Statism Does Not Work

This morning’s headlines are further proof that the state is strangling economic growth.  A modern economic system will not grow when there are high rates of taxation (federal, state, and local) coupled with burdensome regulations on business. We have seen this phenomena quite visibly in our nation’s lack of economic growth for the past eight plus years.  Some of the problem with our nation’s blindness or unwillingness to see this is the fourth estate’s coverage of facts but the sin also rests at the foot of those Americans who do not take the time to be educated on what is happening at a macro level with our economy.

U.S. Economy Expands at Slowest Pace in Three Years

This situation bodes the question, when will Americans say enough is enough?

 

 

 

An Outstanding Assessment

A very insightful piece from Simon Black.  I cannot add to this but to say, Mr. Black is spot on with his assessment of Americans today.

https://www.sovereignman.com/trends/new-poll-record-number-of-americans-want-more-government-in-their-lives-21388/?inf_contact_key=bca43013ae3658dd22297fe0e5837999bd3b2e4d6f6b2a81a9955af064c21ad9

April 24, 2017
Sovereign Valley Farm, Chile

In a poll conducted a few days ago by NBC News / Wall Street Journal, a record 57% of Americans responded that they want MORE government in their lives, and that the government should be doing more to solve people’s problems.

That’s the highest percentage since they started asking this question in 1995.

In fact, 57% is nearly double what people responded in the mid-90s.

Furthermore, the number of Americans who feel the opposite, i.e. responded that the government is doing too many things that should be left to private businesses and individuals, fell to a near record-low 39%.  

Bottom line: people want more government.

It’s hard to even know where to begin with this.

First- more government is nearly an impossibility.

As I’ve written several times in the past, the US federal government already spends almost all of its tax revenue on mandatory entitlements like Social Security, and interest on the debt.

They could literally cut nearly everything we think of as government– national parks, Homeland Security, even the IRS– and still not make a dent in paying down the national debt.

According to the US government’s own financial statements, their net operating loss in 2016 was an unbelievable $1.05 TRILLION.

Think about that– they lost more than a trillion dollars in a completely unremarkable year.

They weren’t waging world war, funding a major infrastructure project, or dealing with an economic crisis.

It was just business as usual. And they STILL lost over a trillion dollars.

More government is going to cost even more money that they don’t have… which means even more debt and even more pain in the future.

The usual refrain is to pay for more government programs by raising taxes on the rich, or big corporations, or whoever the evil villain du jour is.

Anyone who thinks this actually works needs to study history.

Simply put, RAISING TAXES DOES NOT RAISE TAX REVENUE.

I wish every Bernie Sanders voter could understand this very simple fact:

Since the end of World War II, US federal government tax revenue as a percentage of GDP has been nearly constant at 17%.

In other words, while the actual dollar amount of tax revenue goes up every year due to inflation and economic expansion, the government’s slice of the total economic pie is 17%.

Yet during the previous eight decades, actual -tax rates- have been all over the board– sometimes rates were higher, sometimes rates were lower.

Back in 1963, for example, the highest marginal tax rate on individuals exceeded an unbelievable 90%.

I’m sure there are plenty of Americans who would love to see the wealthiest citizens paying 90% again.

Yet in 1963, even with rates that high, the total amount of tax revenue that the US government collected was 16.7% of GDP.

In 1988 when the highest tax rate was slashed to just 28% under Ronald Reagan, total tax revenue 17.3% of GDP.
 
It doesn’t matter if tax rates were high or low– the actual tax revenue that the government collects stays constant at around 17% of GDP.

This raises a point that these socialists never seem to understand:

If the government’s slice of the pie never seems to change no matter how high or how low tax rates are, shouldn’t they focus on making the pie bigger?

Duh.

And it seems intuitive that higher taxes obstruct economic growth (i.e. make the pie smaller) because there’s less money in people’s pockets to spend and invest.

Then, of course, we have to touch on the issue of competence.

It’s absurd to want a government that has a nearly interminable track record of overreach, waste, and failure, to be even MORE involved in people’s lives.

We’re talking about the same institution that wastes taxpayer money to study monkeys on treadmills…

… or spent $1 billion to destroy $16 billion worth of perfectly good ammunition…

… or $2 billion to build a website.
 
It’s extraordinary that these people are already in charge of educating our children, regulating our savings, and now our medical care.

It’s even more appalling that given such dismal performance people want more.

As the old saying goes, the classic definition of insanity is trying the same thing over and over again and expecting a different result.

A final point I’ll mention is that it’s concerning to see people in the Land of the Free and Home of the Brave expect the government to solve their problems.

What ever happened to self-reliance? The pioneering spirit? Good ole’ American can-do ingenuity?

In truth there are countless ways for a motivated person to solve problems. Or at least to make forward progress.

For example, to all these kids that have their hands out demanding free university education, I always ask the same questions:

How many books did you read in the last twelve months?

How many FREE online courses from Harvard and MIT did you take?

Are you actually doing anything to help yourself? Or are you just whining on social media about how no one is giving you anything for free?

America was founded as a place where people take responsibility for themselves.

But this now seems to be an outdated, minority view.

The Land of the Free is truly becoming the Land of Getting Free Stuff.

 

Until tomorrow,

Simon Black

Founder, SovereignMan.com

Basic economic laws should not be thwarted

In the United States of America, the state continues to deploy failed policies that violate basic economic principles to the detriment of the entire society it seeks to control.   This failure can be seen in America’s Welfare State and progressive income tax program. The former subsidizes individual actions and life styles that can contribute to poverty and the later discourages income and wealth generation. Simply put, basic praxeology shows us when you subsidize something you will get more of it. Tax and regulate something you get less of it.

Since the amalgamation of the Revenue Act of 1916 and FDR’s New Deal, (in which the state used taxation, targeted subsidization, and regulation in an attempt to alleviate and or mitigate its definition of poverty among its citizens), the state began to extremely violate the aforementioned basic principles of human behavior.

In FDR’s “First New Deal” (1933–34), many programs were instituted using state subsidies to pay people who did not work and create new regulations for the banking and industrial sector which increased their moral hazard in an attempt to combat the impact and causes of the Great Depression.

FDR’s “Second New Deal” (1935–38) went further and fully institutionalized state involvement in the nation’s personal behavior in an attempt to address the effects of the ongoing economic crisis.  Programs such as Social Security and the Fair Labor Standards Act would change America forever.

The state, in its infinite wisdom, seeing less than satisfactory results from FDR’s New Deal, thirty years later further increased its involvement in Americans’ personal lives with new programs, subsidies, and taxes during LBJ’s Great Society.

Our aim is not only to relieve the symptom of poverty, but to cure it and, above all, to prevent it. No single piece of legislation, however, is going to suffice.”
– President Lyndon Johnson, 1964 State of the Union Address

Recently, according to the 2014 House Budget Committee Report, The War on Poverty: 50 Years Later the state’s return on investment has been less than satisfactory.  Below are some conclusions from the report showing failure of the state to eliminate poverty by not understanding basic human behavior:

The War on Poverty at a Glance
Despite trillions of dollars in spending, poverty is widespread:
• In 1965, the poverty rate was 17.3 percent. In 2012, it was 15 percent.
• Over the past three years, “deep poverty” has reached its highest level on record.
• About 21.8 percent of children live below the poverty line.1
In can be no surprise the state has failed to eliminate poverty if one understands the basics tenets of human behavior and the fundamental principles of economics.   The state’s policy violates them. Government programs targeted at poverty reduction/elimination encourage more poverty by encouraging a person to continue their current situation of being in poverty — receive payments and subsidies for having lower income, receive payments and subsidies for not working, receive payments and subsidies for having more dependents, receive payments and subsides for not completing high school, receive payments and subsides for not living a healthy lifestyle, etcetera.
The state also discourages work and thus wealth generation with its onerous job killing regulations which make it more costly for employers and entrepreneurs to create jobs and thus new wealth.
Additionally, the progressive tax system reduces the incentive to generate new wealth as its marginal income tax rates and capital gains taxes punish those who generate more earned income and investment generated wealth.
The state could easily rectify the current situation by eliminating all subsidies to individuals and corporations and stop taxing income and wealth.
1. “War on Poverty.” Http://budget.house.gov/uploadedfiles/war_on_poverty.pdf. United States House of Representatives , 3 Mar. 2014. Web. 8 Apr. 2017.

Can anyone dispute these statements?

 Walter E. Williams is a professor of economics at George Mason University and well known liberty loving commentator who has long spoke of the injustice of taxation and links it to state sponsored robbery.  His view can be validated in the following statement.

“Government income redistribution programs produce the same result as theft. In fact, that’s what a thief does; he redistributes income. The difference between government and thievery is mostly a matter of legality.”

Can anyone argue that one does not pay taxes under threat of punishment by the federal government?  Imagine, if you refused to pay the state. At best, you would be fined and at worst, you would be both fined and jailed.

Thomas Sowell, another brilliant economist and liberty loving commentator also spoke of the questionable action by the state when they take the fruits of labor from one hard-working individual and give it to another.  https://i1.wp.com/mccluresmagazine.com/wp-content/uploads/2014/09/thomas-sowell-mcclures-magazine-659x412.jpg

“What do you call it when someone steals someone else’s money secretly? Theft. What do you call it when someone takes someone else’s money openly by force? Robbery. What do you call it when a politician takes someone else’s money in taxes and gives it to someone who is more likely to vote for him? Social Justice”.

Are there any flaws in Williams’ or Sowell’s theses?

I was wrong, some places in America are totalitarian already

Leftist-statist fascism is in the news daily and there is no more non-tolerant place than American college campuses. These left leaning institutions have always supported state control of the economy and redistribution policy however, since the 2016 election, the statists have moved to a proscription against speech and freedom of association.

This contagion has spread beyond the traditional east and west coast statist bastions to small lower tier educational institutions in the Midwest.

A story on ZeroHedge,  Conservative Students “Violently Threatened” At Lutheran College

spoke of a situation that could have been reported in 1930s Nazi Germany.  This story is upsetting to any freedom loving American but it gets worse. There is a strong move among these same statists to create an economic crisis by not paying their obligations and then, get taxpayers to foot the bill for their obligated student loan debt.

Students Demand “Sanctuary” From Immigration Laws, Student Loan Debt, And Finals

The First Crack: $270 Billion In Student Loans Are At Least 30 Days Delinquent

Next Mega-Bailout On Deck: White House Studying “New Bankruptcy Options” For Student-Loan Borrowers

At 108 US Colleges, More Than Half Of Students Haven’t Paid Even $1 On Their Student Loans

The Student Loan Write-offs Have Begun: 78,000 Students File For Debt Discharge After Corinthian Closures

24% Of Millennials “Expect” Student Loan Forgiveness

“Cancel All Student Debt” – The Petitions Begin

To correct this we must remove the state from any and all influence in higher education and enforce the rights expressed in the US Constitution. Failure to do so will result in a loss of freedom and a very large tax bill to bailout students by paying off their debt.

America is moving towards totalitarianism

The days of freedom are fading fast in America. Our access to information will be further filtered by the government via a statist supported corporation. Lest you believe this libertarian is over reacting, please consider the announcement by Google today.

Google adds tool to flag ‘offensive’ search results

What any freedom loving American should be afraid of is the following:

The review teams — comprised of contractors known as “quality raters” — already comb through websites and other content to flag questionable items such as pornography. Google added “upsetting-offensive” in its latest guidelines for quality raters. Google declined to comment on the changes, which were reported in the blog Search Engine Land and elsewhere.

This begs the question, who decides what is “upsetting-offensive”?  One will have to be quite naïve to think the new filters will not favor statist information and positions over facts and free thought given Google’s connections with the state.  Look at this dated article and shudder, it is likely even more connected to the state today. In a old 2010 piece on techeye.net, the links between Google and the state are immense.

Google’s connections to the Federal Government listed

Some background. Google’s DC office contains 30 employees, nine of whom are registered lobbyists. In addition to this, Google has hired six to seven lobbying firms. Four management-level Google employees have accepted positions within the Obama Administration, and Eric Schmidt, CEO, and John Doerr, Board Member, served as Obama appointees on a key advisory board.

Given this, please support libertarian candidates even if they are lacking in purity.

 

 

War on Poverty has failed

There is a very good article by Arthur Brooks of the American Enterprise Institute titled The dignity deficit: Reclaiming Americans’ sense of purpose.  The piece speaks of the improbable Trump victory and postulates the win came about because of the anger of those citizens left behind economically in America.  This thesis explaining Trump’s win is not unique, many political pundits have offered the same.  However, Brooks extends the story by going back to LBJ’s War on Poverty. Brooks highlights in his article the plight of a poor Kentuckian named Tom Fletcher. Fletcher, despite government assistance (welfare) is never was able to escape poverty.

In 1966, when the War on Poverty programs were finally up and running, the national poverty rate stood at 14.7 percent. By 2014, it stood at 14.8 percent. In other words, the United States had spent trillions of dollars but seen no reduction in the poverty rate.1

There are millions more Tom Fletchers that Twenty trillion dollars of government largess has not helped and they voted in November, 2016.

The solution to poverty is to go back to fundamental economic principles. If you want more of something, then do not tax it. However, this axiom is ignored by statists and we have many Americans being left behind. The solution is simple, stop taxing the fruits of labor (wealth) and you will see more fruit.

The same principle holds true for government regulations that stifle labor and subsequent wealth generation. If you you want less friction on labor which will lead to more wealth creation, stop unnecessary regulation of the actions that generate wealth.

  1. Brooks, Arthur C. “The Dignity Deficit: Reclaiming Americans’ Sense of Purpose.” American Enterprise Institute. Foreign Affairs, 13 Feb. 2017. Web. 09 Mar. 2017.