Tag Archives: economics

Universal Basic Income

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It’s creeping ever more deeply into the Progressive-Democratic Party’s psyche and ideology. It’s an idea that was first dreamed up in the ’70s, and it remains an idea that can only fail were it to be implemented.

Giving everyone a basic income won’t improve anyone’s income; it’ll only incentivize employers to pay a wage diminished by the amount of the guaranteed government payment.  But the failure runs much deeper than that.

Such a scheme is inflationary: the outcome can only be a spike in inflation followed by price stabilization at a higher price level.

Consider an economy in which a producer has two widgets to sell, and two consumers each have a dollar. The producer can sell his widgets for a dollar each.

Now give the two consumers their basic income of $1,000 (let’s say).  The producer still has two widgets, now the consumers each have $1,001 dollars, and the producer can sell his widgets for $1,001 each.  That’s price inflation to a new level—but the consumers’ buying power remains unchanged*: they each still have only enough money to buy one widget, and no more.

Nor is there any incentive—or buying power capacity—for the producer to make more widgets to sell. The producer is getting those same dollars, devalued by the same inflation, that his consumers are getting (from his sales) and so he’s getting no added value to induce him to produce more.  Furthermore, he still can buy the same amount of widget production inputs, and no more; he cannot produce more without incurring greater cost.

 

*Actually, buying power decreases on net for producer and consumer alike, not from the weaker dollar, but from fewer of them in hands of both.  The money for that guaranteed income can only come from one or more of three (sort of) sources. The money must come from the government’s printing press—but that’s the same as the guaranteed income; the dollars just follow a more convoluted path into economy than direct disbursement.  Or the money must come from taxes, which takes money away from consumers and producers directly and leaves them with fewer dollars with which to buy goods and services or to buy inputs to production. Or the money must come from borrowing—which is future taxes or future money printing.

It’s hard to believe that all of those politicians slept through their high school economics, whether they’re today’s crop, like Progressive-Democratic Party Presidential candidate and minor town mayor Pete Buttigieg, newly graduated from high school, or Progressive-Democratic Party Presidential candidates and Senators Bernie Sanders (I, VT) and Elizabeth Warren (D, MA), who were in high school the first time this idea was floated those years ago.

Contradictions?

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Congresswoman Ilhan Omar (D, MN) condemns our sanctions against Iran—sanctions against that nation’s government, various members of that government, and against that government’s oil sales and other business’ international activities.

calling them “crippling” and asserting they would “starve the Iranian people.”

Of course, the crippling nature of the sanctions is the point of them: to convince the men of the Iranian government to change their ways, to in President Donald Trump’s words, stop trying to kill Americans, stop trying to kill our friends and allies, and to stop trying to get nuclear weapons. If sanctions were not crippling, they’d have no effect. Omar knows this.

And, no, the sanctions won’t starve the Iranian people. Iran produces most of its own food, and food trade is not sanctioned. Omar knows this.

And this:

First he canceled our best shot at avoiding armed conflict—the Iran nuclear deal.

The Iran nuclear deal, on the contrary, transferred $150 billion in lifted sanctions and unfrozen assets to the Iranian government, and it transferred billions of dollars—$400 million of it in cold cash in the dead of night—to the Iranian government—money which went directly to funding Iran’s terrorism-by-proxy efforts throughout the Middle East.  The Iran nuclear deal, further to the point, had no hope of avoiding armed conflict—it actually guaranteed it. This “deal” codified Iran’s “right” to have nuclear weapons after a very few years’ delay, and Iran, true to its word, would have used them to destroy Israel. Omar knows this.

Omar also actively supports the Boycott, Divestment, and Sanctions movement, which designed to destroy the Israeli economy and to starve that nation into submission. Which submission would bring about Israel’s extinction at the hands of enemies sworn to effect that destruction: Hamas and Hesbollah, Iranian terrorist satraps, and Iran itself, which wants to wipe Israel from the map—a major aspect of Iran’s drive for nuclear weapons.  Omar knows this.

Omar also claimed

Since he [Trump] got into office, the president of the United States has been goading Iran into war….

Because objecting to Iran’s terrorist activities throughout the Middle East and in western Europe is goading Iran.

Because objecting to Iran’s attacks on oil tankers in the Arabian Gulf is goading Iran. Because objecting to Iran’s shoot-down of a drone in international airspace is goading.

Because objecting to Iran’s seizure of a US Navy small craft that, with engine failure had drifted a small way into Iranian water, and humiliating the sailors on board is goading Iran.

Because objecting to Iran having its Popular Mobilization Forces militia in Iraq assault and vandalize our embassy in Baghdad is goading.

Omar knows better.

And this:

Sanctions are economic warfare[.]

Of course they are. Would she prefer a shooting war?

No, not contradictive at all.  This is the face of the Progressive-Democratic Party.

Private Charity

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Readers of this blog know that I’ve long championed private charity as better suited to working our social ills than Government welfare—better economically, better for individual liberty, better for personal responsibility/morality.

Karl Zinsmeister, Editor in Chief of Philanthropy Magazine, offered some ways in which this is shown empirically to be true in his Wall Street Journal op-ed, which was adapted from his piece in the magazine’s winter 2020 issue.  One statistic that jumped out at me is this one:

77 million citizens volunteer time and labor [annually]

At Progressive-Democrats’ minimum wage, that works out to just under $1.2 billion per year that’s donated freely and on individual initiative. At current minimum wages, that still comes to nearly $560 million donated freely—at greater personal cost, too, to hear those pushing the higher minimum wage insist no one can live on such a puny wage.

Those numbers understate the donated time and labor contributed.  Many of those tasks done voluntarily are skilled tasks, and so are worth more in the doing.  Many of those volunteering time and labor are skilled individuals drawing high pay, and so their donated labor is worth far more.

But this is what progressive editorialists and political candidates openly call[ing] for deep cuts in the charitable deduction, an end to tax protections for churches and other charities, the taxing down of personal fortunes, and new regimes in which government becomes the sole ministrant of societal needs want to do away with.

Because these Know Betters are the font of what should be the target of largesse, who should pay for that largesse and how much, and how that largesse should be delivered—not the folks whose money, time, and labor would be confiscated.

Population and Income Redistribution

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People are moving from politically blue States to politically red ones, and they’re taking their money with them.

Four states have lost population since 2010 including West Virginia (-3.3%), Illinois (-1.2%), Vermont (-0.3%) and Connecticut (-0.2%), but 10 experienced declines last year. New York was the biggest loser as a net 180,000 people left for better climes. Over the last decade New York has lost more of its population to other states (7.2%) than any other save Alaska (8%), followed by Illinois (6.8%), Connecticut (5.6%) and New Jersey (5.5%).

And

[Illinois] lost $5.6 billion in adjusted gross income last year to other states, about twice as much as in 2012.
…
In the last two years New York has lost a net $18 billion in adjusted gross income.
…
Last year California lost $8 billion in adjusted gross income to other states, up from about $135 million in 2012.

And

Where are high-tax state exiles going? Zero income tax Florida drew $16.5 billion in adjusted gross income last year. Many have also fled to Arizona ($3.5 billion), Texas ($3.5 billion), North Carolina ($3 billion), Nevada ($2.3 billion), Colorado ($2.1 billion), Washington ($1.7 billion) and Idaho ($1.1 billion).

Just so long as those transplants don’t bring with them the same foolish politics that generated the economic failures of the States they’re leaving.

European Keynesianism

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Europe’s investors are hoping for some Keynesian stimulus—or what passes for Keynesian stimulus—in the coming year to continue 2019 boomlet in stocks.

Getting stocks to propel higher however, may require faster growth. Some see that slug of faster economic activity coming from a possible government ramp up in stimulus spending.
“Whichever way you slice it, there is a much greater burden on governments to do more” said Anik Sen, Global Head of Equities at PineBridge Investments.

That’s not stimulus; that’s investors addicted to government spending.  Not even Keynes (to stimulate this horse once again) said higher spending was stimulative. He held that it was the spike in spending that did that, following which spending needed to go back to its original level and the debt resulting from the spike soon repaid.

Which brings me to the second item in this European Keynesian nonsense.

During the European sovereign-debt crisis in the early part of the last decade, governments in the region adopted austerity budgets to rein in spending and calm bond markets. Many investors now say such frugality has been counterproductive….

Again, no. It’s not austerity to lower government spending and thereby get government to stop competing with private enterprises for resources, which is inflationary, and to get government to stop competing with the private economy for borrowable funds, which applies upward pressure on interest rates (for all that governments fix rates by arbitrary fiat), which is also inflationary.