Category Archives

Archive of posts published in the category: Economics

It’s the Entitlements, Stupid

“The long run budget problem has essentially nothing to do with the Trump tax cut. It has been brewing under Bush, Obama, and Trump. It fundamentally comes from growth in entitlements an order of magnitude larger. “

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Tax Math Reality

“A key principle here is that the overall marginal tax rate matters.  There is a tendency, especially on the left, to quote only the top Federal marginal rate of about 40%, and to say therefore that high income Americans pays less taxes than most of Europe. But that argument forgets we also pay state and sometimes local taxes.”

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The Borking of Kevin Williamson

The left has become so illiberal that they not only reject ideas, but they reject the rights of free expression to those who hold those ideas. Their strategy to win an argument is to deny that the argument even exists. By demonizing the opposition as racists, misogynists, bigots or hate-speech, they can dismiss them as unworthy of debate and deny them any platform for expression. The accusations do not have to be true to be effective.

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Bastiat and Trump

When Mnuchin claims that the steel and aluminum tariffs will only add a few cents to a beer can or a few dollars to an auto he displays as much ignorance as Nancy Pelosi who contends that a raise of only $20 a week is crumbs.  It is the classic broken window fallacy of Bastiat, the inability to understand and acknowledge what is unseen.

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Trade Factions

What DT is risking is not just some political points in the rust belt and trade promises. When this trade war ends like all the rest do, and the economy takes a hit- it will not be his stupid trade polices that are blamed, it will be his ‘stupid’ tax cuts.

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Trump Builds only Half a Bridge

Treasury Secretary Steve Mnuchin has expressed approval for a weaker dollar.  Trump is promising higher tariffs.  These moves threaten to undo the benefits of his work on tax cuts and regulations.

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Health Care is an Economic, not a Political Problem

The health care problem, like so many others, is the result of making an economic problem a political problem. Our elected officials make promises in exchange for votes and power without paying for them. They hide the cost in cross subsidies, mandates, regulation, demonization, and wishful thinking.

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Correlation is Still Useful

The problem in political policy is that once a decision is reached, a policy enacted, and a bureaucracy created we get married to the solution and refuse to correct previous analysis and assumptions. Tools that are successful in analyzing are often not so successful in predicting. The problem with government analysis is not their imperfection but their resistance to correction.

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Capitalizing the Great Recession

“The extraordinary postcrash prosperity of the precrash superrich is altogether new in our history. Near-zero interest rates are a godsend to the wealthy, inflating their real estate, stock portfolios, bond portfolios, private equity holdings, and art collections. Middle-class and blue-collar Americans, meanwhile, haven’t made much progress, and many are worse off. Inequality has increased.”

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Immigration Reality Check

The tax cut and the realignment of our tax policy for international business, including the repatriation of overseas earning, is quickly resulting in domestic investment and capital spending. There is also a willingness to support a weaker dollar and impose tariffs on competitive imports, which could stimulate more production short term.  This is a lot of stimulus at once at a time when unemployment is at a record low. This could impede the productivity growth that should be a priority. We need productive immigrants even more.

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The Great Equalizer Surprise

from The Wall Street Journal by Gregory Clark
“As a bizarre consequence of this pattern, African-Americans, who have low levels of net worth on average, are the social group for which inherited wealth represents the largest share of their net worth. Another odd implication is that inheritances tend to make overall wealth-holding more equal. Were inherited wealth to be completely abolished, the wealth of the poor would decline more than that of the rich. Inherited wealth is the great equalizer. Who knew?”

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Leveraging the Free Minds of the World

America’s success is a combination of constitutional liberty, heterogeneous culture that has a healthy disrespect for authority, solid protection of property rights, a respect for the common man and a classless society, and willingness to risk and fail. There are certainly hundreds of other attributes, but the combination is uniquely American.  Government’s function is to foster and protect the elements of our productive society. 

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The FANGs are Old News

Great moves forward, disruptive ground changing innovations do not happen consistently. They do not adhere to a plan or a budget.  The best we can do is create an environment that does not stifle them,  that attracts the bright and the motivated, but we do not know if they come from great tax policies, cultural collusion, ethnic diversity, great education, or just an environment of free thinkers.

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The Hong Kong Experiment

He avoided the accumulation of economic data, believing the cost of accumulating outweighed its value. He felt such data was used to enable economic planning which he opposed, and because it instilled a false sense of certainty about outcomes.  Cowperthwaite governed from principles, not data.

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Sanity Reconsidered

Obama was cool, calm, engaging, charismatic and measured in his responses.  His charm also obscured his record which was disappointing,  an intentional understatement.  Are we so enamored with style and personality that we ignore the policy successes and failures? The media may be, but the public may have more depth on the subject that we allow.

What if sanity was questioned based on substance instead of style?

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Tax Cut Fallacies

from John Cochrane
“The larger economic point: In the end, investment in the whole economy has nothing to do with the financial decisions of individual companies. Investment will increase if the marginal, after-tax, return to investment increases. Lowering the corporate tax rate operates on that marginal incentive to new investments. It does not operate by “giving companies cash” which they may use, individually, to buy new forklifts, or to send to investors. Thinking about the cash, and not the marginal incentive, is a central mistake. (It’s a mistake endemic to Keynesian economics, but the case here is supply-side, incentive oriented.)”

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It’s the Productivity, Stupid

Critics of the tax cuts do not trust the corporations to spend their cuts wisely.  This is the tragic flaw of progressivism.  We are supposed to trust the infinite wisdom and political interests of the state to spend our money, but always suspect the same money in private hands.

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Growth Elements are Now in Place

Deficits do matter, but like the stimulus it also matters how they are spent.  Stimulating demand is less effective than stimulating investment.  Demand stimulus is only effective briefly under certain conditions. Stimulating investment pays dividends (pun intended) much longer.

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The Trickle-Down Calumny

‘Trickle down’ is meaningless and ignorant and does not withstand minimal scrutiny. It hides the greater issues of the size, scope, and expense of government; and whether consumers and investors can allocate resources better than bureaucrats.

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The Counterproductive Estate Tax

by Henry Oliner
The estate tax is less of a transfer from the rich to the poor than it is a transfer from one group of wealthy to other wealthy special interests.  The great beneficiaries of estate taxes are tax lawyers and accountants, insurance companies, and wealthier businesses who use the pressure of the estate taxes to acquire other firms and grow larger.

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