Losing Ground, The Bell Curve and Coming Apart – Commentary on Commentary

Source: http://econlog.econlib.org/archives/2012/03/losing_ground_t.html

 

Very interesting insights on Charles Murray’s  work on poverty and the underclass.  (1) Seemingly a simple premise; intelligence is required for most high-paying occupations ergo the people with lower intelligence will likely suffer a greater incidence of poverty as they have less access to high-paying jobs. (2) Economic incentives have been proven time and time again to drive behavior and decisions. It then follows if you tax income you get less wealth generation and if you subsidize poverty with welfare payments, you encourage more.

The last point (3) regarding cultural differences between America’s economic classes could be more difficult to understand.  However, one item Murray speaks of in his tomes but Mr. Caplan does not specifically point out is, raising children in single parent families has been shown to enable worse life outcomes when compared to a two parent household.  Data has also highlighted there are more single parents in less affluent communities.

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Stop energy subsidies – corporate welfare

In examining the involvement of the state in national energy markets one can become easily overwhelmed and dismayed by the scope and complexity of the state’s reach into the energy industry.  While the brute force power of the state influences much of the industry’s compliance (US Code) there is also the factor of the money, forcibly taken from tax payers, doled out to the energy sector — this is pure corporate welfare. Big-Government-Jefferson-Quote[1] At a minimum, this corporate welfare encourages corruption and market inefficiencies.

One could write in depth about energy, and state involvement within the energy sector but that would become pedantic. Instead,  a section from a complex government report from the US Energy Information Administration (EAI) summarizes the labyrinth of programs and rules representing the state’s reach into the U.S. energy sector.

EIA identified over 70 federal domestic assistance programs, many of which have multiple subprograms, as part of direct or research and development expenditures displayed in this report. 1

It should be obvious this situation is unhealthy; over 70 government programs each being a fiefdom on to the selves is not a ideal way to deal with the intricacies of energy production and consumption.  The complexity and waste of most government programs of this size is well understood – Medicaid, Medicare, Veterans Administration, Department of Defense, etc..There are news stories almost daily of the waste and fraud within these programs but few documenting the costs of subsidized energy.

However, there is a fundamental flaw beyond the administrative bloat these programs induce, there contradicting interests being simultaneously subsided – renewable vs. fossil vs. nuclear. While most libertarians are aghast at the state picking winners and losers in the market, it is completely lacking congruence of investing in competing sources of energy and expecting increased development and innovation within the industry.

A table in the aforementioned report, Table ES2 highlights taxpayers are subsidizing fossil, nuclear, and renewable sources of energy on a yearly basis to the tune of roughly $30B.  The older energy industry sees these investments as an incentive for the status quo and the newer burgeoning energy businesses use their subsides as a crutch and do not innovate as they would if they were competing for their company’s lives in the free market.

It is time to remove the state from energy production and let the free markets deliver the most economical and sustainable energy possible.

 

 

  1. “Direct Federal Financial Interventions and Subsidies in Energy in Fiscal Year 2013.” EIA, U.S. Energy Information Administration , Mar. 2015, https://www.eia.gov/analysis/requests/subsidy/pdf/subsidy.pdf.

 

Redistribution may not be needed

Redistribution is a statist method of taking from one individual (under the threat of violence) and giving what was taken to another individual who is supposedly in poverty. The practice is antithesis to everything libertarian.redistribution_is_not_fairness_its_theft

Poverty can be avoided in many cases by following these steps:

  1. Complete high school and if possible, obtain further career training
  2. Do not have a child out of wedlock
  3. After completing your education or career training, work full-time at your career
  4. Obey all statist laws even if you disagree with them to remain non-incarcerated

Following these simple tenets will help keep most individuals out of poverty thus lessen  the need for the unjust practice of income redistribution.

 

Why we lose our property

One of the most sacrosanct beliefs in a libertarian society is the free right to own property. In the most fundamental sense, this property includes personal possessions such as land, homes, automobiles, and other sundry valuables accumulated over time by an individual or family unit.  In almost in all cases, this private property is obtained from the fruits of ones’ labor; from participation in free market transactions whether from traditional manufacturing – selling of products, by delivering services and expert advice to someone willing to freely purchase them, or even by speculatively investing where one’s original investment is smaller than the final price obtained when the investment is sold.

How much fruit one obtains in a free society is often distributed unequally within the society and is dependent on a multitude of factors including hard work, skill, education, knowledge, experience, and even plain luck.

For some reason, statists despise the inequality of free markets and the fact that someone can be very successful and accumulate significant wealth by conducting free market commence.  To combat this undesirable feature of a capitalist society,  statists have created two large classes of the populace who can be ‘fed’ via the taxation or theft from all wage earners, even those who work within the statist system.  (Very strange, they give money to someone who works for the state and then tax them to pay for their and other government employees’ wages)

The first class to receive the benefits of redistribution of wealth are government employees. Now mind you, many of these employees provide value to society but given their relegation to being employed by the state instead of the private sector they become a protected class that must be supported by the forcible confiscation of wealth (fruits of one’s labor) from workers.

According to the census bureau’s Government Employment and Payroll measure, the number of federal, state, and local civilian government employees and their gross monthly payroll for March of the survey year can be found at. Survey of Public Employment and Payroll website >>

The number within this class is large and as of March of 2015, there are 14,425,359 people drawing wages via the forced taxation of private property.

The other class of people are those who are made dependent on the state for some portion of their existence.  These people receive the fruits of someone’s labor via programs like:

  • Medicaid
  • Supplemental Nutrition Assistance Program (SNAP)
  • Housing Assistance
  • Supplemental Security Income (SSI)
  • Temporary Assistance for Needy Families (TANF)
  • General Assistance (GA)

“Approximately 52.2 million (or 21.3 percent) people in the U.S. participated in major means-tested government assistance programs each month in 2012, according to a U.S. Census Bureau report. “

One final thought to ponder. Do you think these two protected classes (Government employees and people receiving means tested benefits) will ever support changes to our statist system?

 

 

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?

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.