October 18, 2018

Tucker Carlson Feeling the Bern Illustrates Conservatism’s Hostility to Free Markets

screenshot-2018-08-31-at-92959-amTucker Carlson is feeling the Bern on at least one well-established left-wing narrative: that corporations are robbing everyday Americans by paying their workers so little that many of them qualify for food stamps or other welfare benefits. Thus, the founders of Amazon, Uber, Walmart, and other corporate behemoths get richer while taxpayers are forced to pay part of their labor costs.

Carlson appears honestly surprised to be saying “Bernie is right,” referring to U.S. Senator Bernie Sanders, who plans to introduce legislation forcing corporations to “pay back” the government by taxing corporations at 100 percent of all food stamps, public housing, Medicaid, and other federal assistance paid to their employees.

He shouldn’t be.

Conservatism shares the same hostility to laissez-faire markets as modern liberalism. Both are ultimately collectivist philosophies, hostile to liberty in general, albeit for slightly different reasons, and prone to economic fallacy to rationalize that hostility.

First, to the economic errors. It’s hard to believe Carlson could get so many things wrong in under five minutes, starting with his general premise. He and Bernie argue the problem is the corporations not paying enough, resulting in taxpayers having to pick up the slack. But business enterprises in a free market are supposed to seek the lowest prices they can find for labor and other inputs. That’s how market economies drive down the costs of consumer goods and make all members of society richer.

The problem isn’t businesses acting in their economic self-interest; it’s the existence of the welfare programs themselves. They are an intervention in the market that distorts the price of labor. If they did not exist, the market would naturally set labor prices higher because employees wouldn’t accept jobs that didn’t pay them enough to cover the necessities currently subsidized by the programs.

Read the rest at Foundation for Economic Education…

Tom Mullen is the author of Where Do Conservatives and Liberals Come From? And What Ever Happened to Life, Liberty and the Pursuit of Happiness? Part One and A Return to Common Sense: Reawakening Liberty in the Inhabitants of America.

Society is in every state a blessing, but government…

DENVER, CO - JUNE 16: The TSA security lines in the main terminal are crowded with vacation travelers on June 16, 2013, in Denver, Colorado. Located 25 miles from downtown, Denver International Airport is the largest airport in the United States. (Photo by George Rose/Getty Images)

DENVER, CO – JUNE 16: The TSA security lines in the main terminal are crowded with vacation travelers on June 16, 2013, in Denver, Colorado. Located 25 miles from downtown, Denver International Airport is the largest airport in the United States. (Photo by George Rose/Getty Images)

This thing we call “society,” which Thomas Paine correctly observed is separate and distinct from government, is basically an economic arrangement. The basis of and primary reason for society is people exchanging their various goods and services with each other.

I wonder how many hundreds or thousands of years more it will take for people to realize what should be blatantly obvious: that every set of exchanges in which government is heavily involved, by either subsidizing, regulating (aka “protecting established firms from new competition”), or downright monopolizing it, is painful. All these sectors (education, health care, air travel, etc) share the same characteristics: poor service, no accountability, high prices, incredibly outdated, bureaucratic procedures (paper forms, long lines, etc), and lack of choices or options, just to name a few.

Conversely, every industry in which government has low or zero involvement has precisely the opposite characteristics: constantly lower prices, better and always improving service, absolute accountability (you go to a competitor if you’re not happy), cutting edge technology (phone apps, automated texts, etc) and constantly improving ease of use and convenience.

Anyone not completely blinded by their emotions (mostly envy) can see glaringly obvious cause/effect relationships that lead inevitably to one conclusion:

All advancement in human happiness results from markets and other voluntary cooperation and virtually all human misery is rooted in government.

One would think a light bulb would go on sooner or later for most people and government would be banished from most or all human interaction.

Instead, it’s “Thank you sir, may I have another!” ad infinitum.

Tom Mullen is the author of Where Do Conservatives and Liberals Come From? And What Ever Happened to Life, Liberty and the Pursuit of Happiness? Part One and A Return to Common Sense: Reawakening Liberty in the Inhabitants of America.

 

The Jobs and GDP Growth Aren’t There Because Taxes Weren’t Really Cut

s and p one year triangleU.S. stock markets remain volatile and their direction uncertain, although the S&P 500 may have broken out of what technical traders would call a “bullish triangle,” which began forming after the market fell approximately 12 percent in early February from a high of 2,872 the previous month. However, traders will also tell you every technical pattern can tell at least two stories. One must look to the fundamentals for confirmation, and they have been anything but unanimous on the underlying economy.

Stagnant Growth

Corporate earnings have been strong, but that may not be a real indicator of economic growth as much of the earnings per share increases are due to stock buybacks rather than organically increasing profits. And jobs numbers continue to disappoint. Not only did April’s number come in lower than expectations, January’s number was adjusted down by a whopping 63,000 jobs.

Job growth for the first four months of 2018 is still ahead of 2017, but by a lot less than previously thought and we don’t know if March and April numbers will be adjusted downward. Consumer spending remains weak, and surging energy prices, especially gasoline, may continue to eat up what would otherwise be discretionary spending dollars for average households. While unemployment is at or near record lows, so is workforce participation, a statistic conservatives seem to have completely forgotten about since President Trump was inaugurated.

GDP growth slightly beat expectations at 2.3 percent but is far below the 5.4 percent predicted by the Atlanta Federal Reserve just two months ago. Despite missing the real number by a country mile, the same institution isnow predicting 4.0 percent growth for Q2. Why should anyone expect this “irrational exuberance” to be any more accurate than last quarter’s?

Tax Cuts?

The trump card (pun intended) is supposed to be tax cuts. Although they obviously haven’t delivered the jobs or growth promised to date, sooner or later the supposedly smaller slice the government is taking must result in more domestic investment, jobs, production, and growth.

The problem is taxes haven’t really been cut. They’ve simply been deferred. The federal government is going to spend more this year, and every year for the foreseeable future, than in any year in U.S. history. That spending is ultimately going to be paid with taxes, either now or in the future.

Read the rest at Foundation for Economic Education…

Tom Mullen is the author of Where Do Conservatives and Liberals Come From? And What Ever Happened to Life, Liberty and the Pursuit of Happiness? Part One and A Return to Common Sense: Reawakening Liberty in the Inhabitants of America.

Why the Bull Market May Be a Jedi Mind Trick

Publication1The Bureau of Labor Statistics reported Friday that over 300,000 jobs were created in February, making it the best single-month total since July 2016. And unless you’ve been exploring the Arctic Circle or were kicked off Twitter for expressing politically incorrect views, you know that’s just the latest “great” news about the booming economy, bull market in stocks, and, best of all, the significant new job creation since Donald Trump became president.

Certainly, there is no denying that the stock market has continued to rise, with the S&P 500 up over 27 percent since 11/7/2016, as of this writing. But as for the overall economy and, specifically, job creation, even the Trump-hating liberal media seems to have fallen for an economic Jedi mind trick. Regardless of single-month spikes like the one that occurred last month, it only takes one click of the mouse to see that job creation continued to fallin 2017, as it had the previous two years. Looking at yearly totals over the past ten years, job creation looks a lot more like a protracted version of the last business cycle leading up to the 2008 crash.

Read the rest at Foundation for Economic Education…

Tom Mullen is the author of Where Do Conservatives and Liberals Come From? And What Ever Happened to Life, Liberty and the Pursuit of Happiness? Part One and A Return to Common Sense: Reawakening Liberty in the Inhabitants of America.

Economics Was Invented to Refute Trump’s Tariff Arguments

twoboatsWhen Adam Smith wrote Wealth of Nations, it wasn’t to refute the “godless socialists” 21st-century Republican voters believe are taking over the world. It was to refute the kinds of protectionist ideas championed by conservatives like Edmund Burke and Alexander Hamilton in Smith’s day, Abraham Lincoln eighty years later, and Trump today.

Bastiat remade Smith’s case in 1848. Henry Hazlitt did so again in 1946. Still, these economic fallacies persist because they offer the victims of other bad economic policies villains they can blame for largely self-inflicted wounds.

The Broken Window Fallacy

Every time a Trump supporter sees “Made in China” on a pair of sneakers, he throws up his hands and says, “Do you see that? They’re stealing our manufacturing jobs.” He then repeats a version of Bastiat’s broken windowfallacy. It goes something like this:

China puts tariffs on our products so our exports can’t compete in its markets. But we don’t put tariffs on China’s exports, making their sneakers cheaper than we can make them here. American sneaker manufacturing jobs go to China, but no Chinese manufacturing jobs come to the United States.

Not only do millions of Americans lose their jobs, say the protectionists, but all of the money they would have spent domestically is instead spent in China. This causes other American businesses to fail, cut production, or not expand as much as they otherwise would. The unemployed American factory worker doesn’t eat out at the local restaurant. The restaurant needs fewer wait staff and cooks, who in turn don’t have money to spend on new clothing, etc.

As Bastiat would say, this is “what is seen.” But their argument ignores what is unseen.

What is unseen is the money American consumers no longer have when the tariffs are put in place. For example, the tariff may result in them paying $200 for the same pair of sneakers they previously paid $100 for. That means they no longer have $100 they previously had after buying the sneakers, which they could spend on other products. Whatever jobs they were supporting with that $100 are now lost.

Read the rest at Foundation for Economic Education…

Trump and His Supporters Make the Bubble Economy Great Again

blowingbubbles“Well, you know, the participation rate is going to go down over time because all these boomers are retiring,” said Jon Hilsenrath on Fox Business’ “Mornings with Maria” Friday. Hilsenrath, a frequent guest, was referring to the labor participation rate, which measures the overall percentage of workers who are presently employed. It differs from the unemployment rate in that the latter only counts those actively looking for work.

The Participation Rate

Hilsenrath’s statement would have been rather uncontroversial if it weren’t for the previous, eight-year cacophony from conservatives on how falling unemployment numbers were misleading. After every jobs report during Obama’s presidency, Republicans would, without fail, point out falling participation rate numbers, concluding, “People aren’t going back to work; they’re just giving up looking for work.”

While there undoubtedly were some conservatives who acknowledged that some part of the participation rate decline represented people who were just retiring (perhaps even Hilsenrath himself), this writer never heard it mentioned on a conservative program once. Not a single time in eight years.

Perhaps aware of the context, Hilsenrath went on to say, “The fact that it’s held steady is a sign that people that aren’t aging, you know, older people, are coming back into the labor force and that’s a good sign. I’m watching the unemployment rate today. We talked about this earlier. If it goes below four percent, then that shows me an economy on fire.”

Not to pile on, but even the participation rate “holding steady” began during Obama’s presidency, the last dip below 63 percent coming in 2015, followed by a recovery to 63 percent in early 2016 that has held steady ever since.

The President Doesn’t Really Matter

This is not meant as an endorsement of Obama’s economic policies nor necessarily criticism of President Trump’s. Rather, it is an acknowledgment that long-term trends in these metrics haven’t really changed since 2010, other than a leveling off in the labor participation rate, and neither president has had much to do with them, regardless of what they or their supporters would like you to think.

Read the rest at Foundation for Economic Education…

Tom Mullen is the author of Where Do Conservatives and Liberals Come From? And What Ever Happened to Life, Liberty and the Pursuit of Happiness? Part One and A Return to Common Sense: Reawakening Liberty in the Inhabitants of America.

You Deserve a Tax Break and Your Boss Does Too

taxbreak_mini 3Republicans during the Reagan and Bush administrations had a pretty straightforward fiscal policy: increase federal spending dramatically and cut marginal income tax rates modestly, predicting the resulting economic growth would eventually balance the budget. Both administrations increased spending roughly 80-100 percent, depending upon where you draw the start and end lines, given the government’s fiscal year running October 1 – September 30. Predictably, federal debt exploded during both administrations.

This time around, some things are the same, but some are different. The predictable (and predicted) growth of entitlements and the quasi-religious belief military spending must always increase (the military must be “rebuilt!”) has produced what should be a frightening result: federal debt doubled during a Democratic administration under which federal spending increased a mere 28-33 percent, again depending on where you draw the lines.

It’s All Class Warfare

So, the usual Republican modus operandi is not going to fly this time around. Not only have Republicans run on making government smaller, before again blowing up spending once they got in power, but they’ve railed for eight years against Obama’s debt legacy.

They can’t just ignore deficits as they have in the past and expect to win again in future elections, so they’re left with only one choice: “reform” the tax code so it collects the same or more revenue and sell it as a tax cut.

That’s not to say it’s going to work. Federal tax revenue will likely decrease overall under their plan, despite their efforts to raise taxes on some people while cutting them for others. But Republicans can ignore reality as well as Democrats when they need to. If you doubt that, ask any ten Republicans at random if the government got bigger or smaller while Reagan was president.

Republicans are also virtually identical to Democrats in their Marxist view of society.For Republicans, just like Democrats and communists, it is made up of different “classes” of people, competing with each other in a zero-sum game for pieces of a static, finite “pie.” This is explicit in their rhetoric about “tax cuts for the middle class” or the sublimely obtuse “working class” (doesn’t anyone generating an income, large or small, work?)

While it’s true the idea of classes in society predates Marx, it is his vision which dominates the tax code, most strikingly in its assumption there is some fundamental difference between employees of going concerns and owners.

Read the rest at Foundation for Economic Education…

Tom Mullen is the author of Where Do Conservatives and Liberals Come From? And What Ever Happened to Life, Liberty and the Pursuit of Happiness? Part One and A Return to Common Sense: Reawakening Liberty in the Inhabitants of America.

An Extended Tax Reform Debate Will Subject Us to the Usual Absurdities

liarJohn McCain’s confirmation he’d vote against the House tax reform bill as currently proposed means Republicans won’t be able to lower taxes – for some people – nearly as quickly as most of them want to. In all, three Republican senators have indicated their unwillingness to vote for the plan, meaning Republicans would need Democratic votes to get it through.

As Democratic support is unlikely, the American public will have to endure several weeks or months of grandstanding, proposed amendments, and further neutering of any real benefit to taxpayers. The worst thing about these rituals is they are always largely a debate over absurdities. Here are just a few of the perennial favorites.

Over Ten Years

Both sides of any tax and spending debate use the “over ten years” canard. Those politicians claiming their plan will “balance the budget” claim their bill will do so in ten years, always after increasing spending this year. Those opposing the same plan will pick out spending lines they don’t like, whether increases, decreases, or new spending, and use the ten-year canard to make the impact seem bigger than it is.

For example, if Republicans proposed cutting $100 billion from domestic spending (a mere 2.5% of the overall federal budget), Democrats would wail Republicans were depriving the public of $1 trillion of desperately needed services. Republicans would claim they were saving taxpayers $1 trillion. Neither side would acknowledge the $1 trillion is a rather small percentage of the ten-year federal budget.

In reality, Congress has no power to pass any bill that can’t be changed in as little as two years. Spending bills are debated every year. So, anything politicians say and the media parrot regarding a spending bill’s effects over the next ten years is largely hot air. All that really matters is what their proposals will do next year. And that news is virtually never good.

Read the rest at Foundation for Economic Education…

Tom Mullen is the author of Where Do Conservatives and Liberals Come From? And What Ever Happened to Life, Liberty and the Pursuit of Happiness? Part One and A Return to Common Sense: Reawakening Liberty in the Inhabitants of America.

Trump’s Embargo on North Korea Is the Precursor to a War

170403091619-kim-jong-un-donald-trump-split-0403-exlarge-169

Not even President Trump’s harshest critics blame him for creating the North Korean problem. The Kim Jong-Un regime’s nuclear weapons capabilities and willingness to brandish them goes back over a decade, to when Kim’s father was still the ruler.

And while each successive U.S. administration has approached North Korea slightly differently, one thing has remained constant: tens of thousands of U.S. troops on North Korea’s border, maintaining a standoff that just passed its sixty-fourth year.

The other constant, since North Korea’s first nuclear weapons test in 2006, has been economic sanctions imposed on the regime under the auspices of the U.N. Security Council. These sanctions began strictly limited to trade directly related to the regime’s nuclear program and gradually widened to include financial and other trade categories.

One need only read this morning’s headlines to judge their effectiveness.

But over the weekend, President Trump saw every president before him and raised them with this tweet:

Read the rest at Foundation for Economic Education…

 Tom Mullen is the author of Where Do Conservatives and Liberals Come From? And What Ever Happened to Life, Liberty and the Pursuit of Happiness? Part One and A Return to Common Sense: Reawakening Liberty in the Inhabitants of America.

“Price Gouging” in the real world.

waterArt1Whenever there is a natural disaster, we see two things: the best in human generosity, courage and resilience and the worst in economic ignorance. The former includes individuals rescuing stranded neighbors, volunteers lining up to join charity relief efforts, and corporations martialing their vast resources to pour needed items such as food, bottled water and clothing into devastated areas. The latter includes “economists” repeating the age old broken window fallacy and politicians denouncing and threatening so-called “price gougers.”

Emotions run high during disasters, which is a double-edged sword. The outpouring of sympathy for the victims leads to extraordinary efforts in assistance. But it also leads to irrational resentment of those whose actions are often vital to human survival, but whose motives are judged inferior. These are, of course, the aforementioned price gougers.

One of the weaknesses in rational responses to the accusation of price gouging is just that: they appeal to reason when the accusation is born of emotion. And that disconnect is an irrevocable one until the accuser can be persuaded to look at the situation reasonably. But once so persuaded, the accuser often voices the understandable objection that economic arguments rooted in supply and demand charts and theory are too removed from what the accuser considers “the real world.”

Here, then, is a “real world” scenario in which the actors respond to incentives just as anyone in similar situations have countless times in the past:

There is a hurricane and flooding. Drinkable water is in short supply. A man has $100. He needs a case of water to get his family of three through the week.

He walks into the store, where water is $25/case. There are 4 cases left on the shelf. He needs one, but  can afford 4 and he doesn’t know how long the emergency will last. So, he buys all 4 cases.

Immediately afterwards, a family of five walks into the store with $100. There is no water to buy at any price. This family is now in desperate straits and must look elsewhere to procure what they need to survive.

Can anyone dispute the actors in this little parable have acted rationally and precisely as they would in the real world? No. Neither have any acted in a malicious or overly selfish manner. All have made the best choices among the alternatives presented them.

Now, change the price of a case of water in the above scenario to $100/case. What would be different? Of course, the man with a family of three would now only be able to buy one case of water, giving him what his family needs, but not necessarily as much insurance against future uncertainty as he would like. He gives up a little, but the family of five whose survival was in grave danger in the $25/case scenario is now able to purchase at least one case of water.

In the latter scenario, both families have enough to survive and a strong incentive to conserve water, thereby reducing demand and lowering its price, all other things being equal.

The so-called “price gougers” may have acted in their own interests, but they have not only benefited society economically, they have saved the lives of the family of five. Thus, Adam Smith’s 241-year-old “invisible hand” is confirmed by the real world yet again.

But there are still those who claim that, while the price gougers have acted rationally and within their rights and may even have inadvertently benefited others, they have still acted immorally. In the case of the recent hurricane in Texas, many say,

“No, you don’t understand. Many of these people aren’t even from Houston. They knew the hurricane was coming and bought up a bunch of water at regular prices, with the express intent of coming to Houston and selling it for huge profits, while others were giving water away for free. That’s immoral!”

First, anyone selling water at any price is obviously serving people who don’t have access to the free water. If the buyers had access to free water, they wouldn’t pay for it, at inflated prices or not.

Second, this sanctimonious moralizing begs the question, “Why didn’t you buy up a bunch of water and go to Houston and sell it at regular prices?”

The answers to the latter question are many, but they can be summarized as follows: most people do not have the time, capital or expertise to do what the price gougers did. Who can afford to take off from their own job or cease running their own business to start a whole new one on a few days notice, much less donate their time? Some can, but not most, which is why after all those who can be by charitable work are served, there is still a market for those seeking profits.

Lost in all the moralizing is the reality that the so-called price gougers face all the same challenges as anyone else, having to forego whatever income they otherwise would have earned if not for their disaster-relief project, and face the risk of losing future income because they took off from their jobs or put their own regular businesses on hold. These losses and risks must be compensated, which is another reason they sell products at a premium price, in addition to supply/demand realities.

Thus, in the real world, even with as many people as are able acting as charitably as possible, there is a need for those seeking profits from higher-than-normal margins, whose self-interested actions save lives and mitigate the devastating effects of disasters. Yet, the rest of the world condemn them and governments seek to punish them, threatening not only the price gougers, but those whose lives they may save or whose suffering they may lessen during the next disaster.

Tom Mullen is the author of Where Do Conservatives and Liberals Come From? And What Ever Happened to Life, Liberty and the Pursuit of Happiness? Part One and A Return to Common Sense: Reawakening Liberty in the Inhabitants of America.