Raising Taxes on the Rich Won’t Fix a Thing, Mr. Reich Wednesday, Jun 20 2012 

I stumbled upon a video last week from Political “Economist” Robert Reich where he discussed the proposal of raising taxes on the richest Americans:

In this video, Reich outlines 3 points on why taxes should be raised on the rich:

  1. To fill in the gaps of budget deficits;
  2. Top tax rates are at historic lows, meaning that the rich aren’t “paying enough” like they were in the past; And
  3.  They can afford it.

The whole time I was listening to the spew of envy for the rich and the “fair share” talking point, I was already putting together mental rebuttals against these points. I would actually love to take the time to address all 3 of these points individually with some decent detail.

The first point of the video, Reich argues that we have major federal budget deficits because the rich do not pay the sufficient taxes to pay for the ever-numerous government services. Furthermore, he makes the assertion that if the rich do not pay more in taxes, then the middle and lower class Americans will have to pay more in taxes to make up for the revenue funding. I would like to turn the attention to the budget deficits issues first off. Reich’s claim is that we have the deficits that we do because of insufficient revenue intake from the rich, yet, he does not even take into account or even mentions the government spending factor. Government spending has dramatically increased overtime since the federal debt and deficits became a major issue. The Heritage Foundation compiled statistical data from the US Census Bureau and Congressional Budget Office of federal spending per household from 1965 to the present day. Since 1965, federal spending per household has shot up from $11,900 to $30,015 in 2012. That is a 152% increase! With the increasing, overbearing roles of government combined with spending growth for each federal department and agency, it is easy to see where the fault of deficit growth lies. Another piece of information that Reich overlooks in this point is the relationship between individual tax rates and federal revenue flow.

This goes right into my analysis of Reich’s second point: he fails to look beneath the surface of given information and draws a faulty conclusion that higher tax rates mean “fair share” taxation. It sounds as though Reich makes a case here, until you look at the numbers. Looking at the time period of 1964-81, the time frame Reich particularly focuses on, federal revenue as a percent of GDP stood at 8%, including capital gains (capital gains tax rate was 28% until it was reduced in 1997). But if you look at the top tax rate in the present day, the numbers stand in comparison to those from 1997-2002. Even though the growth in federal revenue as a percent of GDP is relatively small, it indicates that higher tax rates (like what Reich advocates for) do NOT translate into higher intakes of revenue. Even with the reduction of capital gains tax rates, revenue intake is still slightly greater than it was when the rate stood at 28%. Therefore, Reich’s “historic lows” assertion is obsolete.

Lastly, Reich’s final point is totally subjective and ignores the economic consequences of raising taxes. Because they can afford it? This is where I get a little preachy so please bear with me.  He says that the rich take home the largest amount of income and more than the bottom 50% of Americans combined, overlooking the IRS data that the richest 10% of Americans pay over 70% of all taxes that contribute to federal revenue. Another important thing to note is that income inequality, while it exists naturally in free market economies, has been artificially expanded and exacerbated by the inflationary policies of the Federal Reserve, but that is for a different discussion. Reich even implies that there is a correlation between tax reduction and unemployment increases (referring to the Bush Tax Cuts which are set to expire on January 1st of 2012). Really? Is that the best he can do? I’ll use the corporate tax rate (35%) as an example of the economic consequences of higher taxation. Corporations, which are generally subjected to scrutiny of wealth-holding, do two of the following things when it comes to dealing with taxation: outsource labor/jobs to cut costs or deduct the pay of workers to pay for corporate taxes. With the many loopholes that exist in our broken tax code today, it is easier for corporations to subject its workers to income cuts. Overall, the net losses of higher corporate taxation far exceed the gains of it. This is just one of many examples that reflect the harmful effects of increased tax burden on individuals and the marketplace. To say that they can “afford it” is no legitimate justification to raise taxes, especially with the numerous net losses of higher tax burdens.

I agree that our tax code needs to be reformed, but trying to modify an entirely broken system is not the way to go. Personally, I think that a consumption-based tax or flat tax would be a far better alternative to the income tax. To say that government should, by force of law, take more of an individual’s property (their income, in this case) based on the subjective ideal of paying one’s “fair share” is ignorant of economics and removes legitimacy of the private property rights of individuals. Economically and morally, discriminatory taxation is wrong and poorly-calculated. If we are to achieve any economic prosperity, we need to scale back most of the regulations that exist on the market today, restore sound currencies such as gold and silver to restore wealth and purchasing power in the American market, rethink the role of government in economic life (in areas such as Education, Commerce, and Energy), and allow the overall market to work to its own devices. Prosperity isn’t perfect, but it will ensure more freedom on the part of the individual to pursue their economic interests than the alternative which promises “equality” of wealth.

Nathan

 

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Bacon Sundaes Thursday, Jun 14 2012 

I had to share this one. Timing coincidence? I think not. Well played Burger King.  They’ve just released in recent weeks a seasonal sweet and salty treat in the form of a Bacon Sundae. Yep, you heard it.  Warning, the image below contains strong language:

‎”As soon as we surrender the principle that the state should not interfere in any questions touching on the individuals mode of life, we end by regulating and restricting the latter down to the smallest details.”
– Ludwig von Mises


Something I’ll never be able to wrap my head around is the willingness or the capacity for people to relinquish freedom and for the state to control the day to day decisions down to the very food we eat. Nanny Bloomberg is on an obesity jihad and nothing is going to convince him of its futility.

This brings to mind another amusing image yet serious topic:

Remember these? They’re going to be black market goods soon.

Freedom reigns supreme Tuesday, Jun 12 2012 

Wow, you know I had to share this one:

North Dakota Considers Eliminating Property Tax

BISMARCK, N.D. — Since Californians shrank their property taxes more than three decades ago by passing Proposition 13, people around the nation have echoed their dismay over such levies, putting forth plans to even them, simplify them, cap them, slash them. In an election here on Tuesday, residents of North Dakota will consider a measure that reaches far beyond any of that — one that abolishes the property tax entirely.

Read more…

Separation of State and Economy Thursday, Jun 7 2012 

Saw this on the Bastiat Institutes’ Facebook page and it inspired me to do a little writing:

“The essential quality of a free economy is that it cannot be planned. It leaves the solution of problems to the inspiration of the individuals in the untrammeled population. When something approaching a free economy has existed, it has always worked better than the schemes of any planners.”
— Thomas H. Barber

This is a topic I delve into quite often. Planning has been the norm all around the globe for over a century, if not longer. The battle of ideas between Hayek and Keynes was tragically won by politicians prescribing tot he idea that you can buy success and power without doing any work or production for it.  Maybe it’s time to expand the 1st Amendment beyond the realm of religion and into the realm of economics as well. I know government, politics, and economics are literally inseparable, but we all have dreams don’t we?

With Ben Bernanke going on live television today to yammer on about how QE (Quantitative Easing) should bolster the markets and round out a global economic recovery, I figured the topic is spot on if any of you watch any of the business networks like Bloomberg, Fox Business, or read Business Insider and Forbes.

Since all I do is talk and explain numbers and relationships on my radio program, I never pass up the opporunity for a good chart, borrowed from a good research organization:

 

 

 

 

 

 

 

 

 

 

 

Again, please be sure to check out my latest radio programs on my YouTube channel.

Tuesday’s Show Wednesday, Jun 6 2012 

Here it is. Listen to it and share widely.  The topic is a fairly doom and gloom discussion based on the recent jobs report and the outlook for the global economy.

Quickly Wednesday, Jun 6 2012 

All of the post-Wisconsin news and debates have been pretty interesting.

Here is a great bit of own-sauce from RedState writer Moe Lane:

I would like to offer these words of comfort. When you progressive/liberal/Democratic activists look back on your quest to begin the Wisconsin recall movement, I want you to appreciate the amazing amount of work that you spent on it. You called. You networked. You wrote letters and blog posts. You contributed to opposition groups. You reached out, and found people just like you, and you banded together to fight. You marched, and you stormed the state capital, and you were arrested.  And you kept going, and calling, and struggling, and you put your time, your money, and every atom of your being on the line. For some of you, this was your finest moment. You fought for this. You fought so hard for this.

Oddly enough, I didn’t do any of that, but I won anyway. That’s because you suck, and I don’t.

Well, I didn’t say that they were words of comfort for you.

And I have to say we can’t be surprised to see a response like this out of the Daily Kos(Warning!!** Vulgar**!!)    Shame shame.

Amidst all of the talk about Wisconsin of course the President and his competition are brought into the fray and the topic of buying elections comes up.

In Wisconsin unions spent millions, Democrat groups spent millions, the Tea Party spent millions, Americans for Prosperity spent millions, and both the Democratic and Republican governors Association spent millions. Millions were spent several times over on both sides.

Somehow, if Romney wins he’ll be accused by the left of buying the election. Even though Obama spent more than McCain did in 2008, and will probably spend more than Romney in 2012.  Both candidates could spend over $1 Billion on the 2012 campaign, shattering all records ever. If both are spending billions, who is buying the campaign? The one that spends $50 million more? Don’t make me laugh.

Minimum Wage, Minimum Outputs Saturday, May 26 2012 

Hello, everyone! Today I would like to focus on a subject matter that has caught my interest as of late and could very well concern your chances of employment: minimum wage. Since 1938, when the minimum wage first took form, the debate on minimum wage has been a heated one, especially among economists. There is a general consensus among economists, conservative and liberal, that minimum wage contributes to unemployment. The question at hand, however, is if the net gains of minimum wage prevail over its net losses. In this note, I will not focus on the magnitude of its effects as much as I will on net losses vs. net gains. Currently, our national minimum wage stands at about $7.25 per hour and proponents are calling for an increase in efforts to help impoverished workers. Overall, forcing wage controls on businesses in the market will harm businesses (by increasing wage expenses) and the employee, whom the proponents of minimum wage tries to protect.

Independence Institute senior fellow and economics professor Linda Gorman puts into perspective how minimum wages cause economic hardship for the workers it means to help:

The reason is simple: although minimum wage laws can set wages, they cannot guarantee jobs. In practice they often price low-skilled workers out of the labor market. Employers typically are not willing to pay a worker more than the value of the additional product that he produces. This means that an unskilled youth who produces $4.00 worth of goods in an hour will have a very difficult time finding a job if he must, by law, be paid $5.15 an hour.

This goes into my first basic point of the damages of minimum wage: it hurts employment. Basically, when businesses are forced to pay a minimum wage to workers, it must pay out of its own operating funds. Policymakers often forget that wage payments are still an expense on businesses; therefore business owners decide to prioritize their higher-skilled labor and cut out its lower-skilled labor in efforts to save money. Ultimately, as minimum wage stands at $7.25 today, workers that produce no outputs  equal to or greater than their minimum hourly pay are cut out of the work force. This hurts the workers in more ways beyond the employment: they remain low-skilled, hurting their work opportunities elsewhere; and work output is decreased (a side effect that hurts businesses, too). Another scary fact to consider is that Gorman, among many other economists (from economic think-tanks such as the OECD) projected, at the time when minimum wage was $5.15 per hour, that a 10% (or ~$0.51) wage increase would stand to increase unemployment by 1%-2%. Today the minimum wage stands at $7.25 per hour, with an unemployment rate of approximately 9%.

To supplement my evidence of minimum wage effects on employment, I will turn to a case study: the Great Depression. President Franklin Roosevelt laid out an economic plan that called for a demand of workers’ wages being increased 25% nationwide. FDR’s general belief that reductions in prices and workers’ wages led to the Great Depression and believed that artificial wage controls, among other things, could avert that.

UCLA’s Meg Sullivan, however, puts forth research and insight against this plan. She points out that 3 years after the implementation of FDR’s economic plan, “wages in 11 key industries averaged 25 percent higher than they otherwise would have done, the economists calculate. But unemployment was also 25 percent higher than it should have been, given gains in productivity.” From the case study of the 11 key industries subjected to FDR’s policies, it has been made even more clear of the apparent inverse relationship of wage rates and employment. Mind you, this isn’t the straw that broke the camel’s back so to speak, given that plenty of other factors of government intervention played a role; however, the artificial wage controls played a significant role and contributed to the maintained double-digit unemployment average of ~16%-17%.

The next and last major point of the damages of minimum wage laws: it hurts business productivity in the market. As mentioned earlier, wage payments to workers is still an expense on the businesses that pay them. If governments try to set a minimal ceiling in which wages must be paid, it forces businesses to allocate those funds into wages that could have otherwise provided wages to low-skilled workers or other business investments, which leads to reduced economic output and productivity. Furthermore, businesses see net losses because they cannot offset the increases in the costs of production onto prices of consumer goods and services. Matthew Kibbe says the following of this situation:

Many firms, however, may be unable to pass on their increased costs to consumers. It is consumers who ultimately determine the price of any good on the market, and they may decide that a business’s product is not worth a higher price.

Market competition makes it harder for businesses to raise prices, especially if consumers feels that the good is not worth the price. Since businesses must meet the needs of consumers in order to make profits, they will have to tailor prices to satisfy customer preferences. Either way, businesses suffer net losses that exceed their net gains.

As I close this article, it can be concluded that minimum wage controls on businesses produces more losses than gains. Low-skilled workers that were meant to benefit from the wage controls are priced out of the market and made just as poor as before since they perform below the minimum wage. Furthermore, economic productivity and outputs decrease as a result, which hurts business growth and consumers who would have purchased their goods at a better, competitive price. Overall, employment and economic output is decreased. Economist Henry Hazlitt says it best when he puts into perspective of how the market typically handles, or would handle, wages when it is freer:

The more the individual worker produces, the more he increases the wealth of the whole community. The more he produces, the more his services are worth to consumers, and hence to employers. And the more he is worth to employers, the more he will be paid. Real wages come out of production, not out of government decrees.

-Nathan

Sources: http://www.econlib.org/library/Enc/MinimumWages.html#abouttheauthor
http://www.cato.org/pubs/pas/pa106.html
http://newsroom.ucla.edu/portal/ucla/FDR-s-Policies-Prolonged-Depression-5409.aspx
http://www.hyperhistory.com/online_n2/connections_n2/great_depression.html
http://www.bls.gov/cps/prev_yrs.htm

Today’s Radio Program Friday, May 25 2012 

The topic? How to cook the books properly. Inspired by this ridiculous chart being touted by the Obama Administration:

 

 

Here’s the video:

The Cool Thing About the Rule of Law Thursday, May 17 2012 

Check out this excerpt of the 14th Amendment:

 No state shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any state deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws.

Let’s look at a few key words from this right quick: “citizens” and “person.”

Our Founders made no mistake in making this distinction: they believed that ALL individuals should be deemed protections under the rule of law, regardless of citizenship status. Therefore, they understood the concept behind the Rule of Law’s application in a free society. As individuals, we are born with inherent liberties accompanied with a government whose few authorities include protecting individual liberties.

Sadly though, our society has fabricated this notion that the protections provided by our Constitution “apply only to the citizenry” when, in reality, that isn’t the case. In the ideal free society where government’s sole focus is the protection of our civil liberties, equal protection under the law means exactly what it says. Regardless of origin.

Don’t believe me? Read the Constitution. That’s a pretty nifty document. Furthermore, I suggest reading The Law by Frederic Bastiat.

-Nathan

P.S. I’m sorry I haven’t been posting lately, but I’ll be back on it as soon as my summer classes end. Thanks for being patient with me, everybody! I know this was a pretty short article.

Maymester Monday, May 14 2012 

Has delayed me editing and publishing last weeks shows till tonight:

Check out the YouTube Channel:

http://www.youtube.com/user/TheLibertariat?feature=mhee

If you’re curious, my other multitude of hobbies are also contained within my YouTube Channel.  I do Autocross (Car racing) and full-contact medieval sword fighting as well and I fought a bit this past weekend. Enjoy! Lots of content from the weird inner depths of the personality of yours truly.

I’m on the air tomorrow and Wednesday I believe as well, listen live 1330WLBB or on the air on your radio!!

Good night folks!!!

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