George Gilder in The New Edition of Wealth and Poverty made an interesting observation that capital is the tool of capitalism like books are the tools of the intellectuals and academics.  This analogy led me to my article in American Thinker Craftsmen of Capital published on 9/29/12.  (I submitted it as Capital Craftsmen.  I like their title better.)

Excerpt:

Capital is the tool of the capitalists.  Those who create it know far better how to deploy it than those who seek to expropriate it in the name of fairness, social justice, or whatever other rationalization the intellectuals and elites may conjure.  Just as the craftsman learned through trial and error, so does the capitalist.  Failure is part of the process.

As George Gilder so profoundly noted in his new edition of Wealth and Poverty, capitalism works best when knowledge is matched with power.  When knowledge and power are matched, we get iPhones, Apples, Microsofts, Amazons, the vaccine to eliminate cervical cancer, J.K. Rowling’s Harry Potter books, Facebooks, and Googles.  When political power is exercised without knowledge or in place of knowledge, Gilder’s definition of regulation, we end up with Solyndras, a collapsed housing market, and dozens of financial regulatory agencies that were unable to stop the worst financial collapse in eighty years.

Warren Buffett may be willing to pay more taxes, though he apparently is not willing to do so voluntarily, as Mitt Romney did.  But the critical question is not how much the wealthy are able or willing to pay, but where the capital will generate the greatest economic growth.  Capital is a tool that, in the hands of Buffett and other capitalists like him, has generated billions of dollars of wealth, jobs, and tax revenues.

Read more: http://www.americanthinker.com/2012/09/craftsmen_of_capital_1.html#ixzz27xMTvOx9

HKO

Unfortunately, thought provoking philosophers are rarely heard on the campaign trail.  Coverage is directed to emotional juveniles and political campaign as a performance art.  It does no good to complain about poll sampling and media bias.  The champion of our free market must connect philosophical truths to the masses at an emotional level.  The takes an extraordinary communicator.  It remains to be seen if Romney and Ryan are up to the task.

Wealth an Poverty was written on the eve of the Reagan Revolution, the supply side tax cuts and the 25 year economic resurgence from the stagnation of the 1970′s, from Nixon through Carter.  Gilder added 40,000 words to this edition but the core was written over thirty years ago and remains pertinent.  Gilder raises better answers by raising better questions.  I have posted several excerpts from his book on this blog and you can access them with the search feature above to the right.

From my recent post in American Thinker, What Government Really Does for My Business, 7/17/12

These are just the recent additions to decades of regulations that have chiseled away at company profits and potential for decades.  “Every snowflake pleads innocent, but it is still an avalanche.”  As bad as this economy is now,  image how much worse it would have been had this administration had its way in passing the Card Check bill and the disastrous Cap and Trade bill.

We are fully aware of the benefits of a government to provide a secure environment to grow, and the infrastructure to move our products. But those in business are also keenly aware of the ever increasing burdens inflicted on those businesses by poorly thought out, never ending, always changing regulations and mandates.  You can’t brag on the benefits without accepting responsibility for the burdens.

The greater debt is owed by the president and his leviathan government to the taxpayers and businesses who fund his endless golf outings, Michelle’s expensive vacations, and the utopian statist nightmare he has foisted on us.

Read more: http://www.americanthinker.com/blog/2012/07/what_the_government_really_does_for_my_business.html#ixzz21Goj8xL4

Few of us who comment on the climate debate know the science involved, but there is more to it than just the science. Claiming to be “beyond left and right” I lean towards a lot of economic thought, but one certainly would expect science to be beyond the constraints of left and right thinking. Scientists are almost by definition skeptics.

My skepticism is based on the language of the radical proponents who treat skeptics like religious heretics. They immediately claim that skeptics are all in the pockets of the carbon fuel industries, when in fact the carbon fuel interests often support the climate change crowd.  When large established industries support such causes and the regulations they spawn, they too often use them to suppress competitions or otherwise seek a market advantage.  Nor should we ignore the influence that government funds have on scientists who are paid to reach preordained conclusions.

History has plenty of dire predictions from the well credentialed that did not come true.   And while we laymen are told to listent to the experts, this usually means listening to just the experts one side wants us to hear.  Furthermore, the ‘experts’ are most often wrong in a field where the variables are infinite and the environment is unstable.  This may be more true of climatology than most other hard scientific fields.

I count myself among the skeptics.  I just do not know enough about the science to state with any certainty that man caused climate change is either true or not, or what the causes and effects of changes in carbon dioxide in the atmosphere are.

S. Fred Singer writes in The American Thinker, Climate Deniers Are Giving Us Skeptics a Bad Name, 2/129/12.

Excerpts:

In my view, warmistas and deniers are very similar in some respects — at least their extremists are.  They have fixed ideas about climate, its change, and its cause.  They both ignore “inconvenient truths” and select data and facts that support their preconceived views.  Many of them are also quite intolerant and unwilling to discuss or debate these views — and quite willing to think the worst of their opponents.

I have concluded that we can accomplish very little with convinced warmistas and probably even less with true deniers.  So we just make our measurements, perfect our theories, publish our work, and hope that in time the truth will out.

• “The data doesn’t matter. We’re not basing our recommendations on the data. We’re basing them on the climate models.” -Prof. Chris Folland, Hadley Centre for Climate Prediction and Research
• “The models are convenient fictions that provide something very useful.” -Dr David Frame, Climate modeler, Oxford University
• “It doesn’t matter what is true, it only matters what people believe is true.” -Paul Watson, Co-founder of Greenpeace
• “Unless we announce disasters no one will listen.” -Sir John Houghton, First chairman of the IPCC
• “No matter if the science of global warming is all phony … climate change provides the greatest opportunity to bring about justice and equality in the world.” -Christine Stewart, former Canadian Minister of the Environment

Three recent instances of anti- Israeli stances have come from administration officials in a very short period of time.

First Hillary Clinton overreacted to an orthodox effort to separate the seating of men and women on Israeli buses. The effort was thwarted by Israel’s own courts.

From The Telegraph  Israel furious at Hillary Clinton’s concern for democracy in country, 12/6/11:

“We fail to see why this is a matter of such importance for the US Secretary of State. Does she deal with the same urgency to the social problems in states other than Israel?

“There is capital punishment in America, this is not the practice in Israel. America’s hard-line Mormons practice polygamy. Which of us is like Iran? We could make many more comparisons which would point out just how ridiculous her criticisms are.”

From Commentary Clinton’s Anti-Israel Broadside Misreads Both Democracy and the Facts by Evelyn Gordon 12/5/11:

In the Obama administration’s latest salvo against Israel (see here and herefor previous rounds), Secretary of State Hillary Clinton reportedly accused Israel of behaving like undemocratic regimes, even comparing it directly to Iran.

This is so outrageous it shouldn’t need refuting. But since the secretary of state is clearly confused about what distinguishes democracies from non-democracies, allow me to help: Democracies, like non-democracies, consist of human beings, and human beings everywhere sometimes produce bad ideas. But unlike non-democracies, democracies have numerous self-correcting mechanisms to keep such bad ideas in check. And nothing better proves this than the very examples she cited.

Take, for instance, the segregated buses. Some years ago, a few extremist ultra-Orthodox communities decided that buses should be segregated, with men sitting in front and women in back. Shockingly, the public bus company serving these communities complied. Like Clinton, I find this outrageous, as did most Israelis when they learned of it. But here’s the part of the story Clinton didn’t tell:

Israel’s vibrant free press reported on the issue, creating a public outcry. The issue was taken up by Israel’s democratically elected government. Ordinary individuals joined with some of Israel’s numerous civil-society organizations to petition Israel’s independent High Court of Justice, which unsurprisingly ruled the segregation illegal. Now, civil-society activists are monitoring the ruling’s enforcement.  The verdict so far, as per one activist’s account in Haaretz last month: Some ultra-Orthodox passengers are palpably hostile, but women can sit in the front of the bus without suffering harassment.

In short, the self-correcting mechanisms of Israel’s democracy worked exactly the way they were supposed to: Instead of receiving official sanction, as it does in, say, Saudi Arabia, gender segregation was legally quashed.

Leon Panetta earned a rebuke from the Anti -Defamation League (ADL) in ADL ‘Deeply Troubled’ at Speech by Defense Secretary Panetta that Puts Onus on Israel:

The president has taken important steps to express U.S. understanding of the challenges facing Israel, notably in his September speech to the U.N. General Assembly, and in work to forestall Palestinian statehood efforts at the U.N.  Secretary Panetta’s unjustified attempt to place the onus on Israel to overcome these forces is a step backward in that effort at precisely the wrong time.

Finally U.S. Ambassador Howard Gutman placed blame for anti-Semitism in Europe on Israel’s shoulders.  In the Jerusalem Post Scary US views 12/5/11:

Just two days before Panetta made his disturbing comments, US Ambassador to Belgium Howard Gutman, the son of a Polish Holocaust survivor, basically blamed Israel for Muslim anti-Semitism in Europe.

Thankfully the White House later distanced itself from Gutman’s speech, made to aconference held by the European Jewish Union. Nevertheless, Gutman had carefully thought out what he said in advance. This was no slip.

First, he noted the “significant anger” and “yes, perhaps hatred and indeed sometimes an all too growing intimidation and violence directed at Jews generally as a result of the continuing tensions between Israel and the Palestinian territories and other Arab neighbors in the Middle East.”

But instead of denouncing Muslims who attack European Jews because Israel stubbornly insists on defending itself in, say, Operation Cast Lead – a military incursion into the Hamas-controlled Gaza Strip to stop rockets and mortar shells fired at Israeli civilians – Gutman attempted to understand these outbursts of violence as a legitimate reaction and, therefore, fundamentally different from “traditional” forms of anti-Semitism.

Just as Jews such as Gutman’s father were not responsible for the sort of anti-Semitism directed at them during the Holocaust, so, too, is it unfair to point to Israeli policies as triggering Muslim violence against European Jews.

And finally from Commentary Has Obama Destroyed the Alliance? By Jonathan Tobin, 12/6/11:

It’s been a difficult week for Israel. A trifecta of attacks on the foundation of the ties between the United States and the Jewish state in the past few days have exposed the ambivalent feelings of top Obama administration officials. If you add together recent statements by Secretary of Defense Leon Panetta,Secretary of State Hillary Clinton andU.S. Ambassador to Belgium Howard Gutman, it’s hard to blame Caroline Glick for claiming that “under Obama, the U.S. is no longer Israel’s ally.”

But it’s worthwhile pointing out that despite these ominous signals and the failure of the administration’s promises to stop Iran’s nuclear program, Obama is still operating under constraints that will make it difficult for him to further weaken the bonds that unite Israel and the United States. The offensive words uttered by Panetta, Clinton and Gutman, as well as previous actions by Obama, point more to their frustration with a situation in which they know they cannot teach Israel’s government the rough lesson they believe it deserves than anything else.

HKO comments:

Read the articles in full and the various links.  As Alan Derschowitz so eloquently explained, the difference between genuine criticism of Israel and anti-Semitism is when you expect Israel to act in a way that you would never expect another country to behave.

With friends like these…….

Supply side economics remains controversial and poorly understood both by its critics who think it is just  ‘trickle down’ economics: a thinly veiled rationalization to improve the lives of the wealthy at the expense of the poor, and by many of its proponents who think that cuts in tax rates will always increase tax revenues.

Both are wrong.  I wrote Understanding Supply Side Economics for American Thinker (6/24/11), to address those who cannot look beyond the ‘trickle down’ description.

An excerpt:

Secondly it shows that there are usually two different rates that will generate the same revenues.  Assume the graph shows that a 30% tax rate and a 70% tax rate will generate the same revenue.  There are some who would prefer the 70% rate because it would make the wealthier pay a bigger share of the bill.  Why would we care whether the rate is 30% or 70% if it generates the same dollar revenue?

The answer is that the 30% rate will support a larger growing economy, more innovation and startups, and lower unemployment.  If we can choose from two rates why not choose the rate that is much more likely to generate a robust growing economy?  It is not a matter of wealthier people generating more wealth that trickles down. It is a matter of stimulating a wider distribution of wealth generating activity.

The first objective is to find the rates that generate the most revenue, but possibly even more important is to find the tax rate that supports the most robust and growing economy.

We must also distinguish between statutory rates and effective rates.  The statutory rate is the scheduled bracket rate but the effective rate is the rate paid after deductions.  Effective rates have fallen much less sharply than statutory rates.

Deductions give the government an opportunity to direct tax cuts to their preference.  Tax deductions for mortgage interest, for example, became one of many factors that contributed  to the glut in housing supply we now face.  The real power of politics is often exercised in the granting of tax deductions.

Equally important to the distinctions between statutory and effective rates is the understanding of marginal tax rates.  What affects economic activity and growth is not the total or average tax rate but the tax burden on the next  (marginal) dollar of income.  In the 1970’s inflation pushed people into higher tax brackets.  The combination of a higher rate with less purchasing power was exceptionally devastating to economic growth.  This is another reason why the control of inflation was as critical to Reagan’s  success as the reduction in friction costs.

The term ‘supply side’ is less descriptive of the theory itself than the fact that it was offered as an alternative and a critique of Keynesian economics which was focused on demand stimulation.

While supply side theory is most commonly associated with Arthur Laffer and the Laffer curve, the theory was not of his origin.  He was noted for the simple bell curve he drew on a napkin for Donald Rumsfeld and Deck Cheney in the 1970’s.  The principle author was Robert Mundell, who won the Nobel Prize in economics.  In his acceptance speech, A Reconsideration of the Twentieth Century Mundell applied the theory throughout recent history.

In 1924 Calvin Coolidge gave a speech that showed his understanding of Mundell’s principle long before the name ‘supply side’ was ever applied to it.

The Laffer Curve applies to taxes but it is really a consideration of all friction costs. Government mandates and regulations that also burden production must be considered.  Milton Friedman noted the Permanent Income Theory which basically noted that one time stimulants do little because consumers and investors will only respond to how their continuous and permanent income is impacted.  I contend that our tax laws have been so inconsistent and erratic that whatever impact they may have in theory are negated by a simple lack of trust.

Theories are explained in a vacuum, but in application there are other factors that must be considered.  Because of this,  tax cuts alone will have limited impact if they are accompanied by growth in other friction costs.  There are other factors such as overall debt, foreign competition, and the existing economic environment that will either facilitate or obstruct the impact of economic policy.

But the best statement on supply side may have come from one of the comments on my article posted by a reader at American Thinker:

The left loves to obfuscate the language.  Let us un-obfuscate it:  “supply-side economics” is simply “economics”.  It is the way the world works.  It’s known, it’s proven and it’s real. Anything else, whether it is called “Keynesian economics” or “stimulus” or “priming the pump” or whatever specious buzzword the “intellectuals” call it today, is just smoke and mirrors.  Stimulus has never worked — unless the goal is to destroy an economy and enrich and empower a small cabal of tyrants.