Category Archives: Economics

Miscellaneous economy stuff

Universal Basic Income

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The Leftist dream of socialism won’t die, and neither will the Leftist dream of free money, which they masquerade as universal basic income, the steady handout of taxpayer money to everyone because—well, just because. The Left doesn’t care that handing out free money—one of the more extreme aspects of socialism—doesn’t work.

The Left simply doesn’t care about making lives better for Americans, only making their own lives better. Free money, this universal basic income, is just modern day bread and circuses offered in payment for votes so the Left can keep their Progressive-Democrat politicians in power, favoring them. They hope.

The editorial at the second link lays out a number of the ways that UBS fails us all.

Here’s another path to that failure. A UBS increases overall demand for goods and services beyond what producers can supply. This is textbook inflation. Eventually, production succeeds in getting supply increased to match that increased demand, and inflation abates. However, the higher price levels resulting from that bout of inflation remain in place, which means the handed-out money doesn’t have the buying power that it was represented as having: recipients can’t buy significantly more goods and services than they could before the handouts started due to that eroded dollar.

It gets worse. One of the areas of failure that the editorial pointed out was that recipients of free money took advantage of that largesse to work less. Since there is less work being done—this is a universal basic income handout, recall; all of us get it—it would take producers commensurately longer for production to catch up to demand. This would let that inflation run longer, elevating overall price levels even higher. That, in turn, would reduce the buying power of the handed-out money even further, leaving us recipients even less well off than before the handouts began, likely worse off in absolute terms.

Leftists and their politicians, of course, know this full well. They’re hoping us average Americans are too grindingly stupid to figure out that these folks are merely buying, and playing, us for their own power gains.

TACO Trump?

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Trump Always Chickens Out goes the latest anti-Trump meme of the Left. This graph tells a different story.

All of those latest agreed/imposed tariffs are higher than the original tariffs.

Keep in mind that Trump is, from the beginning, a builder who learned his trade in the blunt-speaking, trash talking New York City environment and a marketer who learned negotiating in that same environment.

The best deals are made by a marketer who begins the negotiations with an already clearly understood price range within which he’s willing to close a deal and outside of which is willing to walk away. The marketer then begins with offers that are extremely low on proffered buys and extremely high on proffered sales and lets himself be talked up/down toward his already determined range in exchange for more things from the prospective seller or buyer.

This is what that graph illustrates.

A Thought on Interest Rates

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William Silber had one on the Wall Street Journal‘s Sunday opinion pages. Naturally, I have one on his.

The core of Silber’s thought is this:

The so-called neutral rate of interest is observed in hindsight—by whether the economy is expanding fast enough to keep unemployment low but not too fast to provoke higher inflation. By that measure, the current target interest rate of 4.25% to 4.50% seems about right. I say “about right” because the unemployment rate is low but the rate of inflation is somewhat elevated. That suggests, if anything, the target interest rate should be higher to push down inflation.

Silber is right on the first part. He’s wrong on the second. The current target interest rate “seems about right” because it historically correlates with the Fed’s inflation target of 2%. Now it’s time for the Fed to sit down and be quiet—and to say in so many words that that’s what it’s going to do. Excursions above and below the inflation target are just the noise of a free market. The time is not yet—if ever in the current market conditions—to make any sort of move on target interest rates.

This, too, Has a Fix

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The lede intimates the problem:

Dual-earning married couples are estimated to face a loss of $18,100 in annual benefits in seven years without the passage of some sort of entitlement reform, according to a new study.

And this:

“At the same time, those retirees might experience reduced access to health care due to an 11% cut in Medicare Hospital Insurance payments. The cuts would grow over time as scheduled benefits continue to outpace dedicated revenues,” the analysis [by the Committee for a Responsible Federal Budget] also read.

Florida Republican Senator Rick Scott has proposed legislation to address this:

…create a “Budget Point of Order” and require a two-thirds vote against any legislation that the Congressional Budget Office (CBO) “determines would create a “Budget Point of Order” and require a two-thirds vote against any legislation that the Congressional Budget Office (CBO) “determines would reduce or cut existing Medicare and Social Security benefits.”

But that would only increase costs to all of us in the form of steadily rising taxes. After all, any tax bill that didn’t raise taxes sufficiently to suit CBO would be claimed by it to reduce or cut those benefits and so would require that supermajority vote.

No, the better solution is to entirely privatize Social Security and to return responsibility for Medicare entirely to the States under their respective Medicaid programs.

Social Security could be privatized entirely for those currently younger than 50 years—or under 40 years if the longer transition period would be more politically palatable. Continue to require folks to pay those Social Security taxes, but the money would go into retirement accounts strictly for the benefit of the taxpayer and his future retirement, instead of being sent right back out for the current benefit of existing retirees. This would give the taxpayer/future retiree skin in his own game, and I guarantee you that this individual would do a lot better job of managing his retirement money than the government has been doing—especially with the government confronted as it is with both a dwindling supply of employed persons paying the taxes to produce current payouts and an increasing post-retirement life span. The transition would be deucedly expensive for the government (all of us taxpayers), but that expense is only going to explode if nothing else is done.

On the other hand, Medicare conversion doesn’t need so long a transition, and it would produce immediate savings for the Federal budget—its real budget, not the fictional one that pretends Social Security and Medicare aren’t part of government expenditures. For this conversion, it’s a simple matter of converting the Medicare transfer to each State to a Year Zero block grant solely to the State’s Medicaid program. Then each year over the next 10, reduce the size of the block grant by 10% of the Year Zero amount and reduce each worker’s Medicare part of his payroll tax and his employer’s contribution to that payroll tax by 10% of that Year Zero tax collection. At the end of those 10 years, the Federal government would be out of the States’ health coverage business, the States would have their responsibility for and control over their own programs wholly restored, and each worker and employer would be out from under that portion of the payroll tax.

Distortions by Progressive-Democrats

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The latest are illustrated by two graphs from The Wall Street Journal. The graphs illustrate the impact on us taxpayers—rich and poor—of the recently passed tax cuts in the One Big Beautiful Bill Act.

The first shows in dollar terms the impact of the tax cuts.

Progressive-Democratic Party politicians favor this graph because it emphasizes dollars while ignoring both their importance to the taxpayer relative to his income and it ignores the percentage of income received by each taxpayer and the percentage of the tax burden paid by each taxpayer—which for the rich is a larger percentage than their percentage share of income earned.

The second illustrates the changes in percentage terms, which demonstrate the importance of those dollars to taxpayers’ incomes.

Overall, the tax cuts become more important as income level drops from the wealthiest to the poorest. Those with increasingly lower incomes receive increasingly higher tax reductions relative to their incomes, with the poorest getting the greatest relative reductions. The Evil Rich—the top 20% of income earners—get far smaller relative tax drops, with the Evilest Rich—those heinous top 1% of income earners—getting the smallest relative drop.

And that’s entirely appropriate since they start out with the largest tax burden, one that’s much larger even than their relative share of income. This is a detail that Progressive-Democrats actively ignore in their distortionate descriptions of the bill.