Calling John Galt

An Endless Downward Spiral

BoomerJeff pulls together a pile of steaming data on individual and corporate tax receipts to paint a very grim picture of the impact of Obamanomics on the US economy.

ObamaNomics is built on the assumption that politicians are better stewards of economic resources than the millions of individuals and business enterprises who created those resources.  The Democrats’ plan is to dramatically increase taxation to fund programs through which government can exert greater control over our lives.

But these data show that the private sector’s ability and willingness to generate wealth for government to seize through taxation is rapidly diminishing.  These data show that Obama’s own actions are are literally killing the goose that lays the golden eggs he needs to fund his agenda.

It’s really not all that surprising; take more money from the productive part of society and it has less capital left over to pay employees, invest for the future, and, yes, pay taxes.

Read the whole thing…

Up and at ‘em! Big Brother needs you to work!

George Will refuses to let go of the argument that health-care reform legislation needs to overcome a serious hurdle: the Constitution.

Supporters of the mandate say Congress can impose the legislation under the enumerated power to regulate interstate commerce. Since the New Deal, courts have made this power capacious enough to include regulating intrastate activity that “substantially affects” interstate commerce. Hence Congress could constitutionally ban racial discrimination in “public accommodations” — restaurants, motels, etc. — as an impediment to interstate commercial activity.

Opponents of the mandate say: Unless the commerce clause is infinitely elastic — in which case, Congress can do anything — it does not authorize Congress to forbid the inactivity of not making a commercial transaction, of not purchasing a product (health insurance) from a private provider.

“Congress can regulate commercial activities in which people choose to engage, but cannot require that they engage in those commercial activities.” So says Sen. Orrin Hatch, who also notes that if Congress can mandate particular purchases to help the economy, there was no need forCash for Clunkers: Congress could have ordered people to buy cars (with subsidies, if necessary). Why not the Anti-Couch Potato Act to Make Calisthenics Mandatory and to Impose a $50 Excise Tax on Cheeseburgers Because Unhealthy Lifestyles Affect Interstate Commerce?

Will didn’t take it this far, but if you grant Congress that power, here is the logical progression:

IF it is legal for Congress to ban specific forms of inactivity because there would be an economic consequence, THEN it would be legal for the government to force you to work, even at a job not of your choosing. Oh, did you retire? Too bad! Get your ass to the office, pronto!

(Which is a good thing, because once people start dropping out of medical professions, they’ll need a way to conscript doctors, nurses and therapists.)

By What Authority

So, what exactly is the Constitutional authority being cited in the Health Care bill?

The “Interstate Commerce” clause?

Is that the same Interstate Commerce clause that was used in Wickard v Filburn?

The one that said it was illegal for a farmer to grow wheat to feed his own chickens, because it affected the price of wheat, which is traded across state lines?

Welcome to the return of the Company Store. Uncle Sam’s General Store, where it’s now illegal to not buy things!

Forget about Bastiat’s “Broken Window.” Do you really want to live in a country where the State can order you to buy windows, on the grounds that windows are sold across state lines and therefore under the jurisdiction of bureaucrats?!?

(oh, and we’re going to have to tax you on those windows you just bought…)

Whoopee – Raises for everyone!

So the US minimum wage was increased to $7.25, to the cheers and adulations of the nice, but economically-illiterate, multitudes.  Of course, it’s never enough, so there are already calls for further significant increase; for example, a group of churches and religious leaders are calling for an increase to $10 an hour next year.

Look, I’m not a particularly mean guy, and I worked for less than $4 an hour at my first job back in the mid ’80’s — and I sure would have liked to have earned more!  But, the thing is, in our still-slightly-market-based economy, wages, like any other prices, are set by the combination of supply and demand for a product; in this case, a particular set of skills, experience, and capabilities.

My first job was as a cashier at a grocery store; it was an entry level job, requiring no experience and no skills beyond the ability to type numbers on a 10-key keypad and smile nicely at the customers.  There were lots of other high school kids who wanted — and were equally qualified for — the job, so the price (wage) was low.

At the other end of the scale, let’s think about neurosurgeons, the folks who do simple stuff like cut tumors out of your head, repair aneurysms, that sort of thing.  After 4 years of college, 4 years of medical school, an internship, and 5 – 7 years of residency, the small number of people who can actually do this job well can expect to make base salaries of about $400,000 a year; many make total compensation well above half a million.

John Stossel has a good piece on this topic:

Politicians have tried to defy the market process with minimum-wage and living-wage laws for years. The consequences are never good for the people they claim to want to help. When will we learn what workers need is not meddling politicians but free and competitive markets?

While the math of supply and demand can get complicated, the logic is really very simple.  If it’s worth it to me to pay the neighborhood kid $30 to mow my lawn, and he’s willing to do it for $20, then we’re going to be able to come to a mutually-beneficial deal.  If the town government says passes an ordinance that the minimum price for mowing a lawn is $50, then I’m not going to pay the kid to do it.  I’m worse off because I have to waste my Saturday afternoon, and he’s worse off because he doesn’t get to earn money.  The townspeople are worse off because they now have an “unemployed” kid running around making trouble and needed some sort of benefits program — leading to increased taxes.

Is it THIS easy to get an economics degree?

In the Freakonomics blog, Justin Wolfers tries to make the case for another round of Federal Stimulus.

Some argue that the original stimulus didn’t work, and so we shouldn’t try more.

This is silly for a variety of reasons. First, it is way too early to tell. Second, the economy may be bad, but to figure out whether the stimulus helped or hurt, you need to know the counterfactual: how would the economy have performed otherwise?

The two arguments here are stunning in their lack of logic.

1. If it is way too early to tell if the Stimulus was a failure, then it’s too soon to throw more money at the project!
2. The fact that we had a first stimulus destroys the counterfactual – just as not having a second stimulus destroys the counterfactual argument for continuing the program! How will the economy perform with more stimulus?

Finally, there’s the issue of all the unspent Stimulus. We’ve only used a fraction of the $800-billion originally allocated. Maybe Wolfers could argue we should have spent that allocation faster, and on actual activity that stimulates the economy and not special interest groups and partisan political projects?

If I buy a dozen eggs and eat two of them, it would be stupid to come back and say “Four eggs would be great! Let me buy another dozen!”

The resistance to the Stimulus is the broken eggs – the sheer amount of waste we must deal with to get to the “good spending.”  (Yes, I deny the existence of “good spending” in my opposition to Keynesian theory, but for the sake of argument if you grant them the possibility their own logic still fails.)

The Purpose of Economics

I am somewhat disappointed by comments over at the Freakonomics blog.

Steven Levitt is running a little contest to see who can finish a sentence uttered by his fellow economist Gary Becker over lunch:

“The only purpose of economics is _______.”

Well, I entered my guess. The disappointment for me is the sheer number of people who are answering “allocating resources.”

Economics is a study of what people actually do — not an exercise in telling them what to do or how to do it. Yes, the tools can be useful for understanding how to be more efficient, but the purpose isn’t making the damned trains run on time!

Media Malpractice

This piece from the Foundation for Economic Education clearly shows how the fourth estate is falling down on the job, and can’t seem to report anything involving economics with any real context.

What amazing magical powers our benevolent government has! It stimulates when it spends, unlike what happens when the rest of us spend. I suppose the difference is that when you and I spend, the money comes from somewhere.

The $2 Stimulus

A pharmacist in Brewton, Alabama, prescribed his own cure for the recession. He gave his employees unexpected bonuses, paid out in two-dollar bills.

He challenged them to give to charity, and spend all of that money in local downtown businesses. Just as you’d expect, the money is circulating in a very visible and tangible way.

The instructive piece here comes from the comments. This one, from Zekie:

It’s called basic economics. It is exactly how Obama’s stimulus bill is supposed to work. And it’s exactly how Bush’s worked. However, there were no new jobs created to keep the $$ circulated.

First of all, there is a big difference between a stimulus where they money is injected from the outside (the $16,000 in savings the pharmacist invested in the project), and money that the Federal government must first acquire through taxation, borrowing, or printing.

Second, there is a bit of circular reasoning in effect. The stimulus is supposed to create (or save) 3.5-million jobs, but if the jobs don’t exist the money doesn’t circulate?

CDM2008 adds this piece of wisdom:

Wherever you live, spend locally. Eat at local restaurants, shop at local stores, patronize the businesses that are the foundation of your community. It’s a shame large news stations won’t pick up on something like this. Imagine if it happened in communities throughout the U.S. Good news for a change.

Sorry, but “Buy Local” only works if “Local” saves you money. Going out of your way to prop up local businesses is clearly your choice, but any effort to artificially reduce competition just results in higher costs and greater inefficiency. 

If “communities throughout the U.S.” did this very thing, we’d be in seriously dire straits. Trade creates wealth at a greater clip if those trades are of the greatest value to both parties. Such artificial caps reduce the overall wealth and welfare. Yes, it looks good for your community in the short term, but “if everyone else did it” there would be a tremendous flow of capital into the community that gets shut off in the bargain.

If Zekie and CDM2008 have their way, you’d better get used to those $2 bills, because they’ll be getting awful lonely and stale.

Home is where the Squat is

There is an inherent danger when people start confusing the actions of private citizens with the actions of the State.

Many will snicker at the above clip between Stuart Varney and Bertha Lewis (with ACORN), but what isn’t funny is the clear dichotomy in how people view the legitimacy of certain actions.

1. There are many who don’t like the notion of bailouts in any regard, but it is within the purview of government to engage in that behavior.
2. Lewis makes the contention that if it’s okay for the government to give money to banking institutions, it must be alright for citizens to take it upon themselves to interfere in a private business matter (a foreclosure.)
3. Once there is an erosion in the firewall between the rights a citizen enjoys and the rights governments employ, then the counter also becomes true: the State enjoys the privilege of making your business its business.

We’re reaching a critical tipping point in terms of civic knowledge and responsibility. The State ought to be fashioned to respect and uphold our Constitutional rights, not be a guarantor of our needs or the instrument to acquire our wants.

Laugh at Bertha Lewis all you’d like – she and others who misunderstand the distinct roles of Man and the State will have the last laugh. We’re running out of time to defeat the squatters who are claiming a dangerous definition of government, and possession is the only game that matters.

The Weakness of Stimulus

Simply put: the Stimulus doesn’t return the same bang for the buck as private investment, so why take money out of the hands of private investors?