Tag Archives: economics

Taxing vs Spending

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In a Wall Street Journal piece about Tennessee’s required closure of failing bridges problem, a Leake County Democrat supervisor, Joe Andy Helton, had this:

…he was frustrated by politicians being afraid to raise taxes—even to pay for basic services like roads and bridges.

“There’s only but one way to fix things on the local, state or federal level and that’s taxes,” he said.

Of course. Reallocating spending is utterly inconceivable to him.

The two bridges in Helton’s county that must be closed until repaired would cost, at most, a bit over a half-million dollars, together.  That’s not pocket money for a rural county like Leake, but it’s not that much, either.  County and State spending could be (re)directed toward the repairs.

This is a local failure of performance, but rising taxes and no spending responsibility nationally are what we can expect if Progressive-Democratic Party politicians like this one gain the majority in the House this fall.

Guaranteed Basic Income

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Italy’s 5-Star Movement, nominal winners of the latest Italian national elections, wants to provide one.  5-Star Movement (M5S) Senator Nunzia Catalfo has proposed legislation giving every Italian whose existing income falls below the nation’s defined poverty level a Guaranteed Basic Income of up to €780 ($960) per month, with the actual amount presumably varying in relation to how much the person’s existing income falls below that poverty line.

We want to grant a decent life to those millions who are unemployed or whose wages and income are below the poverty line[.]

So do we all (using “grant” very loosely), and to MS5’s credit, Catalfo’s bill does require proof of efforts to get work or better paying work, but a GBI isn’t the way to help anyone.

On the one hand, employers will lose considerable incentive, if not outright interest, in raising pay—indeed, they’ll be incentivized to reduce pay (mostly by not giving raises or bonuses)—because Government will make up the difference.  This will result in no net increase in income for those already working, except possibly to the extent the government holds off on taxing the GBI as ordinary income.

On the other hand, a GBI is unavoidably inflationary.  Prosperity increases only to the extent productivity increases faster than the labor force, which at full employment can grow only as fast as the population grows through birth rate and net immigration.  Thus, prices will increase to absorb the GBI available to pay them.  The buying power of tomorrow’s GBI recipient will be the same as today’s person without a GBI.

There will be no net increase in economic wellbeing from a GBI.

There will, however, be a net decrease in national economic wellbeing with a GBI: taxes will have to committed to paying the GBI.  Whether those taxes are obtained by increased borrowing, increased taxation, or simply diversion of existing tax revenues to the GBI (or any combination of those three), there will be fewer resources available to government to do things like support a defense establishment or maintain/improve national infrastructure, the latter which especially would lower the cost of doing business.

There also will be fewer resources left to the citizen—those taxes, that borrowing, that inflation—with which he can see to his own needs and wants: less spending (at least relative to what he might have done), and so less demand for any company’s goods or services, and so reduced production of those goods and services, and so lowered hiring—and so, on top of that net lowered economic activity, reduced opportunity for GBI recipients to succeed in their required job search, leaving them trapped in a government welfare cage.

Union Threat

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The American Federation of Teachers doesn’t like guns, gun owners, gun manufacturer, or those who support them.  That’s fine; this is America.

The union’s President, Randi Weingarten, has taken a typically union follow-on step: threatening a union boycott of Wells Fargo if the bank doesn’t end its relationship with the National Rifle Association and with those manufacturers.

We’re issuing Wells Fargo an ultimatum.  They can have a mortgage market that includes America’s teachers, or they can continue to do business with the NRA and gun manufacturers. They can’t do both.

The rest of us, including banks, have rights, too.  Wells Fargo is resisting Weingarten’s ultimatum, which if widely acceded to will leave the very people she pretends to want to protect utterly defenseless.  Wells should advise her and her union supporters to not let the door hit her in the fanny on the way out.

And the rest of us should push the harder for schools that aren’t unionized.  Wells’ products, along with the NRA’s and manufacturers’, are quality products.  The same can’t be said for the AFT’s products.

Messaging and the Midterms

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Here’s a bit about income taxes, via Laura Saunders in Friday’s Wall Street Journal.

For 2018, households in the top 20% will have income of about $150,000 or more and 52% of total income, about the same as in 2017. But they will pay about 87% of income taxes, up from about 84% last year.

And

[T]he lower 60% of households, who have income up to about $86,000, receive about 27% of income. As a group, this tier will pay no net federal income tax in 2018 vs. 2% of it last year.

And this:

…the top 1% will pay for 43% of income tax, up from 38% in 2017.

So much for tax cuts being for the benefit of the rich.

Here’s another bit about who pays and who benefits:

[I]ncome includes earnings from wages and investments plus untaxed amounts, such as from health coverage. These additions nearly double the income of people in the lowest tier and add about 20% for those in the highest tier.

Republicans are shockingly silent about this in their respective local press outlets.  If they don’t start getting these messages out to their constituents early and often, each mid-term candidate needs to fire his communications director and replace him with someone who knows how to talk to local folks.

A Simple Solution to the US-PRC Trade Dispute?

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More like a simplistic one.  Martin Feldstein, ex-Chairman of the Council of Economic Advisers under President Ronald Reagan, has one, summarized by the headline and subhead in his Wall Street Journal op-ed:

How to Make Trade Peace With China
A mutual promise to abide by the WTO’s intellectual property rules would solve much of the problem.

Feldstein is…naive. By his own acknowledgment later in his piece, the PRC routinely violates WTO rules–and international court rulings, lately seen by the PRC’s refusal to abide by a Hague ruling against them regarding the Spratly Islands. The PRC will promise to abide by the WTO’s intellectual property rules?

The PRC government’s word is worthless.