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?

 

 

 

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.

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.

Beware – statists strike again

In their misguided attempt to ‘help’ low wage earners, statists have increased the minimum wage to the point where Wendy’s, the Dublin based fast food company, is reducing their purchases of minimum wage labor and  instead, adopting automated Kiosks where customers can place orders to reduce labor costs. These Kiosks will likely replace many minimum wage workers and will spread beyond Wendy’s.

“Last year was tough — 5 percent wage inflation,” said Bob Wright, Wendy’s chief operating officer, during his presentation to investors and analysts last week. He added that the company expects wages to rise 4 percent in 2017. “But the real question is what are we doing about it?”kiosk

Wright noted that over the past two years, Wendy’s has figured out how to eliminate 31 hours of labor per week from its restaurants and is now working to use technology, such as kiosks, to increase efficiency.1

When will statists ever learn basic economic principles? If labor costs rise and the business owner cannot raise their prices to offset the rise in their costs, they will cut costs.

Source:

  1. Malone, J. D. “Wendy’s to install ordering kiosks in 1,000 stores this year.” Columbus Dispatch. N.p., 28 Feb. 2017. Web. 28 Feb. 2017.

Getting off of the dole is not popular

An article on ZeroHedge titled, It Was A Pretty Disturbing Briefing”: Why State Governors Suddenly Got Cold Feet About Obamacare Repeal spoke about the difficulty the states see in the new administration’s efforts to repeal Obamacare. The crux of the problem is the statists’ fear of the wrath of people who lose government funded healthcare and the vast amount of federal money in play for the states to quickly repeal and/or replace Obamacare. The article makes it clear as shown in the quote below; governors fear the back lash from those forced off of the dole and of the loss of federal funding for their Medicaid programs if changes are made to Obamacare.

“Tens of thousands who would not be able to afford their coverage and would lose their coverage,” Democratic Governor Jay Inslee of Washington said after the closed-door meeting. “It was a pretty disturbing briefing.”

In non-statist speech, the governor of Washington was simply saying that taking these people off of the public dole would be politically untenable  – the MSM would have a field day reporting how evil politicians are hurting Americans and how irresponsible governors are for ever growing state budget deficits.

I suspect other governors beyond Inslee, both Democratic and Republican, feel the same as they are more concerned with keeping their positions of power by keeping everyone happy rather than face the truth of the debt ridden situation Obamacare places America’s finances into.  This is not a right vs. left issue but one of survival of statist politicians. From the same article:

On Friday, Kasich called House Republicans’ initial plans to replace the health-care law “inadequate.” Kasich, a former Republican presidential candidate, didn’t go into details during brief remarks to reporters after a meeting Friday with President Donald Trump. “To me, it’s not acceptable,” Kasich said. The governor, who opened Ohio’s Medicaid program to more low-income people under Obamacare, has advocated maintaining the Medicaid expansion. He has said the income limit for the program should be lower.

Whether one believes it or not, once the ink was dry on the Affordable Care Act (ACA) the die was cast. With Obamacare as the first step, America is heading towards socialized medicine and likely financial Armageddon.  The Congressional Budget Office (CBO) in their March 2016 report shows this in the large and growing expenditures the federal government is making to support ACA.1

The federal government subsidizes health insurance for most Americans through a variety of federal programs and tax preferences. In 2016, those subsidies for people under age 65 will total more than $600 billion, the Congressional Budget Office and the staff of the Joint Committee on Taxation (JCT) estimate. (The government also bears significant costs for health insurance for people 65 or older, mostly through Medicare and Medicaid).

Like the metaphor about the frog in boiling water, Obamacare is mechanism the statists are using to control America’s healthcare system.

  1. Federal Subsidies for Health Insurance Coverage for People Under Age 65: 2016 to 2026. Rep. Washington, DC: Congressional Budget Office, 2016. Print.

I am in awe

While reading quotes of our nation’s founders, I am in complete awe of their wisdom prescience. Let me highlight a few I like.

The source is: http://econfaculty.gmu.edu/wew/quotes/govt.html

My comment: This quote could speak to the last few people occupying the Oval Office

“As democracy is perfected, the office of the President represents, more and more closely, the inner soul of the people. On some great and glorious day, the plain folks of the land will reach their heart’s desire at last and the White House will be occupied by a downright fool and complete narcissistic moron.”
–H.L. Mencken, the Baltimore Evening Sun, July 26, 1920

My Comment: Madison is foretelling the welfare state which has been a destructive force in America since the days of FDR.

“The government of the United States is a definite government, confined to specified objects. It is not like state governments, whose powers are more general. Charity is no part of the legislative duty of the government.”
— James Madison, speech in the House of Representatives, January 10, 1794

My Comment: Jefferson is spot on regarding the current situation. 

“The issue today is the same as it has been throughout all history, whether man shall be allowed to govern himself or be ruled by a small elite.”
— Thomas Jefferson

My Comment: Jefferson is predicting the problem of Judicial Activism.

“…the opinion which gives to the judges the right to decide what laws are constitutional and what not, not only for themselves in their own sphere of action but for the Legislature and Executive also in their spheres, would make the Judiciary a despotic branch.”
— Thomas Jefferson

My Comment: Franklin told us about the Welfare State years ago and yet, here we are today with millions on the public dole.

“I am for doing good to the poor, but I differ in opinion of the means. I think the best way of doing good to the poor, is not making them easy in poverty, but leading or driving them out of it. In my youth I travelled much, and I observed in different countries, that the more public provisions were made for the poor, the less they provided for themselves, and of course became poorer. And, on the contrary, the less was done for them, the more they did for themselves, and became richer.”
— Benjamin Franklin

My Comment: Webster highlights the need for the Second Amendment to the US Constitution.

“The supreme power in America cannot enforce unjust laws by the sword; because the whole body of the people are armed, and constitute a force superior to any band of regular troops that can be, on any pretence, raised in the United States.” .”
— Noah Webster

My Comment: Madison warns of the creeping behemoth of the Federal Government.

“There are more instances of the abridgment of the freedom of the people by gradual and silent encroachments of those in power than by violent and sudden usurpations.”
— James Madison, speech to the Virginia Ratifying Convention, June 16, 1788

My Comment: A prediction of the power grab (production of others) to fund the elites’ power.

“We still find the greedy hand of government thrusting itself into every corner and crevice of industry, and grasping at the spoil of the multitude. Invention is continually exercised to furnish new pretenses for revenue and taxation. It watches prosperity as its prey and permits none to escape without a tribute.”
— Thomas Paine

Is the 5th Amendment no longer valid?

In reading this article, one can see the state taking a very casual view of the rights guaranteed by the 5th and 7th Amendments to the U.S. Constitution. Under the guise of system efficiency, the statists have usurped peoples’ rights to due process and trial by jury.  This circumstance of power grab by the administrative law judges (ALJs) distills down to Lord Acton’s Power Corrupts adage.

Please read, How Government Agencies Usurp Our Rights — The federal bureaucracy increasingly acts as prosecutor, judge, and jury by Philip Hamburger and tell me if I am wrong.

Find the piece at: How Government Agencies Usurp Our Rights – The federal bureaucracy increasingly acts as prosecutor, judge, and jury.