Tag Archives: Economics

How much money is ‘too much’?

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Thomas Sowell makes a great point in response to Obama’s rather bizzare statement that “at some point, you have made enough money”.  Sowell address this rather benign-sounding remark by pointing out that:

There is nothing wrong with my deciding how much money is enough for me or your deciding how much money is enough for you, but when politicians think that they should be deciding how much money is enough for other people, that is starting down a very slippery slope.

Politicians with the power to determine each citizen’s income are no longer public servants. They are public masters.

…Once you buy the argument that some segment of the citizenry should lose their rights, just because they are envied or resented, you are putting your own rights in jeopardy — quite aside from undermining any moral basis for respecting anybody’s rights. You are opening the floodgates to arbitrary power. And once you open the floodgates, you can’t tell the water where to go.

Now, some of you may read this analysis and say: well, we limit rights of individuals all the time, just because we limit this one right doesn’t mean we put all of our rights in jeopardy.  Well, you might be right.  Maybe we can still have some rights and not others… but who will get to decide what rights those will be?  And how many of them will we have?

If someone can just categorically say that he or she dislikes the freedom to earn the income you are capable of… and turn this personal preference into a moral axiom… what other personal preferences could just as easily be turned into axioms?  Could the right to other personal property be repudiated?  What about the right to political speech?  What about the right to due process?  Could we at some point have “too much” due process?  What about Children?  China already has proven THAT personal right can be trampled pretty easily if enough power is influenced on a population… what about our right to practice religion?

But these questions aside… assuming we got past the rather uncomfortable political conflict I just addressed;  assuming we accepted that government SHOULD have this prerogative… How are we to weigh and evaluate the value of one right vs the other?  Do we have a coherent framework to make this balancing process fair and equitable (and perhaps more importantly… subject to the will of society as opposed to the whim of those in power?)  I ask this rather rhetorically to point out that for those of you on the left… who are comfortable with Obama’s statement… you had better have ready answer to this question because if you don’t… than you have lost the debate.  If you don’t have a solution or a philosophy on balancing rights (and a way to enforce this process on those in power)… than we are not subject to anything other than the whims of those in power and Sowell would therefore be not only right but justified in his argument.

Now, philosophical arguments aside, I think the more important question is really this: what KIND of politicians do we want to be governed by?  Public masters or public servants?  I don’t know about you, but I’d prefer the latter.

via ‘Enough Money’ – Thomas Sowell – National Review Online.

Microsoft’s economic message

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It turns out that when you raise taxes on businesses… you push American jobs overseas.  Here’s Steve Ballmer yesterday:

June 3 (Bloomberg) — Microsoft Corp. Chief Executive Officer Steven Ballmer said the world’s largest software company would move some employees offshore if Congress enacts President Barack Obama’s plans to impose higher taxes on U.S. companies’ foreign profits.

“It makes U.S. jobs more expensive,” Ballmer said in an interview. “We’re better off taking lots of people and moving them out of the U.S. as opposed to keeping them inside the U.S.”

If we don’t provide a competitive tax environment for our businesses here in the U.S. then we will continue to loose jobs well into the next decade… far outpacing the 2.5 million jobs the stimulus supposedly ‘created’ (or was it 2.5 million saved?  who knows.)  The fact of the matter is that Obama has done NOTHING to reduce business costs…  NOTHING… even when those businesses are laying people off right and left.  In fact, he wants to RAISE the costs of doing business.

This is nothing more than economic ignorance on display.

via Ballmer Says Tax Would Move Microsoft Jobs Offshore (Update3) – Bloomberg.com.

Cosmic Justice – book review

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cosmic justiceOne of the major benefits of being done with lawschool and the bar exam is that I finally get to read — not what I HAVE to read — but what I WANT to read.  This disconnect has been going on for so long now that I have (literally) 10 books in a stack just waiting for me to read.

The first of these books is called “The Quest for Cosmic Justice” by Thomas Sowell.  Described by David Mammet (screenwriter, playright, director) as “Our greatest living philosopher”, Sowell certainly challenges all who read him and is exacerbates those who don’t.  His book explores the causes of (and failures that result from) a vision of justice held by many on the left — a vision dominated by what Sowell refers to as a pursuit “cosmic” (as opposed to traditional)  justice.  Cosmic, in this instance, refers to a desire to rectify inherent or “natural” inequalities. Sowell puts it this way:

Traditional justice can be mass-produced by impersonal prospective rules governing the interactions of flesh-and-blood human beings, but cosmic injustice must be hand-made by holders of power who impose their own decisions on how these flesh-and-blood individuals should be categorized into abstractions and how these abstractions should then be forcibly configured.

For Sowell, these inequalities are not necessarily desirable, but are realities caused by far more complicated circumstances than any politician can fully understand — or fully prepare for.  Sowell points to scores of examples including welfare, poverty, usually made worse by the policies of the self-appointed elite.

We must begin with the universe that we are born into and weigh the costs of making any specific change in it to achieve a specific end.  We cannot simply “do something” whenever we are morally indignant, while distaining to consider the costs entailed…

What, after all, is an injustice but the arbitrary imposition of a cost– whether economic, psychic, or other–on an innocent person?  And if correcting this injustice imposes another arbitrary cost on another innocent person, is that not also an injustice?

As soon as one starts asking whether the costs to one segment of society outweigh the costs to another segment, the process of creating “cosmic justice” becomes nothing more than a crude balancing of the equities, a fight for federal dollars — a corrupting process that almost never provides real relief.  In fact, the pursuit of social justice is not necessarily even an appropriate term:

In pursuit of justice for a segment of society, in disregard for society as a whole, what is called “social justice” might more accurately be called anti-social justice, since what consistently gets ignored or dismissed are precisely the costs to society.

The Quest for Cosmic Justice is not a learned treatice by any stretch of the imagination, it is in many ways a series of simple explanations about why social justice fails… and how we should approach issues of inequity instead of an analysis OF inequity.  Even so, I think what is so important about the book is the categorical framework Sowell suggests: Social justice is really anti-social justice, cosmic justice has nothing to do with “justice” at all but is instead the re-distribution of wealth to fix natural inequalities.  Conservative need to start approaching the world through the filter of these concepts… and hopefully we will convince others to do the same.

economic dream team *sarcasm*

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I’m not sure if this is ironic or just plain depressing.  Turns out that Obama is tapping Michigan Governor Jennifer Granholm, the most incompetent and financially damaging governor in Michigan’s history, to serve on his economic pannel.  GREAT, I just can’t wait for the next four years…

WASHINGTON — Gov. Jennifer Granholm and former U.S. Rep. David Bonior will serve on a panel of financial luminaries and corporate experts advising President-elect Barack Obama on the nation’s hard-bitten economy, ensuring Michigan, its troubled auto industry and labor has a seat at the table.

Granholm, Bonior join Obama’s economic transition team | Freep.com | Detroit Free Press.

“the system”

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I wanted to point you all to an outstanding point made by Lee Cary @ the American Thinker.

Here’s what he [Obama] said,

“But understand this: We also have to look at where some of our tax revenues are going. So when Sen. McCain proposes a $300 billion tax cut, a continuation not only of the Bush tax cuts, but an additional $200 billion that he’s going to give to big corporations, including big oil companies, $4 billion worth, that’s money out of the system.”

“The system.” What is this system to which Senator Obama referred?

This system is the federal government’s budget — the hub of Obama’s American economy – the center of the nation’s financial universe — the core of the American enterprise. It’s the federal government’s taxing system.

The center of his economic universe is the budget of the federal government.

Gas prices – 101

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The Liberty Sphere has the low-down…

The solution that many liberals are selling to a gullible public is to place a windfall profits tax on the oil companies. My friends, oil is already taxed at a rate that boggles the mind. For every 8 cents the oil companies make in profits, the federal government alone collects 18 cents in taxes, and that doesn’t count state and local taxes.

Actual gain vs. relative gain

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New figures from the Treasury Department indicate that the economic policies of the last 10 years have done overwhelming amounts of good for the poorest in our society.   Incomes from the lowest quintile (an arbitrary categorization in 5ths of wage earners) increased on average by 90%!  In layman’s terms, most of the poor in the U.S. have almost doubled their income in the last 10 years, while the top 2 quintiles even took a hit….

All of this certainly helps to illuminate the current election-year debate about income “inequality” in the U.S. The political left and its media echoes are promoting the inequality story as a way to justify a huge tax increase. But inequality is only a problem if it reflects stagnant opportunity and a society stratified by more or less permanent income differences. That kind of society can breed class resentments and unrest. America isn’t remotely such a society, thanks in large part to the incentives that exist for risk-taking and wealth creation.

The great irony is that, in the name of reducing inequality, some of our politicians want to raise taxes and other government obstacles to the kind of risk-taking and hard work that allow Americans to climb the income ladder so rapidly. As the Treasury data show, we shouldn’t worry about inequality. We should worry about the people who use inequality as a political club to promote policies that reduce opportunity.  (WSJ)

What I find most interesting in this report is that the quintiles are continually in flux; the poor are moving up and the rich are moving down on a continual basis.  As the Journal editor pointed out, there is REAL opportunity for the poor in this country; the concept of a permanent underclass is simply an inaccurate representation of our society.  

For that matter, the notion that the “rich” are getting “richer” — the implication being, of course, that some closed group of identifiable individuals is hoarding vast quantities of wealth for themselves and no one else — is also fundamentally wrong.  The “rich” are only those people who, in a given time period, happen to be making enough to be in the top percentile.  The facts indicate that individuals are falling out of this group just as quickly as new ones enter.  Is this continuous upward movement by the “less fortunate” something we should dis-incentive, or is this what makes our country great?  Discuss…

Some, such as John Edwards, Hillary Clinton, and others have argued that the wealth ‘gap’ is getting bigger because the increases in the higher quintiles, despite their lower percentage, translate into larger dollar figures.  I’m not going to debate that assertion, it is a fact.   However, to claim that that this is somehow unfair to the poor or is an outrageous claim. 

Say, for example, that one person from each quintile put 10% of their yearly salary into a bank account to earn interest.  After one year, the person in the highest tax bracket (who also put the most total $ into the bank) would have gotten the largest $ figure return on their investment.  Are we to believe that this practice is “unfair”, or that we need to remedy the situation so that the time value of money is less for people who put more cash into the system?  Is the time value of money working against the poor?  Of course not!  The investment system treats all money equally, and the people who invest more, very often get greater returns because of their volume.  Should those investing in higher volumes be treated less favorably simply because they have more money in the system?  Discuss…

My main point is that while ACTUAL gain of those in the top quintile is more, their RELATIVE gain is much less (and has been a net loss according to the data).  If the rich were almost doubling their income, I would be worried. However, this is not what the data shows and it is not the way a market system works. Making a breakthrough is much easier than staying in the lead.

When you boil it down, the income inequality arguments can be simplified to a single statement: “it is unfair for the rich to have more money than the poor”.  Period.