Tag Archives: political economy

Outcome Inequality

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The Daily Caller is writing about “The Inequality Trap,” in the context of income inequality.  Indeed, TheDC points out the hypocrisy generally inherent in the plaints:

At the World Economic Forum in Davos, Switzerland, last week, heads of state and billionaires from around the globe lamented the fact that some people are not as well off as they are, and called for government to do something about it. Then they went skiing.

And our favorite uncle Warren Buffet decries the premise that he pays less (income) tax than his secretary and wants government to raise his taxes—all the while declining to make donations to the Treasury and while doing everything legally within his and his accountants’ skill to reduce his own total tax bite.

Income or tax inequality, though, is just a small part of a larger item—inequality of outcomes generally.  The fact is, we can have equality of opportunity, as the principles statement of our social contract, or Declaration of Independence, promises us; or we can have equality of outcomes, as the Progressives today want us to have.  We can’t have both.

Not every individual has the same degree of talent, or capability, or work ethic of every other individual.  John Adams understood this:

Although, among men, all are subject by nature to equal laws of morality, and in society have a right to equal laws for their government, yet no two men are perfectly equal in person, property, understanding, activity, and virtue, or ever can be made so by any power less than that which created them.

Forcing equal outcomes, then, is nothing more than denial of a more successful man’s right to the fullness of his Liberty and Life by denying him the right to the fruits of his success, his right to achieve his fullest potential, and it holds him back for no other reason than that others have not kept up.  This also subsidizes the less successful so they have the same outcomes as the more successful independently of their own labors.  This government subsidy, then, usurps that individual’s right to make his own decisions and makes the government responsible for each individual’s welfare, eliminating that individual’s own responsibilities and obligations.

But restraining the more successful, or subsidizing the less successful, are the same thing: the more successful are denied full value for their work, their talent, and their skills.  In the first instance, the more successful are held back directly, with the full measure of their success denied them.  In the second, the more successful are denied the same extra return to their performance that is awarded the less successful through subsidy.  Here, for instance, is every child receiving a prize, independent of the outcome from his effort or skill or talent, and so both the self-esteem of the child who did not do well and that of the child who won the competition are damaged by not being able to reap a reward consistent with actual effort or reap the consequences of failure and the opportunity to learn from that—with its own concomitant return to self-esteem.  Each child functionally receives only a participation award.  Here, too, is the high school orchestra, having won a state-wide competition in one year denied by rule the opportunity to compete at all in the following year.  This punishment for success denies the successful orchestra the opportunity for further success, and it denies the newly “winning” orchestra the opportunity to show that it is truly the best by outperforming last year’s winner.  Here, too, is the man who worked hard, both at the particular endeavor and at acquiring the skills necessary for success in the endeavor, and who was able to bring his talent to bear, being forced to give up some portion of the results of his more successful effort to another who did not do as well.  This concept of equal outcomes punishes the successful for their success, and it denies the unsuccessful the opportunity to do better and to become successful in their own right.

Instead, under our social compact, each American has an equal opportunity to achieve his version of the American dream, to achieve the full potential of his own capabilities.  This necessarily produces unequal outcomes when measured merely by fiscal wealth or material possession.  However, this equal opportunity is a grand implementation of American rights and liberties, as it provides the greatest equality for the protections of each one’s existence, rights, freedoms, and social well-being.  This also produces the greatest moral strength.

Thomas Jefferson understood this, too:

To take from one, because it is thought his own industry and that of his fathers has acquired too much, in order to spare others, who, or whose fathers have not, exercised equal industry and skill, is to violate arbitrarily the first principle of association, the guarantee to everyone the free exercise of his industry and the fruits acquired by it.

State of the Union

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Third verse, same as the first.  President Obama’s speech Tuesday night before the Congress, although couched in rousing terms of “teamwork” and “rebuilding America,” was in the end just more of the usual Progressive fare of class warfare, higher taxes and spending, and bigger government.

While promising to work toward job creation, Obama already has cancelled the Keystone XL pipeline, which would have been worth a prompt 20,000 construction and construction-related jobs and an additional 100,000 plus follow-on, more permanent jobs.  While promising vast reductions of intrusive regulations (he actually cited only a single elimination, that of 40-year-old regulation concerning treating spilled milk as an oil spill), his EPA has been running amok with intrusive regulations, from dictating the light bulbs we’re allowed to have in our bed- and bathrooms, to closing down badly needed electricity power plants (with their jobs and the jobs of the businesses that need that power) with excessive “pollutant” regulations that will do nothing to improve our environment or our health, to expanded regulations in the medical device industry that will stifle innovation in that vital area, and on and on.

He wants to reform our tax system, he said, but only to raise taxes on disfavored groups while “reforming” it through extending a payroll tax holiday that guts funding for Social Security;  “double[ing] the tax deduction” for businesses that manufacture in the US, adding to the Byzantine complexity of our corporate tax code; taxing revenue (all of it) from the sale of those severely regulated medical devices; and so on.  But he refuses to accept an overall reduction in income taxes in substitution for that general payroll tax reduction, he refuses to simplify the code and reduce the rates for all corporations—or for all individuals.  Instead, he wants to raise taxes on his “wealthy,” the top 5% of whom pay nearly 60% of the nation’s income taxes, while he refuses to talk about the taxes of the 50% of Americans who pay around 3%-4% of the nation’s income taxes while.  He wants to eliminate the tax breaks for

an [oil and gas] industry that’s rarely been more profitable, and double-down on a clean energy industry that’s never been more promising. Pass clean energy tax credits….

Yes—he refuses to eliminate the same subsidies for his “green” energy efforts, like Solyndra, et al.

Obama said he wants an “an economy where everyone gets a fair shot, everyone does their fair share, and everyone plays by the same set of rules.”  This from the president that shoved senior creditors (at least as defined by existing bankruptcy law) to the back of the bus and gave preferential treatment to his union donors in the government-union takeover of GM and Chrysler.

And he promised openly to continue to govern by fiat whenever our democratic process won’t let him get his way:

With or without this Congress, I will keep taking actions….

Next, there are factual errors in Obama’s speech.  He claimed that Obamacare “relies on a reformed private market, not a government program.”  But the fact is that fully half the more than 30 million currently uninsured are expected to receive coverage through government programs, while the other half are expected to be enrolled in government-approved “private” health insurance through state-based insurance markets.  Moreover, many of these will be get federal subsidies to do so.  Further, Medicaid will be expanded drastically.

And there’s this:  “On the day I took office, our auto industry was on the verge of collapse. Some even said we should let it die. With a million jobs at stake, I refused to let that happen.”  I’ve addressed above some of the corrections to this claim.  Here’s more: the bailout actually began under President Bush the Younger.  Ford, though, the other member of the American auto industry as Progressives define it (eliding Toyota, Nissan, Honda, Volkswagen, etc. that also have major manufacturing plants in the US and so are key participants in the American auto industry) took none of the bailout money.  Furthermore, if we’re limiting the “American auto industry” in the Obama manner, Chrysler is no longer a part: it’s owned by Fiat, an Italian company.

Finally, although Obama gave short shrift to America’s foreign affairs, he did claim this.  “The Taliban’s momentum has been broken, and some troops in Afghanistan have begun to come home.”  However, the latest National Intelligence Estimate says that the Taliban will grow stronger, and it’ll use Obama’s unilateral offer of “negotiation” for delay.  The NIE adds that the Taliban in fact will end controlling the Afghan countryside—which gives it the cities

Hasn’t Our Economy Been Managed Disastrously Enough?

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Congressman Dennis Kucinich (D, OH) considers that the oil and gas businessmen are greedy b*stards, and they cannot be trusted.  He wants to put their business’ profits under government control—and not just any part of government; he wants to cut the Congress out of the picture and set up another Board for President Obama.  He’s joined by five more Democrats.

The Democrats, worried about higher gas prices, want to set up a board that would apply a “windfall profit tax” as high as 100 percent on the sale of oil and gas, according to their legislation. The bill provides no specific guidance for how the board would determine what constitutes a reasonable profit.

This “Reasonable Profits Board” is intended to control gas profits in the industry.

Further, in an amazing display of economic ignorance, the bill Kucinich proposes actually requires, in all seriousness, that it’s the oil and gas companies who must pay the tax.  They really don’t believe that the cost increase would be passed on to the customers.  They really don’t understand that the tax, and the cost bump to the end user, would simply depress the business’ ability to fund their own operations, expand hiring, search for more oil and gas supplies, conduct R&D, and so on; and it would similarly reduce consumers’ ability to put food on their tables and pay their rents.

But it’s all for a good cause.  Kucinich earmarks the taxes for funding alternative transportation programs when oil-and-gas prices spike.  This is just ridiculous on its face.  If those “alternative transportation programs” were any good, they wouldn’t need government subsidies—your tax monies—to compete in the market.  Just look at how the Obama High Speed Rail boondoggle, including the California bullet train, for instance, have turned out.  See who’s left holding the bag for that “alternative transportation program” stuff and nonsense.

I’m a bit confused by another aspect of this proposal, though.  It’s a lot of trouble to get such legislation passed these days, especially with unruly Republicans running amok in the House.  It would be a lot easier just to have the EPA issue a rule.

The other Democrats who are pushing this invasion of the free market are these

  • John Conyers, Jr. (D, MI)
  • Bob Filner (D, CA)
  • Marcia Fudge (D, OH)
  • Jim Langevin (D, RI)
  • Lynn Woolsey (D, CA):

All six need to be replaced at the 2012 election, if not in the Democratic Party primaries leading into the election.

Keystone XL: Too Many Jobs

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Take some of them out.  President Obama has chosen to kill the Keystone XL pipeline project, which aside from contributing to reducing our dependence on overseas (literally—and so especially vulnerable) oil, would have generated some 20,000 jobs in the near term and a few hundred thousand long term jobs from work in follow-on and associated enterprises.

Naturally, it’s those evil Republicans, who imposed an arbitrary deadline on his “environmental” assessment process, that are to blame, he says.  Of course, he ignores the fact that the environmental assessment—which had already taken three years—was complete, and that’s why it was in the State Department’s hands in the first place last fall, when he first tried to duck the question.  What’s arbitrary is his decision to cancel the project, a decision that he thought needed to be delayed for more than a year that has now been made fully a month ahead of a deadline set solely to stop his stalling.

It’ll be interesting to see the justification Obama is required by law to provide Congress to explain his decision (which explanation he would have been required to provide had he approved the pipeline, also).

In the meantime, we have these Alinsky-esque obfuscations to keep us distracted.

When President Obama took office, the United States imported 11 million barrels of oil a day. The President has put forward a plan to cut that by one-third by 2025 by…transitioning to a wide range of clean energy technologies [among other means].

and

[T]he Department of Energy’s (DOE) Loan Guarantee Program has already supported more than 40 clean energy projects….

Clean energy projects like Solyndra, Beacon, Evergreen Solar, AES Eastern Energy LP.

The White House goes on:

[T]wo of the Administration’s programs – the DOE Loan Guarantee Program and the EPA’s Mercury and Air Toxics Standards – will create more than 10 times the amount of jobs generated by the Keystone XL pipeline, which will only generate a few thousand temporary jobs.

The DoE’s Loan Guaranty Program’s effectiveness can be seen above.  The EPA’s Mercury and Air Toxics Standards already are costing jobs as coal-fired electricity generating plants are shut down, eliminating jobs permanently in those closed plants.  The EPA’s program also is costing jobs at the small businesses that depended on those plants for their power.  These jobs are lost, at best, for the intermediate term, until the businesses can restart when new plants come on line in a few years—for those businesses that can restart.  Yes, the EPA’s Standards will provide jobs for the conversion and compliance tasks mandated—but it’s these jobs that are the temporary ones.

Obama has opened another front in his class warfare election campaign: this time between his overzealous “green” backers and (erstwhile) working Americans.

An Example of Centrally Managed “Capitalism”

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In the People’s Republic of China, reports The Wall Street Journal, the urban population has, for the first time in Chinese history, now exceeded the rural population.  This situation serves as a backdrop for some of the problems in China’s centrally managed economy.

One problem involves access of the newly migrated people to public services in their new cities—accesses their already resident neighbors have.  It seems Chinese can only have access to public services in the towns and villages they’ve just left, because that’s where their families have been registered.  Under China’s household registration system—intended to rationmanage access to such services so as to prevent their being overwhelmed—only registered households can avail themselves of the public’s weal.

More importantly, such property rights as a Chinese citizen might have, have gone by the boards.  It seems that city—and village—managers are seizing farmers’ land that lies on the margins of the rapidly growing cities, and on the edges of the just departed villages, too.  In fact, farmers on the outskirts often are willy-nilly uprooted and moved into apartment complexes so their land, including the old homestead, can be consolidated into larger tracts.  Bigger farmers know better how to run the farmland, after all, and more lucratively, developers can take the land out of production and turn it into shopping malls and luxury homes for the growing populations of middle class and wealthy.  Just to rub salt into the farmers’ wounds, the urban leadership pays the farmers a token for their land (it’s not an outright confiscation), and then charges market rates as they flip the land to developers, pocketing the difference—ostensibly for the town or city budget.

The Chinese government seems powerless to stop this.  The local central managers insist they need the income from their land flips to “maintain growth, service debt and top up their budgets.”  Further, pressure to continue the practice will continue: Beijing intends to build an additional 36 million units of affordable “social housing” just in the next 5 years.  Those buildings have to sit somewhere.  And this doesn’t consider the ordinary housing building that will occur for those who don’t need “social housing,” or all the building for all the supporting infrastructure—schools, shopping malls, government buildings, roads and streets, and the like—that will go up along with all that housing construction.

Hmm….