The Human Cost of Protectionism

Steve Landsburg on the very high humans-costs of legislating against child labor and in favor of protectionism.

(H/T: Don Boudreaux @ Cafe Hayek)

The Worst of All Tax Policies

For decades, voters have had to balance proposed increases in government spending against the necessary increases in taxes they would require. Government growth has been tempered by voters asking "yeah, that sounds nice, but how much will it cost me, the taxpayer?"

There are some who are suggesting Obama's plan to only raise taxes on the top 5% of earners is nothing but a typical empty campaign promise. But let's suppose Obama is telling the truth. That if elected he and the Congress will change the tax laws so that:

No family making less than $250,000 will see their taxes increase [and] the typical middle class family will receive well over $1,000 in tax relief under the Obama plan.

Such a change would turn the temperance of voters asking themselves "how much will government program X cost me, the taxpayer?" completely on it's head because only 1.5% percent of households (which I'll equate with Obama's use of "family") make more then $250,000.

Apparently, no longer would 98.5% of the population need to worry about increased taxes for the increased spending Obama is pushing for.

This shifting the tax burden for new spending to the top 1.5% reeks of "tyranny of the majority" and ominously brings to mind the Alexis de Tocqueville quote: "The American democratic experiment will succeed until the people realize they can vote themselves money from the public treasury. Then it will collapse."


And all this does call into question exactly how Obama will pay for the $430 billion a year of spending increases he proposes.

In 2006, 43% of the government's $2.4 trillion tax revenues came from individual income taxes. (With 15% from corporate income taxes and the remaining 42% from "other taxes").

Let's assume these percentages remain under a hypothetical Obama administration. That would mean Obama needs to raise individual income taxes by $185 billion - all of which would only be paid by the top 1.5% of income earners.

Now I'll be charitable in my analysis here. In addition to the $250,000 figure, Obama has also thrown around the figure of the "top 5%." So, let's actually be more generous and say this $185 billion will all be paid by the top 5% of income earners, not just the top 1.5%.

For 2006, the top 5% paid more than 60% of all personal income taxes - in dollars (rather than a percent), that's somewhere a bit higher than $625 billion. Adding this $185 billion would pump up the total personal income tax revenues by about 15%, from $1.04 trillion to $1.23 trillion. Adding this $185 billion strictly to the burden of the top 5% of income earners would mean that instead of paying 60% of income taxes, they would pay approximately 66%. That means the top 5% (which would include households making $150,000 and up) would be responsible for two-thirds of personal income tax revenue.

That's right:
5% paying two-thirds.

By contrast, let's look at the bottom 40% of households. Allow me to simply quote a recent Weekly Standard article:

The lowest 40 percent of income earners as a group actually receive net payments from the federal income tax system. (They get 3.8 percent of total federal income tax revenues instead of paying any income taxes.) The middle 20 percent of income earners pay 4.4 percent of federal income taxes. Thus the bottom 60 percent of income earners together, on net, pay less than 1 percent of all federal income taxes. (These workers earn 26 percent of national income.)

The data show that the top 1 percent of income earners now pay 40 percent of all federal income taxes, which is almost double their share of the national income. The top 10 percent pay 71 percent of federal income taxes, though they earn just 39 percent of the nation's pretax income.

At what point do even liberals realize this would be grossly unfair?


When you add in the fact that Obama is going to these lower income families a refundable tax credit (meaning that if the tax credit makes you have a negative tax liability, the government gives you the money for the credit, not just reduces your tax burden to zero), what we are really looking at here is, in fact, redistribution. Or, in Obama's words, sharing the wealth.

As Don Boudreaux clarifies, this isn't pure socialism, but:

This "socialism-lite," however, is as specious as is classic socialism. And its insidious nature makes it even more dangerous. Across Europe, this "mild" form of socialism acts as a parasitic ideology that has slowly drained entrepreneurial energy – and freedoms – from its free-market host.

Could it happen in America? Consider the words of longtime Socialist Party of America presidential candidate Norman Thomas: "The American people will never knowingly adopt socialism, but under the name of liberalism, they will adopt every fragment of the socialist program until one day America will be a socialist nation without ever knowing how it happened." In addition to Medicare, Social Security, and other entitlement programs, the gathering political momentum toward single-payer healthcare – which Obama has proclaimed is his ultimate goal – shows the prescience of Thomas's words.

The fact that each of us depends upon the efforts of millions of others does not mean that some "society" transcending individuals produces our prosperity. Rather, it means that the vast system of voluntary market exchange coordinates remarkably well the efforts of millions of individuals into a productive whole. For Obama to suggest that government interfere in this process more than it already does – to "spread" wealth from Joe to Bill, or vice versa – overlooks not only the voluntary and individual origins of wealth, but the dampening of the incentives for people to contribute energetically to wealth's continued production.

Gov't Takeover: Fannie and Freddie

A post of quotes:

From Russel Roberts:

Following its knee-jerk, free-market, Milton Friedman obsessed ideology, the Bush Administration has seized control of Fannie Mae and Freddie Mac.

Joke. A bad one, really. If anything, this is just the latest evidence that it doesn't matter who's President. Is there anything this administration has done lately that reflects a free market philosophy? Yet because the administration sometimes uses the rhetoric of economic freedom, it allows people to paint the administrations policies as market-oriented.

From the Washington Post:

There is no guarantee that the takeover will work, and it comes at a potentially massive cost to taxpayers. The government has pledged to inject money in the companies in any quarter in which they would otherwise be insolvent -- up to $100 billion in total for each company.

"This is a shareholder bailout financed by the U.S. taxpayers," said Armando Falcon Jr., formerly the chief regulator of Fannie Mae and Freddie Mac.

Paulson also announced a separate program in which the government will start buying securities backed by mortgages -- $5 billion worth, initially. That will, in effect, subsidize the purchase of homes by lowering the interest rate that buyers must pay for a mortgage.

From Jon Henke:

This is how government grows...

1. Socialize Risk: Government intervenes in an industry to "solve" some apparent and visible problem.  This is done "for the people."


2. Unintended Consequences: This intervention merely shifts the costs to new areas and sweeps problems under the carpet, where they accumulate.


3. Blame The Market: Government intervention is not blamed, because the people who support it assume their good intentions could not be responsible for bad things.


4. Socialize Profit: The Left demands Something Be Done by people with Good Intentions. Politicians comply.  This is done "for the people."

Unfortunately, our political structure comes at this from four different places.

• Democratic politicians, organizations and activists are happy to go along with Steps 1-4, because, hey, #4 was their goal in the first place.


• Republican politicians and organizations go along with Steps 1-3, only objecting at Step #4.  By which time it is too late.


• Business goes along with Step #1, and attempts to use Step #2 to get more of Step #1.


• Libertarians believe the problem occurs at Step #1.  Once Step #1 is conceded, we've already lost on steps 2-4.  But libertarians and limited government conservatives have relatively little power.

Neighborliness

From the Obama - O'Reilly interview last week, about raising taxes on the wealthy:

Obama:

Well, but the problem is, if I am sitting pretty, and you've got a waitress who is making minimum wage plus tips, and I can afford it if she can't, what's the big deal for me to say I'm going to pay a little bit more? That is neighborliness.

Suppose I was your neighbor. And suppose I know of a waitress making minimum wage who's having trouble keeping up on her bills. So, I come and ask you if you'll donate some money to help her stay afloat. OK, now that's "neighborliness".

Now - new thought experiment - again suppose I'm your neighbor. I still know of said waitress, and my intentions are still utterly pure - I just want to help her out. But this time, I show up at your house, with the police standing behind me, and I say "Hey - I want to help this waitress. It's a really noble cause. Oh, and if you don't give me money to help her, these police are going to take you to jail."

That's only "neighborliness" if you're Barack Obama. To me, that's called any of "the nanny state" or "socialism" or "income redistribution." Those are highly charged terms, but - that's exactly what this is. People don't pay their taxes as "charity" - they pay them because they don't have a choice. If you don't pay your taxes, you go to jail. Removing the person's choice in the matter changes the action of helping the waitress from charity to government coercion.

Dale Franks at QandO had an excellent treatment on this about a year ago, from which I'll liberally quote here:

The basis of socialism—and that's what it is, no matter what prettier, more trendy name you prefer—is that you will intentionally harm Person A to some degree, in order to help Person B.

Now, I'm sure we're all keen to see Person B get help, but what moral reason justifies harming Person A to supply that help?

I mean, it's not enough to say, "Well, Person A is only harmed a little bit. He doesn't need all that money." Because, even if the harm is slight, you are intentionally causing harm to an innocent person, for no other reason than its a convenient way to help Person B. But convenience, whatever else it may be, is not a moral justification.

After all, Person A isn't harming Person B. He isn't culpable for Person B's problem. So, what justifies taking Person A's property, simply because person B could make some use of it? Is it because Person A is morally different in some definable way from person B?

And, while we're on the subject, what is the limiting principle for taking something from one person by force, in order to give it to another?

For instance, we could conceivably save a number of lives by requiring, by law, that every healthy citizen report to the local blood bank at least twice a year, in order to "donate" blood. It would be a slight inconvenience for us to all trudge down to the blood bank every six months or so, but it wouldn't really cost us anything significant, and we aren't really harmed by donating a pint of blood. And, it would probably save a number of lives every year. So, why don't we make that a law?

Another argument that one might make is that, "Well, most people think it would be a good thing to do it. So it's a democratic decision."

Okay, but how does the fact that most people want something done morally justify doing it? At various times in history, a majority of people have wanted to do any number of awful, harmful things. But democratic legitimacy is, again, a legal concept. Not a moral one. Democracy is nothing more than a means for deciding what public policy will be. It is morally neutral. Just because a lot of people want to do something, doesn't make it a moral thing to do.

The bottom line for socialism is that it claims a moral right to take the property—and if necessary, the freedom, or even the lives—of one class of people by force, in order to distribute it to another class of people. I simply want to know what the moral justification for that claimed right might be. This is not about convenience. It's not about the needs of the afflicted. It's about philosophy.

Seventeen to one

Take a listen to the August 7 Cato Daily Podcast interview of Andrew J. Coulson on Education Markets versus Monopolies.

Some poignant facts:

• Market-based schools where parents pay a significant portion of the cost of their child's education out perform government schools 17:1


• High school graduates today can't do/don't know anything substancially different than those of 40 years ago despite spending about 2.5 times as much per pupil.

An Argentinian Question for Obama

As Mary Anastasia O'Grady discusses in the Wall Street Journal, many of the (big-government) public policy prescriptions proposed by Barack Obama are quite similar to the policies actually enacted by Argentina.

Question for Senator Obama: Why will those policies bring prosperity to the United States when they clearly did not work in Argentina?

(H/T: Don Boudreaux @ Cafe Hayek, who also recently linked to this great piece of sarcasm ... why's it seem so unreasonable to "redistribute grades" when redistributing income is so common place?)

Fairness Doctrine

Bringing back the "Fairness Doctrine" seems to be getting mainstream attention, which I find surprising and perhaps (if this leads to popular support) unfortunate.

The latest episode of the CNN "Special Programming" Podcast is about "Reviving the Fairness Doctrine." It begins:

Maurice Hinchey (D-NY) (Guest): The people of this country should have the opportunity to hear all points of view.

Announcer: Reviving the Fairness Doctrine.

Maurice Hinchey: You're jeopardizing the basic principles of the Constitution.

Announcer: A CNN Podcast.

Dick Uliano (Host): Here's an issue that may soon move from back to front burner in Washington. A bid to rein in one-sided talk radio.

I guess we know where CNN stands.

Granted, there is a Constitutional issue here. But it's not at all what Hinchey's trying to claim. It's called the freedom of speech and the freedom of the press. You know, the very reasons the FCC did away with the Fairness Doctrine back in 1987 -- from Wikipedia:

In August 1987, the FCC abolished the doctrine by a 4-0 vote, in its Syracuse Peace Council decision. The FCC stated, "the intrusion by government into the content of programming occasioned by the enforcement of [the Fairness Doctrine] restricts the journalistic freedom of broadcasters ... (and) actually inhibits the presentation of controversial issues of public importance to the detriment of the public and the degradation of the editorial prerogative of broadcast journalists", and suggested that, due to the many media voices in the marketplace at the time, the doctrine was perceived to be unconstitutional.

QandO has excellent commentary on this going back to as early as January:

• The False Assumption Underlying the Fairness Doctrine (January 17, 2007)


• Why I don’t buy the liberal argument about Talk Radio (June 26, 2007)


• Gearing up to pass the Fairness Doctrine (June 27, 2007)

Additionally, the Heritage Foundation's analysis from October 29, 1993 continues to be spot-on.

For those interested in a less intellectual evaluation of the issue, just give this your consideration:

Calling a Disgrace a Disgrace

Well said: Senator Graham on yesterday's House vote for the emergency appropriations bill (my emphasis added):

The vote in the House of Representatives was a disgrace.

The House put more than $20 billion in spending -- completely unrelated to the war -- in the bill. Putting pet projects into an emergency spending bill funding our troops fighting a war is one of the low points of my time in Congress. The Democratic House also put conditions on how to operate in Iraq that will undermine our efforts to secure victory. They set deadlines for withdrawal that will empower our enemies.

In the Senate, I will do everything in my power to strike the provisions of this bill that undercut our troops' ability to win this war. Congress is not the Commander-in-Chief and should not micromanage the war. It's incredibly disappointing to see House Democrats put our troops at risk for short term political gain. The Democratic leadership in the House is like the cavalry in reverse. They're coming over the hill, but instead of helping, you know they are just going to make the problem worse.

The President is right to threaten a veto of this legislation. If this bill ever makes it to his desk, he won't have a shortage of pens available to sign a presidential veto. If necessary, I will be more than happy to bring one for him to use.

Light Bulbs and Liberty

Congresswoman Jane Harman is one of the few Democratic politicians whom I think actually has a reasonable grasp on U.S. foreign policy. Which is probably why Nancy Pelosi robbed her of her deserved post on the House Intelligence Committee.

Unfortunately, Harman's domestic policy seems as troubling a typical Democrat's foreign policy. She has introduced a bill that would ban the sale of traditional incandescent light bulbs.

I make generous use of fluorescent blubs myself. Not really out of environmental concerns, but rather because it makes economic sense to do so. As Harmon points out on an entry on HuffPo:

Only 10% of the power used by today's incandescent bulbs is emitted as light. A full 90% is released as heat. The typical 60 watt bulb only lasts 750-1,000 hours. Most fluorescent bulbs can last 8 to 10 times longer.

You do the math, and it makes a lot more sense to use fluorescent bulbs. But I have absolutely no interest in the government dictating the kinds of light bulbs that light bulb producers can manufacture. If people want to buy inefficient light bulbs, they should have the freedom to do so. This is the United States not The Nanny State.

You let this kind of thing slide, and you run the risk of the government over stepping its bounds elsewhere.

Like maybe some day they'll start telling restaurants they can't use certain kinds of cooking oils. Oh wait.

At least it hasn't gotten to the point of the government taking away citizens' houses, right?

via digg...

Barack Obama's Divided House

This is commentary about ancient (by which I mean two week old) news, but given that Obama-rama has been going since at least late 2006 and shows no signs of stopping anytime soon, I think it's commentary worth my time.

Back on February 10, Barack Obama announced his campaign for the Democratic Presidential nomination.

Press reports detailing his announcement made it sounds like his speech was delivered in a "can't we all get along?" style with promises Obama would unite the country, overcoming divisive politics.

Frankly, in my first viewing of it, I came away with that take too. I mean, he has gems like this in there:

In the face of a politics that's shut you out, that's told you to settle, that's divided us for too long, you believe we can be one people, reaching for what's possible, building that more perfect union.

But that take got me thinking about the fact he decided to invoke Lincoln's A House Divided speech in his own. Maybe public opinion thinks A House Divided is a speech Lincoln gave to try to unite the country, but that's flatly not the case.

Lincoln begins it saying "A house divided against itself cannot stand" and spells out the consequence of that truth: that the United States must inevitably become all-slave or all-free:

I believe this government cannot endure, permanently half slave and half free.

I do not expect the Union to be dissolved -- I do not expect the house to fall -- but I do expect it will cease to be divided.

It will become all one thing or all the other.

The only unity Lincoln speaks of in that speech is a unity that will be imposed. And although many media reports talked about "Abraham Lincoln's ability to unite a nation," Lincoln did no such thing. He impose the "no slavery" stance on the country, causing it to divide - not unite.

Looking closer though, I think Obama's speech actually is in the same style as Lincoln's — although it's a style of "unite; and by unite I mean impose my position."

Obama's speech is full of policy positions, but they aren't policy positions that fit the non-dividing politics he pays lip service to in his introduction. Rather his policy positions include:

• Universal Health Care ("Let's be the generation that says right here, right now, that we will have universal health care in America by the end of the next president's first term.")
  
• Mandated Living Wage ("Every single person willing to work should be able to ... earn a living wage that can pay the bills, and afford child care so their kids have a safe place to go when they work.")
  
• Rapid Withdrawal from Iraq ("But all of this cannot come to pass until we bring an end to this war in Iraq. Most of you know I opposed this war from the start. I thought it was a tragic mistake ... That's why I have a plan that will bring our combat troops home by March of 2008")
  
• More Restrictive Environmental Regulations ("We can set up a system for capping greenhouse gases.")
  
• Increased Political Clout for Unions ("let's allow our unions and their organizers to lift up this country's middle class again")
  

Those positions might unite the Democratic party, but they aren't things the entirety ... or perhaps even a majority of Americans can get behind. They are, in fact, devicive positions.

Perhaps Obama could deliver a modern day A House Divided speech:

I believe this government cannot endure, permanently half conservative and half progressive.

I do not expect the Union to be dissolved -- I do not expect the house to fall -- but I do expect it will cease to be divided.

It will become all one thing or all the other.