects had to be crushing. 

From elsewhere, I looked at the 1929 stock market crash.  The market dropped from 381 (Sept 3) to 198 (Nov 13). It then recovered to 294 (Apr 17).  Thus, what happened in 1929 proper is comparable to what we've just been through.  It was only later that Hoover got things really rolling (down to 41 by 1932).  That was after he raised taxes, including higher taxes on goods due to Smoot-Hawley.  Taxing is economic friction, exactly what you don't want during an economic downturn.

So if Hoover did so wrong, which I believe he did, why do my "progressive" friends think FDR was right to do the same thing?

Inalienable Rights

The Bill of Rights doesn't actually give individuals anything. Instead, it prohibits the government from infringing on inalienable rights.

Favorite Quotes

Since this is MY blog, I've decided to keep some of MY favorite quotes here. It's an ongoing project.

The inherent vice of capitalism is the unequal sharing of blessings; the inherent virtue of socialism is the equal sharing of miseries. -- Winston Churchill

A wise and frugal government, which shall leave men free to regulate their own pursuits of industry and improvement, and shall not take from the mouth of labor the bread it has earned - this is the sum of good government. -- Thomas Jefferson

I cannot undertake to lay my finger on that article of the Constitution which granted a right to Congress of expending, on objects of benevolence, the money of their constituents. -- James Madison, Father of the Constitution

It would be thought a hard government that should tax its people one tenth part. -- Benjamin Franklin

I didn't say it would be easy, Neo. I just said it would be the truth. -- Morpheus

Among the natural rights of the colonists are these: first, a right to life; secondly, to liberty; thirdly to property; together with the right to support and defend them in the best manner they can. -- Samuel Adams

Posterity, you will never know how much it has cost my generation to preserve your freedom. I hope you will make good use of it. -- John Quincy Adams

Gentlemen may cry, Peace, Peace--but there is no peace. The war is actually begun! The next gale that sweeps from the north will bring to our ears the clash of resounding arms! Our brethren are already in the field! Why stand we here idle? What is it that gentlemen wish? What would they have? Is life so dear, or peace so sweet, as to be purchased at the price of chains and slavery? Forbid it, Almighty God! I know not what course others may take; but as for me, give me liberty or give me death! -- Patrick Henry

The moment the idea is admitted into society, that property is not as sacred as the laws of God, and that there is not a force of law and public justice to protect it, anarchy and tyranny commence. -- John Adams

The taxpayer: That's someone who works for the federal government but doesn't have to take the civil service examination. -- Ronald Reagan

The difference between genius and stupidity is that genius has its limits. -- Albert Einstein

When the government fears the people there is liberty; when the people fear the government there is tyranny. -- Thomas Jefferson

The natural progress of things is for liberty to yield and government to gain ground. -- Thomas Jefferson

You cannot bring about prosperity by discouraging thrift. You cannot strengthen the weak by weakening the strong. You cannot help little men by tearing down big men. You cannot lift the wage earner by pulling down the wage payer. You cannot help the poor by destroying the rich. You cannot establish sound security on borrowed money. You cannot further the brotherhood of man by inciting class hatred. You cannot keep out of trouble by spending more than you earn. You cannot build character and courage by destroying men's initiative and independence. And you cannot help men permanently by doing for them what they can and should do for themselves. -- William J. H. Boetcker, but commonly misattributed to Abe Lincoln

They who can give up essential liberty to obtain a little temporary safety, deserve neither liberty nor safety. – Benjamin Franklin

No One Should…

No one should lose their freedom because someone else cannot afford health care, and no one should go broke paying other people's bills.  If you agree, please post this as your Facebook status for the rest of the day.

The Kennedys and Egalitarian Force

A good friend of mine expressed his view that the Kennedy family are “givers, not takers.”  That’s only partly true, I responded. The elected Kennedys are takers of my wages. Big time. Teddy is essentially a Euro-style socialist opposed to my freedom.

What I bothers me about Ted Kennedy et al is the forced altruism inherent in egalitarian ideology. The Kennedy family has established numerous helpful private sector charities, and I've contributed to several of those myself. Good job!

But the progress of civilization is measured in freedom and individual rights, not entitlements and income redistribution. The ideological right tends to force morality on people, while the secular left tends to force their own "religion" of egalitarianism through government confiscation of the fruits of people's labor.

As none of that social engineering force is authorized by the US Constitution, it's a form of theft and oppression. So left wing forced egalitarianism is no better than right wing quasi-theocratic authoritarianism. In both cases, Americans lose their liberties. I just want to be free.

Obama Sets Back Race Relations

President Obama inappropriately injected himself into a Cambridge, MA, incident involving the local police and Obama’s friend, Professor Henry Louis Gates.  Due to race-related comments by Obama and Gates, the situation was transformed from a routine police response to a reported break-in into a race issue.

Most reports I've seen say Professor Gates behaved badly, and he pursued the policeman as he was leaving the scene. Sgt. Crowley did not take kindly to that.  The black officer accompanying Crowley agreed with the arrest. It could have been handled quietly until Obama and Gates imagined a racist angle, which made the whole thing spiral out of control. This was an ordinary police response to a reported break-in until Gates, then Obama, imagined a racist angle.

There are some calling President Obama and Professor Gates “racists” for jumping to conclusions against a white cop.  I think "racialist" is a better way to describe their controversial attitude.  They have a tendency to frame many issues in terms of race, but they're not necessarily racial bigots.  They just imagine racism where there is none. Racism in America won’t end until racialists of all skin tones let it end.

As we now know, Sgt. Crowley is an expert police trainer in racial profiling. This is only a case of racism in the imaginations of Gates and Obama, and their inappropriate behavior can only delay our path to a post-racial society. Fortunately, Obama now recognizes his huge blunder and is taking an apologetic approach. What beer did they choose?

President Obama seems to forget that he is now president, not a private citizen, but that's a competence issue, not a racial one. Obama wasn't ready for the presidency. He had rather meager political experience, almost no practical professional background, and zero executive experience coming into the job. Unfortunately, the media and political powers ordained him as “The One,” and so now he is.

President Obama has been stumbling since even before the inauguration. My 13 year old daughter is even in disbelief over his clumsiness and apparently inability to speak without a teleprompter.  Well, President Clinton had a rough first year, too, then eventually got his bearings.  Maybe President Obama will, too.

Government Burden on Small Business

I own two small retail stores and a piece of commercial property. Here's what Big Brother requires me to file: annual IRS, CA, and MA personal and business income tax returns (total of 60-90 pages); annual corporate reports; annual renewal applications for common victualler, tobacco, lottery, liquor licenses; semi-annual business fixtures excise tax; quarterly IRS, CA, and MA estimated tax payments; quarterly US and MA wage reports and unemployment reports; monthly withholding (both US and MA), sales tax, tobacco tax.

There are 3 business entities, so some of the above must be filed multiple times. Then, my tax return is so complicated, the IRS conducts mail audits at least once a year - even though I use a CPA who specializes in small business.

Is this the way to run a productive economy? I can guaranty Americans would have a far higher standard of living if we simplified this absurd system of guilty-until-proven-innocent taxation. And all that is independent of the rate of taxation.

Misrepresenting the Green Economy

In Tilting at Green Windmills, George Will shows how the Obama administration is either irrational or dishonest in promoting a “green jobs” initiative as making the US economy stronger.

[Spanish Professor] Calzada says Spain's torrential spending -- no other nation has so aggressively supported production of electricity from renewable sources -- on wind farms and other forms of alternative energy has indeed created jobs. But Calzada's report concludes that they often are temporary and have received $752,000 to $800,000 each in subsidies -- wind industry jobs cost even more, $1.4 million each. And each new job entails the loss of 2.2 other jobs that are either lost or not created in other industries because of the political allocation -- sub-optimum in terms of economic efficiency -- of capital. …Calzada says the creation of jobs in alternative energy has subtracted about 110,000 jobs from elsewhere in Spain's economy.

It would be more accurate and honest to just admit the facts:

Indeed, environmentalists with the courage of their convictions should argue that the point of such investments is to subordinate market rationality to the higher agenda of planetary salvation.

With that, voters and policy makers could better trade off the cost-benefit parameters and determine a balanced and reasonable plan for the environment and economy to coexist.

Union Tyranny

If workers have the right to form a union, then don't corporate shareholders have the right to reject the union? It seems like a huge violation of property rights to force business owners to deal with workers collectively (i.e., with socialistic force) rather than as individuals (i.e., with individual liberty).

The US should be a meritocracy, not a land of entitlement. If unions behave and work to improve sales, then companies will want to deal with them. Otherwise, unions will make all companies end up like GM and Chrysler.

California's Progressive Tax Problem

Part of California's tax revenue problem is due to the highly progressive nature of its tax code. When the economy slows or shrinks, high-income taxpayers get little or no income from bonuses, commissions, and capital gains on stocks and real estate. Tax revenues sink accordingly. Almost no one cries for the rich, and I'm not saying we should, but a tax system based on soaking the rich leaves you high and dry during economic downturns.

It would be more equitable and stable if all California workers paid a similar percentage of income tax, with capital gains taxed at the same rate. In addition to providing a more stable tax base, it would be fairer to have voters share the burden of any tax increases or rewards of any tax cuts. You shouldn't be able to vote for a tax increase on others unless you're willing to pay a proportional share yourself.

A proportional (i.e., "flat") tax is a reasonable compromise between what is fair and what is practical. However, a person's "fair share" would ideally be based on an average individual's burden / impact to society. There would be a head tax (i.e., per person), plus some taxation based on how much impact you have on roads, schools, public safety, etc.

That's what I'd call a "fair share" of the tax burden, although I make no claim such a tax system is practical. Poor people are unable to pay their "fair share." I just don't think it's "fair" to blame middle class and rich people for that; nor is it "fair" to say middle class and rich people must subsidize the poor through highly progressive tax schemes.

Tax Reform

My proposal for reforming the federal tax code:

1) The entire federal tax code shall fit on one side of a letter size 8.5 x 11 inch paper with Arial 10 (or Times Roman 12) font.

2) An individual tax return shall fit on one side of a 3 x 5 inch postcard with the same font.

3) A tax return shall be on an individual basis, i.e., no married filing jointly or similar collectivist filings.

4) There shall be no corporate income tax.

5) The tax rate shall be the same for all individuals, with no zero-bracket amount and no exempt income.

That should result in massive layoffs at the IRS -- and a better life for all productive Americans.

Conservatives are freedom-friendly; Liberals, not so much

A Rasmussen poll says:

59%of U.S. voters agreed with Ronald Reagan that “government is not the solution to our problem; government is the problem.” ... Only 28% disagree, and 14% are not sure.

Middle class people are with us:

Middle-income voters are more likely to agree with Reagan than those who earn less than $20,000 or more than $100,000.

When looking for help from non-libertarians, we're much more likely to get support from conservatives than liberals, who basically love big government:

Political liberals strongly reject Reagan’s view by a 60% to 28% margin. Forty-seven percent (47%) of moderates agree, while 32% do not. Conservatives are overwhelmingly supportive.

Also interesting:

Although the Republican Party in Washington veered away from Reagan’s approach in the years since the 40th president left office, 83% of Republican voters around the country still agree with him. So do 40% of Democrats and 60% of those not affiliated with either major party.

See the full story for more interesting data. But libertarians should stop being mean to conservatives. They believe in freedom, while liberals do not.

FDR and the Great Depression Myth

Let's dispel the myth that President Franklin D. Roosevelt saved America from the Depression.  The Depression would not have been so "Great" if not for bad policies from FDR and Herbert Hoover before him.

The New Deal Didn’t Always Work, Either

By TYLER COWEN

MANY people are looking back to the Great Depression and the New Deal for answers to our problems. But while we can learn important lessons from this period, they’re not always the ones taught in school.

The traditional story is that President Franklin D. Roosevelt rescued capitalism by resorting to extensive government intervention; the truth is that Roosevelt changed course from year to year, trying a mix of policies, some good and some bad.

<snip>

In short, expansionary monetary policy and wartime orders from Europe, not the well-known policies of the New Deal, did the most to make the American economy climb out of the Depression. Our current downturn will end as well someday, and, as in the ’30s, the recovery will probably come for reasons that have little to do with most policy initiatives.

Tyler Cowen is a professor of economics at George Mason University.