Category Archives: Economics

Different Perspectives on Responsibility

I have several friends from the Netherlands.  Some of them were visiting us the other night, and we ate homemade pizza.  We started talking about social welfare. 

I asked my friends, “Don’t working people in the Netherlands ever wish that they could keep more of the money that they earn?  Don’t they ever resent having their money taken away and given to other people?”

They looked at me as if I were nuts or as if I were speaking a foreign language.  I was speaking English, after all.

“It’s our responsibility,” they insisted. 

“Why?” I asked.  “Why is it your responsibility to help anyone except for yourself and your own family?”

“Because,” they answered, “they are all part of our society.”

We talked some more, but it was clear that they and I had widely diverging views that were never going to converge.

Here’s how I see it.

Let’s say that my neighbors on the left are a young couple who have decided not to have children.  The husband and the wife both work and they are saving their money to have a nice early retirement.

Let’s say that my neighbors on the right are a family with six children.  Let’s say that mom stays home to look after the youngest kids and to take care of the house.  Dad has an associate’s degree but got tired of going to school and never got a bachelor’s.  He works hard but doesn’t make very much money.

In my family, we have three children.  My wife and I have college degrees, although I am the only one who is gainfully employed.  We do not live extravagantly, but we have enough money for necessities and an occasional luxury.  Our children earn their own spending money by doing odd jobs.

So. . .

Didn’t each family make their own choices regarding education, employment, marriage, and child rearing?  If it were truly my reponsibility to take care of my neighbors on the right, then I would have mandated that they not have so many children, since that makes my burden heavier.  On the other hand, my neighbors on the left might have mandated that I have only two children instead of three.

If it were truly my responsibility, I would mandate that the man to my right complete a four-year degree so that he could qualify for a higher position and better pay.  I would mandate that if they are having trouble feeding their children, then the mother should work part-time, perhaps from her home.  The older children should do some odd jobs around the neighborhood.

You see, it is unfair for somebody to impose a responsibility on me that does not also give me power to make choices.  If I have a responsiblity to provide for my children, I also have the right to choose how many children I have.  I have the right to follow any career path that allows me to meet my responsiblities.  But if other people are obligated to take care of my children, then logically and naturally they have the right to make those choices for me.

In addition, they have the right to tell me what to feed my children, what clothes they should wear, and what medical care they can afford to provide for them.  That’s not how I want to live.  Why would anyone want to live that way?

Well, in the Netherlands and in the United States, they do not have to.  Our “societies” can pay for people’s groceries and give their kids free meals at school–so that they can eat at McDonalds too often and become obese.  Our “societies” can pay for people’s housing expenses so that they can buy cellular telephones and televisions in every room in their house.  I cannot afford to do those things, but I have seen people with lower incomes than I do them.

I, the guy in the middle, do not qualify for government assistance.  Therefore, my neighbor lives better than I do.  His kids eat free at school, but I buy mykids’ lunches.  His kids are given free medical treatment, but I have to go into debt when my kid needs surgery.  Their kids will automatically go to college for free, while mine will work their way through and be saddled with loans when they are finished.  And I have no say in the matter.  I cannot tell my neighbors to economize or to look for other sources of income.  I cannot tell them to buy clothes at the thrift store, the way I do, or to go to McDonald’s less often.  And I have no say in how much to give them.  Money is taken from my paycheck, and then somebody else decides how much to give my neighbors.

So, at the very least, if you claim that my neighbors on the left are required to take care of my neighbors on the right, then you have to give them power as well.  He who pays the piper calls the tune.  If I have to trim my hedges, I have a choice:  manual clippers or a power trimmer.  I might be forced to use manual clippers by my budget.  However, I might also choose to use manual clippers just to save money.  My responsibility, my right.  If my neighbor were paying for my tools, then he should tell me what tools I am allowed to purchase.  In fact, he would have every right to demand that I work in his yard, if he is helping to support my family.

Occupy Wall Street or Work on Wall Street

A story on CNN about a participant in the Occupy Wall Street movement caught my attention.  It seems that she decided that maybe it really was better to get a job–just like the hecklers have been telling the OWS crowd. 

If you want a laugh, read the article.  Nothing more needs to be said.

Stop Enabling Them

I have not read the entire Harry Potter series or gone to one of the movies, but I did read the first one.  I wanted to see what all the hype was about, and I wanted to screen the book before my children read it, which I did not let them do until they were around 14 years old. 

Taking a cue from Walter Williams, I want to point out that the author of the books, J. K. Rowling, is one of those evil 1% people that the Occupiers keep shouting about.  She went from living off government assistance to being a multi-millionaire.  How did she get that way?

Did she rob people?  No.  She sold books and movies.  So, guess whose fault it is that she became filthy rich?  It’s mostly the fault of the 99% who bought her merchandise. 

Nobody forced those people to buy her books.  I have managed, by borrowing the only book of hers that I read, not to enrich her by even one cent.  Of course, maybe she really is a witch and she cast a spell on her books that compelled people to fork over the $12 or so to buy one.  I doubt it. 

By the way, how did Bill Gates become so stinking rich?  It was because the 99% bought his software.

How did Oprah Winfrey become so stinking rich?  It was because the 99% watched her show.

How did Kobe Bryant?  It was because the 99% watched him dribble and shoot a basketball.

So, my friends, if you are mad at those 99%, stop enabling them.  Stop buying their products.  No more iPods for you.  No more Nike shoes.  No more movies starring Will Smith or Julia Roberts.

Indeed, let’s petition the government to subsidize the book industry and pay each author exactly the same, no matter how many copies of his or book get purchased.  Let’s pay all basketball players and movie stars the same amount.  And let’s make sure that we do not pay them enough to be in the top 1%.

Of course, the only way to absolutely prevent their being a top 1% is to pay everybody the same and to make sure that nobody discovers any secret way to trade with his neighbors to make more money than somebody else.  No freelancing or moonlighting!  No black market lemonade stands or lawn care services!

By the way, while we are waiting for a system with equal outcomes, maybe the real lesson of J. K. Rowling and the others in the top 1% is that if you produce something that people like, you can move up the ladder–maybe not all the way to the top 1% but maybe into the top 20% at least.  Then the 80% can boo and hiss at you and blame you for their lack of great wealth.  (While wishing that they were you!)

I’m not sure what Rowling has done with her millions.  Maybe she’s gone around the city of Edinburgh passing out cash to those who have less than she does–which is pretty much everybody in Edinburgh.  Maybe she stores it in a big vault in her basement and, when she is particularly bored or lonely, sneaks down to roll around in the dough.  Maybe she has invested it in real estate or government bonds or–perish the though–oil companies.  It doesn’t matter.  She earned it.  However, I expect that the money continues to work for her, and that as it does so it enriches others.

Think of how her creations have impacted people.  Aside from the entertainment and inspiration that many have gotten from her books, she helped create wealth for her agent, her publisher, the editors, the screenplay writers, the actors, the movie theater operators, and a host of other people that I cannot even think of.  If we made a list of all the jobs involved in the production of her work, it would be mind-blowing, I’m sure.

Yet some people say that people like her need to “give back.”  Why?  The people who bought her merchandise did so willingly.  As I said before, she probably did not cast a spell on them or hypnotize them.  It was a fair trade that benefited both parties.

Some people say that it is “unfair” that people like her are so rich.  They simply have a juvenile mentality of what is fair and unfair.  I suppose it is unfair that Kobe Bryant scores so many goals or that Julia Roberts is pretty and talented enough to be a leading lady.  They probably thought it was unfair when they got a C- on a poorly written school essay or when they had to stop eating chocolate because they developed an allergy.

What I admire about Rowling is that she chose to work for a living.  In doing so, she stopped being a burden on those who were working to support her.  She prevented her offspring from ever becoming such a burden.  I also admire her for her presistence.  That is a quality that would serve the Occupiers well, if they would only heed the lesson.

Percentages

I’m sure that you have seen the “We Are the 99%” signs.  Several thoughts go through my mind.

First, the cut-off is arbitrary.  Maybe the 90% should all be mad at the 10%, which means that some of those 99% might actually be the enemy to some of the other 99%.  Or maybe the 99.5% should all be mad at the top 0.5%.  Which means that the 99% should include at least some of the other 1% who are still not the very, very richest of the rich.

Second, so what?  Do the 99% have more rights than the 1%?  Do they have the right to steal from the 1%, just because they are the overwhelming numerical majority?  And if so, then don’t the bottom 51% have a right to steal from all the top 49%, which would include a lot of people from the 99%?  In other words a large percentage of the 99% are richer than the rest, so what makes them more righteous than the ones who are richer than them.  Somebody should take away their iPads and their Nike shoes and their Gucci bags and their BMWs and then cancel their club memberships.  That’s right.  You don’t have to be in the top 1% to be rich enough to have those things.  I have none of them myself, so I should be angry at the n% who do.

And what about the 53% who pay income tax?  They should be angry with the 47% who do not.  It is not fair for people to pay absolutely no income tax, unless they are really making absolutely no income.  Many of the 99% are in that group.  It is there money that is supporting the other 47%.  That is what they should be angry about.  (DISCLOSURE:  I am in the 47%, and that is just plain wrong.)

Are they angry that banks got bailed out?  Blame the guys who gave them the money.  Are they angry that the banks made stupid investments?  They weren’t angry when they or their friends were given foolhardy loans.

I’m in a small percentage myself.  I’m in the percentage of people who wants to live my life in freedom.  I want to make my own financial decisions and live with the consequences of them.  I want to decide for myself how much risk to take and how much not to take.  I want to prepare for retirement in my own way and prepare for emergencies in my own way.  I want to have a free economy that is thriving, so that I can make the most of the money that I earn–so that it does not lose value just because time passes.  I want to stay out of debt and live within my means.  Anyone want to join?

 

Shifting the Argument

     Whenever somebody like me argues that taxes are too high, or that they should not be raised anymore, people like a few of my readers bring up the police and roads. 

     Let me make one thing perfectly clear.  People should be willing to pay for whatever they use.  I have never argued that taxes that people pay in exchange for services rendered are inappropriate.  They are perfectly legitimate and appropriate.

     If my valued readers could convince me that every cent of a person’s tax liability goes for only the vital services offered by local governments, such as roads, police forces, fire departments, sanitation, and whatever else, I would have no disagreement at all.  People should pay for what they use.

     However, paying for government services and redistributing wealth are not the same thing.  Please do not shift the argument.  It’s really the same as putting words on my blog that I did not write.

     Then again, I think a good case could be made for privatizing most government services.  That way people who are actually using them would actually pay for them.  I’m not quite there in terms of full acceptance of privatization, but it is an intriguing and appealing idea.

     As it now stands, some people are paying more for those services than others, and I am fairly sure that it is way out of proportion to usage.  People in poorer neighborhoods call on the police more often than people in higher class neighborhoods.  Inner city strip malls are more prone to fire than upscale shopping centers in the suburbs.  So, if you want to shift the argument to everyone paying for the services that they get, the people who need police and fire protection the most should pay the most.  You don’t want to go there, I don’t think.

     One day, Atlas might actually shrug.  Then we will see who is already giving to the community.  Then maybe we will stop saying that the ones who are already giving should start doing so–as if they aren’t.

How Expansive?

     According to the 11th Circuit Court of Appeals, the Patient Care Act promoted and signed by President Obama is breathtakingly expansive.  Oh, and it is unconstitutional. 

     So, it’s not just Tea Partiers who think so.  A three-member panel of the 11th Circuit decided that. . .

This economic mandate represents a wholly novel and potentially unbounded assertion of congressional authority: the ability to compel Americans to purchase an expensive health insurance product they have elected not to buy, and to make them re-purchase that insurance product every month for their entire lives.

     Earlier the 6th Circuit Court of Appeals had ruled that the law is consitutional, so now it is up to the Supreme Court.  Several more cases are pending, so who knows how long all of this will take, how much it will cost, and what the outcome will be.  President Obama now has to decide if he should try to stall the litigation until after the election or get it over with to save the government a lot of money.

     The fundamental question is whether the Congress can grab more and more power on the basis of the Commerce Clause in Article 1, Section 8, of the United States Constitution.  The 11th Circuit has answered with a very strong no.  They not only pointed out that the Obama Care law could set a precedent for allowing Congress to force people to buy insurance against other problems but also to force people to buy any number of other products–a fence around one’s yard, a rabies vaccination, a smoke detector in every room of one’s house, a central air conditioner, voltage surge protectors for every electrical outlet, etc.  (The examples are mine.)

     They pointed out not only that Congress is forcing private citizens to enter into contracts with private firms, but also that they are forcing them to do it month by month from the time they are born until the day that they die.  That is a lot of power that they have taken upon themselves–without, according to this court, any authorization by the Constitution. 

     There is no precedent for such a thing, the court pointed out.  The government has never required people to buy a surplus of food or to acquire savings bonds or to put money into the bank or to buy more products to stimulate the economy or to buy a car with high fuel efficiency.  (Those are their examples.)  Even though those things would benefit both individuals and the country in general, the Congress has never presumed that it had the power to tell people what they have to buy.  (I would point out that many of their regulations limit what you can buy, but it is true that they have never mandated what you must buy.)

     The court also pointed out that the government’s position is that the mere fact that you exist makes you subject to the Commerce Clause, rather than your choosing to engage in interstate commerce.  Not only that, but your existence gives Congress gives the power to regulate you during every moment of your entire life–not just when you choose to engage in business of some sort.

      The court said that the Congress cannot claim absolute power to regulate from the consitutional fact that it has limited power to regulate.  In other words, saying that the individual mandate is necessary to make the rest of the law work is not a valid argument.     It said that the weak penalties for noncompliance actually undercut the Congress’s claim that the mandate to purchase insurance is necessary and essential to the rest of the law.

     The court also said that the law is overly complex, and they took thirty-five pages our of their 304-page ruling to try to outline what the law actually does.  They claim that the complexity of the law makes it difficult for any court to determine whether it, in its entirety, is consitutional or not.  (Maybe they should just do what Nancy Pelosi said–wait and see!)

     I did not see that the court mentioned it, but I would add that the granting of temporary waivers proves that the Congress and the President know that the law is injurious to businesses, including the many unions that have applied for and gotten waivers.

     Although the court cited dozens of legal precedents, the Obama administration has, of course disagreed with the ruling.  We’ll see what the Supreme Court says.

Spreading the Wealth Around

    It seems that some people actually believe that millionaires and billionaires stuff stacks of $100 bills under their mattress or pile them up in a huge vault inside their house.  They seem not to believe that the wealth of the wealthy is naturally spread around or that it drives the economy.

     I just learned that Alice Walton has spearheaded the founding of an art museum in Bentonville, Arkansas.  She has been an art enthusiast for a long time and has been the driving force in the sponsorship of art by the Walton Foundation.  If you don’t know who she is, Alice Walton is the daughter of the founder of Sam Walton, the founder of Wal-Mart.  She is a billionaire.

     Before launching into my main point, I want to first say that I resist the idea, often stated or implied, that Sam Walton did anything wrong by building his company and becoming wealthy from it.  Not only did he have an absolute natural right to do so, but (completely irrelevant to the underlying morality) he also blessed vast numbers of people with the stores themselves and with the jobs that he created.  If you don’t like him or his stores, then don’t shop there.  That is your right.  If you don’t like the working conditions, then don’t wok there.  That is also your right.  Furthermore, Walton had every right to pass on his wealth to his family, if he wanted to, or to somebody else if he had preferred.  His wife and children are not evil for receiving it from him, and the fact that they did not earn it does not diminish their right to have it–just as a valid lottery winner or game show contestant has the right to the money that he or she won.  Nor are they obligated by any moral principle to give it to somebody else, unless they want to.  They didn’t steal it, after all.

     Now to my main point. . .  By building this museum, the Walton Foundation and Alice Walton have spread their wealth–just what so-called liberals say they want the wealthy to do.  They created jobs–in a better way than any government stimulus can do, since they did not do it with “fake” money but with actual capital.

     Just think–they hired an architect to design the building.  They hired a contractor to build it.  He probably had several subcontractors.  All of those contractors employed a number of construction workers of various kinds.  The museum employs a curator and a number of staff members.  There is probably going to be a gift shop in the museum that will sell products like books and art reproductions, which will enrich the producers and distributers of those products.  They will hire printers to produce brochures.  They have probably enriched several art dealers and gallery owners.

     And it keeps going.    Everyone who earned or who will earn a paycheck from this museum project will spend that money.  They will buy food, fuel, clothing, appliances, and other goods.  They will, therefore, enrich various retaliers, distributers, and manufacturers in a chain that stretches far.

    Beyond all that, they have “given back to the community,” as the leftists among us like to say.  They have provided for the people of Bentonville, Arkansas, and the surrounding area, something that is culturally enriching–something that their grandparents would probably not have even imagined in that part of the country.  They have given school kids a truly educational place to go on field trips.  That result is, as they say, priceless.

When A Cut Is not a Cut

If you are a businessman, and your business is not doing well, you might have to reduce the amount you pay yourself from $45,000 a year to $40,000.  That’s a cut of $5,000.

However, if your business is doing well, but not as well as you hoped, you might increase your salary from $45,000 to $50,000 instead of the $55,000 that you hoped for.  That’s not really a cut.  That’s an increase of $5,000.

If you have massive credit card debt, and you start making double payments each month and not charging anything new, then you are cutting your bills.  You are reducing your debt.

However, if you put your credit card aside and you keep paying the interest payments–but not the principle–you are never going to get out of debt.  You are not cutting anything.

If you go to the store and find that the gas barbecue grill that you wanted is on sale and costs $350 instead of the $400 that it cost last week, you haven’t actully saved $50 by buying it.  You have spent $350.  And if you charge it, you increased your debt by that much plus interest if you do not pay it off right away.

If you go to the store with the idea of buying a new gas barbecue grill but decide that the $400 price tag is too steep, you can be proud that you did not spend the money, but you didn’t cut anything–unless it had been budgeted for awhile.  Then you could say that you made a cut in your budget by not spending the money after all.  Of course, if you buy the grill knowing that you have $20,000 in debt, you haven’t done yourself any favors.  You have cut your spending but have not reduced your debt.

If you have been stopping at the coffee shop every morning for a cup of coffee and a pastry, you really are cutting your spending if you quit going.

But if you give yourself permission to keep popping in there and buying that coffee and that pastry, you haven’t cut anything.  You have just tried to assuage the guilt that you feel for wasting that money.

And if you give yourself permission to stop there again in the afternoon every day for another cup of coffee and a sandwich, you are not only not cutting, you are adding to your expenditures.

And if you charge those purchases day after day, there might come a point when you start getting nasty phone calls.  And then you will have to borrow more money to pay off what you owe, or you will have to beg or steal the money from a kind uncle or friend or neighbor who hasn’t squandered his money on over-priced coffee and goodies.

You might give yourself permission to keep borrowing even more, but you will get more and more bogged down with the interest payments.  You will make it increasingly hard to get things you need–like bread and milk and vegetables.  And even though you might give yourself permission to borrow more, the people you already owe will eventually lose patience.  They will eventually demand that you pay up.  That will be the big OOPS! moment.

Is that clear?

A Reasonable Request For Obama Supporters

For eight years I heard how President Bush and the Congress at that time were spending too much.  They were operating with huge deficits and increasing the debt hugely.  That is what my leftward friends said, and I agreed.  I was no fan of Bush.  He seemed to have lost his VETO stamp.  There was not a spending bill that he didn’t like, and there was no project that the Congress at that time could refrain from funding.

President Bush is gone.  He could not run again, according to the Constitution, so let’s not blame him for our current problems.  A year after President Clinton left office, I gave up thinking that any of or nation’s problems were his fault.  In one year’s time a new President and a new Congress should be able to at least start correcting any problems caused by a previous administration or the previous legislature.

President Obama has had two and a half years to correct any problems initiated by President Bush.  (How has his plan to close Guantanamo Bay Prison been going?  Oh, and his plan to withdraw from Iraq and Afghanistan?)  If too much money was spent under President Bush, then Obama has had over two years to rein in the Congress and cut back on spending.  Has he done so?  Just a few months ago, the enormous budget that he proposed was unanimously disapproved by the Senate.  They rejected President Obama’s $3.7 trillion dollar deficit.  But this President told us a few days ago that it is now time to make cuts.  Hmm. . .It wasn’t time to make cuts in 2009, 2010, or in the first half of 2011, but now–suddenly–it is time to make cuts It’s like the person who sees that his bank account has literally run out, and decides, when he has no choice, that he had better cut back on his spending.  Obama is a very talented politician, and I mean that sincerely.  He is seemingly able to convince his supporters that he has, all along,  been for both raising taxes and for substantial budget cuts.

So, I have a request.  If you disliked, Bush’s spending, please be consistent and dislike Obama’s spending.  Please understand that his sudden willingness to trim the budget is a sudden and unexpected turn from his actions during the last two-and-a-half years.

Most of my weird conservative friends blindly support Bush and blindly loathe Obama.  I am unhappy with both of them.  However, if I was unhappy with spending under Bush, I am doubly unhappy with it under Obama.

Some of my conservative friends like spending when Republicans do it and dislike it when Democrats do.  Some of my liberal friends like spending when Democrats do it and dislike it when Republicans do it.  I’m evenhanded.  I don’t like conservative spending or liberal spending.  (Conservatives who spend like there’s no tomorrow should give up that descriptor and join the Democratic Party.)  I would cut across the board.  I would start with the bloated bureucracy and move to local pork barrel projects.  I would cut out grants to liberal groups and projects and to conservative groups and projects alike.  I have no pet projects or charities or agencies that I would spare.

Maybe you’ll still say, it’s Bush’s fault.  Really?  Well, I have two questions for you:

  • What has President Obama done to cut the reckless spending of Bush and that Congress?
  • What has he done not to add new expenditures, given the reckless spending of Bush?  After all, when the budget is tight you don’t add more expenditures.

Who’s Angry?

I just read a healine that ran Nation Angry Over Debt Impasse.  Such headlines, and such reports always bother me.  If 51% of people in a survey answer yes to a question of whether they are angry about the stalled negotiations, irresponsible journalists report that the nation is angry.  The subtitle said that the reporter looked at American’s collective sense of frustration over the standoff.

Excuse me.  Nobody asked me if I am angry or frustrated.  And even if I am, I do not share my feelings with all other Americans; I am a sovereign individual, thank you very much.

I am not angry at all, although I will be sad to see the deadline arrive with no solution in place.  Far from being angry, I am delighted that the two parties are hashing it out and that they are sticking to their stated principles.  In the end there will have to be a compromise, but I do not want to see one side give up too much.  I do not want one party to “win” and the other “lose.”  I would be angry if the Republicans just caved in.  People did not elect them to just bow their heads and say “yes, massa” to the Democrats.

It will come as no surprise to my readers that I would like to see a small-government, low-tax solution to the problem.  If it were up to me, I would not raise the debt ceiling, and I would cut spending with a chain saw, not with a mere scalpel.  I know that that will never happen, so I will be grateful for whatever fiscal responsibility can get worked into the deal.

What would I risk?  If the Democrats are willing to default rather than cut spending substantially, I would still stand my ground and let it happen.  It’s just like my personal budget.  I have to be tough and courageous at times in order to make it balance.