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Addicted to the Devil

from Thomas Donlan at Barron’s, What Went Wrong in Kansas

Americans want government like they want services generally: “faster, better, and cheaper.” But economists know there’s a problem: The optimistic ones say, “Pick any two”; the pessimists say, “Choose one.”

Too many Democrats, however, pick all three and say they will squeeze more taxes out of the rich to pay for it. Sorry, even in this new gilded age, there aren’t enough rich people to pay for national health care, let alone the rest of the party’s wish list—bridges, roads, rail lines, broad band internet, and most recently, a national drive to cure opioid drug addiction.

Meanwhile, too many Republicans pick all three and say they will pay for it with economic growth. Sorry, Americans have enjoyed more economic growth in the past 228 years than any other big nation on Earth; there’s little that any government can do to push it along against the power of the law of diminishing returns. The results of even the best imaginable policies will come too slowly to satisfy most Americans.

Tax cuts can work to stimulate growth, but not everywhere, not every time. Kansas had and has a lot more problems than its tax cuts.

Letters to the editor on that article the following week:

Growing up in the 1980s, I felt that President Ronald Reagan’s policies were the great impetus for the ensuing growth. I still feel that freedom and low taxes are the root of growth, especially when that growth has been fettered by regulation and discouraged by high taxes for a long period. But I now think that the great growth we saw was as much a result of the baby boomers working through the system as the policies and tax cuts.

The baby boomers were starting to come into their own in the ’80s and making their mark on the economy, creating that tremendous growth. And I think that easily carried into the 1990s. Now, as time marches on and we’re nearing eight years of slower growth, I partially attribute that to slower population growth, as much as to the stifling effects of higher taxes and greater regulation.

So can we count on growth to save us? I don’t think so, and that means we have to do the hard work of cutting government expenses, because the money simply won’t be there to pay for larger and larger government in the future. The rich don’t have enough money to pay the bill, even if you taxed them at 100%, so either you start taxing the poor more or cut expenses.

HKO

The left is in a quandary.  Without generating growth the welfare state must shrink.  This growth may come from a business friendly environment or population growth, both of which are contrary to the policies of the left.  They have demonized the main source of support for the welfare state and now they are addicted to the devil.

Deluded Missionaries

from Sarah Hoyt, Poor Darlings:

It’s not what they think they’re doing.  Like deluded missionaries for a doomsday cult, they think they’re fighting for paradise.  Of which more later, and which is why you should pity them.  But it is what they’re doing: biting the hand that feeds them, pulling up the planks from under their own feet, generally making it impossible for the prosperity they were born to to exist.  And in the process taking us down too.  So we’ve been resisting.  For a long time we resisted inside our own heads, then we resisted in our friends’ group, in our tiny blogs, in our news reading and oh, very much in our voting.

What we didn’t do is put up big signs in our yards and throwing noisy fits.  Why not?  Because we’re not spoiled children.  If we screamed, cried and held our breath, we’d just get pulled along by our arms.

Bad Economics, Bad Character

from The Georgia Public Policy Foundation Friday Facts 7/7/17

“People of solid character don’t spend money they don’t have year after year. They don’t send the bill to generations they don’t even know yet. That is not just bad economics, it is extraordinarily, shamefully bad character.” – Lawrence Reed

Piketty’s Serious Flaws

Thomas Piketty’s Capital in The Twenty First Century, has spawned a cottage industry of dissent.  Piketty uses masses of data to illuminate a growth in inequality, that he surmises is an inevitable result of capitalism and can only be resolved by painfully high taxes on the rich. For the left it is a pivotal work that brings data and credentialism to their ideology that capitalism is so flawed that it requires constant and strong control from the state.

Anti-Piketty is a collection of noted economists and political thinkers that find significant flaws with Piketty’s work.  These critiques include serious flaws with the data itself and how it is used, the difficulty of measuring the forms of income and inequality itself, conclusions that are not supported by the data, and a philosophically flawed concept of wealth, growth and capitalism.

From   Chapter 13 of Anti-Piketty. The Financial Times vs. Piketty,   by Chris Giles

The FT (Financial Times) revealed many unexplained data entries and errors in the figures underlying some of the book’s key charts, few of which were adequately explained by Piketty after being challenged. Those unexplained entries and adjustments were sufficiently serious to undermine Piketty’s claim that the share of wealth owned by the richest in society has been rising and “the reason why wealth today is not as unequally distributed as in the past is simply that not enough time has passed since 1945” (Piketty 2014, 372).

After referring back to the original data sources, the FT investigation found numerous mistakes in Piketty’s work: simple fat-finger errors of transcription; suboptimal averaging techniques; multiple unexplained adjustments to the numbers; and data entries with no sourcing, unexplained use of different time periods, and inconsistent uses of source data. Together, the flawed data produce long historical trends on wealth inequality that appear more comprehensive than the source data allow, providing spurious support to Piketty’s conclusion that the “central contradiction of capitalism” is the inexorable concentration of wealth among the richest individuals.

Once the data are cleaned and simplified, the European results do not show any systematic tendency toward rising wealth inequality after 1970. The U.S. source data are too inconsistent to draw a single long series. But when the individual sources are graphed, none of them supports the view that the wealth share of the top 1 percent has increased in the past few decades. There is, however, evidence of a rise in the top 10 percent wealth share since 1970.

Restricting the Customer Base

from National Review and Kevin Williamson, Don’t Count On the Growth Fairy

Native birth rates being what they are, this would seem to add up to a case for more immigration, something that neither the populists on the right nor those on the left are very friendly toward. We all know Donald Trump’s views on immigration, but consider that Bernie Sanders campaigned for president arguing that American billionaires are scheming to flood the United States with cheap immigrant labor to undermine the position of the working class. Of course, the reality is more complicated than such campaign crudities, inasmuch as it matters what kind of immigrants we are talking about: Indian oncologists aren’t South African entrepreneurs aren’t English journalists aren’t Mexican day laborers. Much of our current immigration debate is about the wrong question — How many? — rather than the right one: Who?

Is America full, or is America open for business? How we answer that question will mean a great deal more to our future prosperity than debates about presidential budget proposals.

HKO

You can not grow an economy by restricting your customer base.