September 3, 2015

Trump’s Protectionist Fallacies Have Been Refuted By Free Market Economists for Hundreds of Years

n-ADAM-SMITH-largeIt’s easy to understand the visceral attraction to Donald Trump’s campaign. My own libertarian heart beats a little stiff when he waves the one finger salute at establishment institutions that crush our freedom, including the Republican Party leadership, the mainstream media and the useless D.C. politicians themselves.

It’s not what Donald Trump is against that bothers me. It’s what he’s for. So much attention has been paid to his immigration stance from a race perspective that no one seems to care how anti-free market his platform is. Trump is running on economic fallacies that have been consistently refuted by free market economists for hundreds of years.

When 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.

Read the rest at The Huffington Post…

 

Tom Mullen is the author of A Return to Common Sense: Reawakening Liberty in the Inhabitants of America.

 

Job growth in WNY has speed, but does it really have credibility?

Pair_of_2009_SolarCity_Dodge_SprintersA July 26 article in the Buffalo News rejoiced, “Job growth in WNY gains speed, credibility.” There is no doubt about the speed. The credibility may be another story.

Writer David Robinson gave due credit to “high-profile projects, from the Medical Campus to Solar City’s 1,500-employee solar panel factory, that are giving a jolt to the local job market, first because of all the construction associated with those projects, and eventually with the hiring that will take place as those businesses ramp up.”

What he didn’t mention was why those two sectors were enjoying such spectacular growth: tax breaks and other incentives provided by local, state and federal governments.

It has become fashionable to call tax breaks “subsidies,” based on the perverse idea the government not only has a legitimate claim to all wealth you’ve created in the past, but any you may create in the future. Tax breaks aren’t subsidies, but they are part of a larger economic system that has never worked.

Step One is to tax and regulate everyone into a state of complete economic paralysis. Buffalo’s local governments perfected that fifty years ago. They never got around to Step Two until now.

Step Two is to grant limited relief to those businesses who either represent something politicians like or who promise to deliver something politicians need. Solar City does both. They represent the green energy movement, the cause célèbre of politicians everywhere. They have also promised to create a significant number of jobs, which helps politicians get reelected.

This may seem like a win-win for everyone, until that buzzkill called “economic reality” turns on the lights and turns off the music. Growth created by government privilege almost always turns out to be temporary. Viable business plans don’t need government assistance to make a profit and create new jobs. They produce products customers are willing to pay for at a price that supports the company’s costs and profits.

Solar City may or may not have a viable business plan. We don’t know, because it is presently riding government “subsidies” in all its markets, not just in Buffalo. We do know its stock is down over 8% since it reported earnings in May. We’ll get another report later this week.

The risk is Solar City turns out to be another Chevy Volt, a product that never would have made it to market without similar assistance from the government. Despite that assistance, the product’s sales have consistently failed to materialize. The government continues to help keep the product alive, but if jobs were actually dependent upon producing it, they’d cease to exist. Chevy’s sales of viable products are what actually subsidize the Volt.

Not only does this form of central economic planning promote unviable business ventures over viable ones, it encourages businesses to do economically idiotic things, like hire more people than it needs. A June 11, 2015 article in the News lamented, “Billed by officials as creating 400 jobs, FedEx center in Hamburg will fall short of that tally.”

The article attempts to incite outrage that Fedex has reneged on its promise of 400 jobs in return for the tax incentives, although it acknowledges it may have been politicians who made that promise, not Fedex. Lost in all of this is the basic economic principle that a business venture is supposed to produce its product at the lowest cost possible. It’s economically harmful to everyone when it intentionally raises its costs for political reasons.

That the other significant contributor to WNY jobs is the medical sector is ominous for all the same reasons. Medical care was already the most subsidized economic sector in human history before Bush and Obama subsidized it even more. It receives real subsidies, meaning direct cash payments from the government that represent about half of all U.S. health care spending. What happens when those subsidies run out?

Central economic planning doesn’t work. They found that out the hard way in the Soviet Union and China, where tens of millions literally starved to death because of it. Central Economic Planning Lite as practiced in this country doesn’t work, either. If tax breaks stimulate growth, they should simply be granted to all businesses, no strings attached. Then, the market will allow viable businesses to create permanent jobs.

Buffalo should try this approach and lead the nation in demonstrating the power of the free market, instead of following Washington to another disaster.

Tom Mullen is the author of A Return to Common Sense: Reawakening Liberty in the Inhabitants of America.

 

Greek “no” vote on austerity isn’t remotely heroic or “libertarian”

greece-referendum-_3365507bThe 21st century global banking system based on fiat currencies and redistribution of wealth through inflation is immoral and destructive. That doesn’t mean stiffing your creditors is at all justified, heroic or remotely “libertarian,” as many on my newsfeeds are suggesting.

The Greeks who decided to take two month vacations, vote themselves useless government jobs and then retire at 50, all on someone else’s dime, aren’t the victims today. They are as much the perpetrators as the so-called “banksters.”

Photo: Sakis Mitrolidis/AFP

The real victims are those hardworking Greeks who have hitherto paid for all of this and the honest creditors who lent them money, although the latter have some culpability for bad judgment.

The Greek “no” vote on accepting “austerity” measures in return for additional loans from the European Central Bank (ECB) was more like a childish tantrum than a blow for freedom.

Imagine if you couldn’t pay your rent and asked a friend for a loan. If she agreed, stipulating you must cut your ice cream consumption from $100 to $50 per month, you wouldn’t be considered heroic for defiantly refusing her terms and still not being able to pay your rent or repay the other friend you borrowed from last month.

The Greek vote had nothing to do with liberty, but it was certainly democracy in action. Over two hundred years ago, John Adams wrote,

“Remember, democracy never lasts long. It soon wastes, exhausts, and murders itself. There never was a democracy yet that did not commit suicide.”

The Greek democracy has the revolver to its head. Time will tell if democracy or common sense will prevail.

 

Tom Mullen is the author of A Return to Common Sense: Reawakening Liberty in the Inhabitants of America.

 

Buffalo News Another Voice: Buffalo doesn’t need another interfering ‘master plan’

An editorial in The Buffalo News June 19 headlined “Welcome new master plan aims at making downtown core more people-friendly” said this:

“Yes, continued development could happen by accident, but it’s dangerous to leave growth up to chance and likely to produce less desirable results.”

Wrong. Leaving growth up to chance is Buffalo’s only hope for escaping the economic blight that has plagued it for over a half-century.

Let’s not forget what killed Buffalo in the first place: government interference in the marketplace and central planning, from destroying untold billions in waterfront property with wrongheaded expressways and disastrous public housing projects to larcenous taxes to stifling regulations.

“Leaving growth up to chance” really means leaving growth up to the market. Instead of government officials seizing money from taxpayers and deciding how it will be spent, each individual spends his or her own money as he or she sees fit.

This subjects new projects to the rigors of the market. Entrepreneurs face the prospect of losses if they build something people won’t buy voluntarily. When the government builds it, taxpayers don’t have a choice. They pay whether they want it or not. This steals capital from enterprises that can make a profit and employ people.

Read the rest at The Buffalo News…

Tom Mullen is the author of A Return to Common Sense: Reawakening Liberty in the Inhabitants of America.

 

 

Buffalo doesn’t need another “master plan”

buffaloBUFFALO June 22, 2015 A June 19 Buffalo News Opinion piece entitled, “Welcome new master plan aims at making downtown core more people-friendly” said this:

“Yes, continued development could happen by accident, but it’s dangerous to leave growth up to chance and likely to produce less desirable results.”

Wrong. Leaving growth up to the market is Buffalo’s only hope for escaping the economic blight that has plagued it for over a half century.

Let’s not forget what killed Buffalo in the first place: central planning by the government, which destroyed untold billions in waterfront property with wrongheaded expressways and disastrous public housing projects, built the Subway to Nowhere and generally taxed and regulated the economy to death.

The alternative to central planning isn’t “leaving growth up to chance.” It’s leaving growth up to the uncoerced choices of producers and consumers. Instead of government officials seizing money from taxpayers and deciding how it will be spent, consumers spend their own money as they see fit.

When consumers have choices, entrepreneurs face the prospect of losses if they produce products people won’t buy voluntarily. When the government plans and subsidizes, taxpayers don’t have a choice. They pay whether they want to or not. This steals capital from projects that can make a profit and employ people and leaves us with projects that need subsidies to survive.

Having lived away from this city for ten years, I’ve been overwhelmed since returning at the extent of government interference in every economic decision. There is literally no new building or business initiative local government officials aren’t intimately involved in planning.

This is to some extent the natural result of taxing the daylights out of everyone and then offering tax breaks, perversely called “subsidies” in modern socialist parlance, to those who start businesses the government approves of. But Buffalo takes it to a whole new level.

After living and doing business in relatively freer places, I feel like I’ve moved back to 1960s Moscow. It’s abundantly clear why people are leaving this city to find opportunities elsewhere.

Most are familiar with Einstein’s definition of insanity: repeating the same procedure and expecting a different result. We’ve let government central planners kill Buffalo for too many decades. It’s time to try something new.

Let’s let the market decide what is built or not built in Buffalo. That’s what made America the richest country in the world. It’s what is rebuilding the places our young people are fleeing to.

We have nothing to lose but our fifty-year recession.

Tom Mullen is the author of A Return to Common Sense: Reawakening Liberty in the Inhabitants of America.

 

 

No one really believes the Federal Reserve or the BLS

Federal ReserveLast Friday was anything but good for news on the economy. The Bureau of Labor Statistics (BLS) released a dismal jobs report that missed expectations by fifty percent. This followed a press conference two weeks ago by Federal Reserve Chairman Janet Yellen during which she indicated rate hikes might not come as soon as expected because “room for further improvement in the labor market continues.”

Yellen’s statement would be fairly unremarkable if it were not for one troublesome fact: the U.S. economy is supposedly at “full employment,” according to the measures the Fed uses to guide their interest rate policies. The Bureau of Labor Statistics has it at 5.5% as of today. That is the rate most economists consider full employment for the U.S. economy and we’ve supposedly been there since February.

How could there be room for improvement in the labor market if we’re at full employment? There can’t be. But everybody knows real unemployment is much higher than the manipulated BLS statistics represent. Janet Yellen knows it. The markets know it. Tens of millions of unemployed Americans know it.

Yet everyone keeps talking about the BLS unemployment rate as if it were true.

Tom Mullen is the author of A Return to Common Sense: Reawakening Liberty in the Inhabitants of America.

Read the rest of the article at Rare…

The Federal Reserve runs the economy, not Congress or the President

federal-reserve-building.top

BUFFALO, March 18, 2015 – Janet Yellen told the markets what they wanted to hear today and the indexes rocketed out of negative territory to finish up over 1 %. As usual, speculation abounds on precisely what was in the minds of investors.

Journalists tend to overstate the causal importance of breaking news when the market makes big moves. Often, those moves were predicted months in advance by serious traders and what happened that day had little to do with what the market did. Not true for the Fed’s announcements. They do move the markets immediately.
What most people don’t know, or at least don’t acknowledge, is that the Federal Reserve really runs the entire economy. When the Fed inflates the supply of money and credit, indexes go up, growth occurs and the economy “improves.” When it deflates the supply of money and credit, indexes go down, contraction occurs and the economy “slows.”

That’s really the whole story of the American economy. Think about that for a moment.

It doesn’t matter who is president, which party controls Congress or what any of those people do or don’t do. Yes, regulations and tax rates have some effect on the economy. Liberals might say more regulation is a good thing, conservatives might say it is bad.

But taxes and regulations haven’t really had much effect at all in the past 40 years. Before that, when taxes were at 90%, they mattered, but not when the top rate fluctuates between 35% and 39%. Do the math. It’s not that significant.

Read the rest of the article at The Huffington Post…

 

Tom Mullen is the author of A Return to Common Sense: Reawakening Liberty in the Inhabitants of America.

 

Fast food and retail employees are capitalists, too

fast_food_strikes_ap_img_1TAMPA, January 6, 2014 – It’s startling how pervasive Karl Marx’s worldview has become, even here in the supposed home of capitalism. Economists since Adam Smith have represented the division of labor with names for the different roles played by individuals within it at any given time.

But it was Marx who identified “capitalists” as vampires sucking the blood of victim workers. He didn’t use labels such as capitalist and worker merely to explain economic roles, but identified them as separate classes in a political struggle.

Without even realizing it, even pro-market Americans accept these assumptions and largely base their arguments upon them. When the debate devolves into one in which low income earners claim an entitlement to higher wages and high income earners respond by telling them why they don’t deserve higher wages, Marx has already won.

There is no difference between capitalists and workers. All workers are capitalists, even those currently making minimum wage in the fast food or retail industries.

Somehow, the employment contract has assumed a Romulan cloaking device that prevents people from seeing it for what it is. The employment contract is a buyer-seller exchange, like any other. Employees sell a product to employers at a mutually agreed upon price.

That the employer will use that product to make another and then sell it is not substantively different from a manufacturer buying a tire or a bearing and using it to manufacture a bicycle. This is not to say that human beings in an employment agreement have no more worth than a tire or a bearing. Rather, they are fulfilling the same economic function in a complex production process as the manufacturer of the tire or the bearing.

Employees produce the product they sell to employers themselves. Therefore, they must have capital, i.e. “the means of production.” It is their minds and bodies, with which they produce the products called fast food grill services, or cashier services, or shelf stocking services. They sell these products to the highest bidder, the employer willing to pay the most in cash and benefits in exchange for the products they offer.

Employees at a fast food establishment don’t make lower wages than doctors or engineers because they are less educated, less skilled or part of some imaginary “class.” They make lower wages, i.e., are forced to sell their product at a lower price because the product they produce is less scarce than that produced by doctors and engineers.

There is no question of justice or injustice, social or otherwise. It’s simple supply and demand. The supply of capitalists who can produce fast food grill services is far greater than the supply of capitalists who can produce doctor or engineer services.

Like all exchanges in a free market, the exchange between the capitalists commonly known as “employees” and those known as “employers” should be voluntary. Minimum wage laws destroy the voluntary nature of these exchanges for both parties. It prohibits employers from buying services at the market price and prohibits employees from selling services at the market price.

It turns employees into “crony capitalists,” just like the corporate recipients of farm subsidies or the beneficiaries of favorable regulation. Government intervention allows them to charge higher prices than they could in a free market and insulates them from the competition of people willing to sell the same product at a lower price.

Ultimately, it results in higher prices for consumer goods, which affects everyone, including the employees it purports to help.

Raising the minimum wage raises the cost of production. As capital is finite, that means that less overall goods and services will be produced. Scarcer goods and services mean higher prices. Higher prices lower real wages.

So, unlike the higher standard of living corporate crony capitalists realize through government intervention, employee crony capitalists realize a lower one. Raising the minimum wage also gives politicians cover for all sorts of other interventions, none of which are designed to improve the lives of fast food employees.

During the 19th century, wages increased modestly at the market rate, but vast increases in production made consumer goods more abundant and thus cheaper. Real wages skyrocketed, as average income earners could buy almost twice the amount of goods and services with each dollar by the end of that century.

There was also a gold standard that prevented the inflation we have today, but that is another story.

Minimum wage laws destroy the cause and effect relationships that result in higher production, lower prices and ultimately a higher standard of living for everyone. Lower consumer good prices benefit low income earners much more than high income earners. High income earners can afford a 20% increase in the price of a pound of hamburger or a gallon of gas.

Not once in all of history have low income earners been better off after listening to the demagogues. They won’t be this time, either.

Tom Mullen is the author of A Return to Common Sense: Reawakening Liberty in the Inhabitants of America.

 

What Bible is Pope Francis reading?

popeTAMPA, December 18, 2013 – There has already been a lot said about Pope Francis’ EVANGELII GAUDIUM, in which he is critical of free markets. Reactions by Christian proponents of capitalism have ranged from respectful disagreement to full-on denial that he was critical of the market at all.

The latter group is not facing reality. While having since clarified that he is not Marxist, the pope clearly rejected the laissez faire approach to the market in favor of the highly regulated, redistributionist model promoted by the left. His offering is chock full of the usual sophisms leftists use to justify overriding freedom of choice in exchanges of property.

There is no need to address each of the pope’s arguments against free markets from a purely economic perspective. Tom Woods has already done this thoroughly during his December 6 episode of the Tom Woods Show, “Pope Francis on Capitalism.”

What is more surprising than the pope’s leftist economic ideas is his ability to ignore the overtly pro-capitalist themes in the gospels themselves. Jesus’ teaching consistently holds capitalists up as heroes. He never once even hints that the government should direct economic affairs.

The misconception that Jesus’ message is anti-capitalist probably stems from the same confusion that pervades all leftist thinking: the inability to distinguish voluntary from coerced human action. Jesus often exhorts his followers to voluntarily give to the poor. Nowhere in the gospels does he suggest that the Romans or the vassal Jewish government should be empowered to tax the wealthy to provide for the poor.

Tax collectors are de facto sinners, remember?

Jesus also warns against the temptations that great wealth may expose one to. Being consumed with accumulating wealth to the exclusion of all other concerns leaves no room for devotion to God or charity to one’s fellow man. This is summed up in Luke 16:13 when Jesus says,

“No one can serve two masters. Either you will hate the one and love the other, or you will be devoted to the one and despise the other. You cannot serve both God and money.”

Again, Jesus charges his followers to manage their own passion for wealth. There is no suggestion that the government should be involved.

Jesus doesn’t expound on political economy because, as he told Pilate, “my kingdom is not of this world.” (John 18:36). However, his parables have consistently pro-capitalist themes.

In the parable of the bags of gold (Matthew 25: 14-30), the servants who choose to be capitalists with the master’s money are richly rewarded upon the master’s return. The servant who chose not to be a capitalist is not only not rewarded, he is “cast into the outer darkness, where there will be weeping and gnashing of teeth!”

Certainly, the story is symbolic. The money in the story represents the abilities given to each individual by God. But even on that level the story does not support the anti-capitalists. First, the master, the ultimate capitalist in the parable, actually represents God. Certainly, Jesus would have found another way to make his point if capitalists were de facto sinners (like tax collectors).

Notice also that the servant who chooses not to invest the master’s money is the one given the least. Symbolically, he represents the person who has the least natural gifts or who is born to disadvantage. Does Jesus suggest that the other two servants should be taxed to help him? No. The most disadvantaged servant is expected to do the best with what he has. He isn’t punished because he achieves less. He is punished because he fails to try.

In two other parables, Jesus represents God as the owner of a vineyard. In Matthew 20: 1-16, he makes the point that it is never too late for salvation and that a repentant man can claim it the same salvation as one who has been devout all of his life. He represents salvation as wages paid to laborers. When a laborer who worked longer complains that he is paid no more than one who only worked an hour, the master replies,

“Friend, I do thee no wrong: didst not thou agree with me for a penny? Take that thine is, and go thy way: I will give unto this last, even as unto thee.”

Again, the message is spiritual, but Jesus uses the very libertarian, capitalist idea that no one is entitled to any more wages than both parties voluntarily agree to.

God is again depicted as the owner of a vineyard in Matthew 21: 33-41. In this parable, the vineyard owner is even more overtly capitalist. Verse 33 in particular highlights that it is the previous work of the owner in planting the vineyard, hedging around it, and building a tower that makes the land productive before it is ever rented out to the husbandmen.

In other words, the capitalist has sacrificed his own consumption in the present to invest in land and capital goods to improve the productivity of the land. This has created an opportunity for the husbandmen to be more productive by working on the owner’s land than they would be on their own, without the land or the capital goods the owner has provided.

The owner then enters a voluntary agreement with the husbandmen whereby each party keeps part of what is produced. Both owner and husbandmen benefit from the agreement. The owner is entitled to the profits because he is the one who created the opportunity by sacrificing his own consumption in the past.

The husbandmen are evil specifically because they act like Marxists and renege on the agreement. They kill the owner’s agents and even his son, hoping to seize all of the wealth for themselves.

In verse 41, Jesus teaches that the owner will destroy the Marxists and rent the land to other husbandmen who will make him profits. The right of the owner to profits is affirmed, the idea that the workers are being exploited or should be able to take more than the owner has agreed to pay them is completely absent.

Nowhere in any of these parables are socialist ideas advanced. On the contrary, God is consistently represented as a capitalist and his children judged by how profitable they are to Him.

While the purpose of the parables is to teach a spiritual lesson, these are not the literary tools that an anti-capitalist author would employ. Jesus’ pro-capitalist bias couldn’t hit one over the head any harder, prompting the question:

What Bible is Pope Francis reading?

Tom Mullen is the author of A Return to Common Sense: Reawakening Liberty in the Inhabitants of America.

 

The Thanksgiving Day deception: Exhibit A against public schools

Embarkation_of_the_Pilgrims (640x419)TAMPA, Fla., November 27, 2013 — Tomorrow is Thanksgiving Day and millions of schoolchildren couldn’t be happier. Not only will they have a fantastic meal on Thursday, but they get a mini-vacation from school. For at least the past week, they’ve been cutting Pilgrim hats and Native American headdresses out of crepe paper and listening to stories about the Pilgrims’ first few years in Plymouth Plantation.

Little do they know they’ve been lied to.

It’s not that what they’re told isn’t true. The Pilgrims did sail over on the Mayflower. They did face incredible hardship, losing half their numbers during the first winter and half of their supplemented numbers again during the second. The Indians did help them. Squanto really did advise them to put a dead fish under each cornstalk to help it grow in the New England soil.

But that’s not why they stopped starving.

Governor William Bradford was quite explicit in his diary about the real reason the Pilgrims starved during the first two winters. It wasn’t because they were suddenly incompetent after prospering in England and the Netherlands for decades.

It was because they set up a communist economy. The Pilgrims had reluctantly agreed with their investors to hold all property in common, under the erroneous assumption that this would give the investors a faster return on investment.

It worked as well in 1620 New England as it did in 20th century Russia and China.

Bradford is also clear about what halted the “misery.”  It wasn’t Squanto’s gardening tips. It was because they abolished communism and set up a private property system. As Bradford writes,

“At length, after much debate of things, the Governor (with the advice of the chiefest amongst them) gave way that they should set corn every man for his own particular, and in that regard trust to themselves; in all other things to go on in the general way as before. And so assigned to every family a parcel of land, according to the proportion of their number for that end, only for present use (but made no division for inheritance), and ranged all boys and youth under some family. This had very good success; for it made all hands very industrious, so as much more corn was planted then otherwise would have been by any means the Gov. or any other could use, and saved him a great deal of trouble, and gave far better content.”

After establishing even this imperfect private property model, the Pilgrims never starved again. That seems pretty important, doesn’t it?

It’s not some minor detail like how they started wearing buckled shoes or how much beer they had onboard the Mayflower (they had quite a bit). It’s the crux of the Pilgrim’s story, why they starved and how they solved that problem.

There is a vital lesson that the Pilgrims learned from this experience that schoolchildren should be learning as well. Bradford thought it important enough to include this aside before continuing his narrative:

“The experience that was had in this common course and condition, tried sundry years, and that amongst godly and sober men, may well evince the vanity of that conceit of Plato’s and other ancients, applauded by some of later times; -that the taking away of property, and bringing in community into a common wealth, would make them happy and flourishing; as if they were wiser then God.”

During their entire primary and secondary education, children will hear the Pilgrim story retold, using details taken from the very same primary source. They will hear about the Pilgrims starving and about Squanto’s fish trick, being led to believe that was what saved the Pilgrims.

They won’t hear the truth, even though one has to trip over oneself to tell the Pilgrims’ story without revealing it. Some may argue that younger schoolchildren are too young for such a “political” subject, but they’re never too young to hear about how awful private property and free enterprise are or how the government saves us all from “robber barons,” or how human beings are a scourge upon the Earth that pollute the air and destroy habitats.

One thing is certain. The very first event in American history is grossly misrepresented by the public school system. It certainly doesn’t end there. Given the importance of what is omitted, it is hard to believe the omission is not intentional.

Regardless, the public school version of early American history begins by depriving schoolchildren of a vital lesson: private property is essential to human survival. Communism led to starvation in 1620 just as it did in 20th century Europe and Asia.

With an education that starts this way, it’s not hard to understand why these innocent kids grow up to support a $4 trillion government that recognizes no limits on its power.

Strike a blow for freedom. Pull your kids out of school.

Tom Mullen is the author of A Return to Common Sense: Reawakening Liberty in the Inhabitants of America.