Creating pensions that offer generous retirement benefits wins votes in the present by promising spending in the future. Promises cost nothing in the short run — and elections are held in the short run, long before the pensions are due.

Guns and Pensions – Thomas Sowell


Thomas Sowell has another good column this morning…

A news report last week said the group projected that about 47 percent of American households pay no federal income taxes at all.

If half aren’t paying, that means the other half is paying for everyone. It is a sign of how both the tax system and the economy as a whole have become seriously out of joint.

via Galloping inequality: Rutland Herald Online.

What do you know?  Up until this point in the Herald editorial, I am in agreement with the editors.  The agreement is short-lived.

Among those 47 percent are people with wages too low to face any tax liability at all. Also, in recent years exemptions and credits have expanded up into the middle class so that a family of four earning $50,000 may pay nothing. Then there are wealthy people who exploit all the exemptions, credits, shelters and write-offs that have been designed to protect them. Thus, billionaire Warren Buffet has complained that his secretary pays just as much income tax as he does.

This is also fairly innocuous and agreeable.  However, including “billionaire Warren Buffet” as complaining indicates where they are headed next.

The expansion of tax cuts and exemptions for low- and middle-income workers is a response to the vast expansion of economic inequality in America in the past 30 years.

Ding, ding, ding!  Expansion of economic inequality.  As though the phrase itself has a transcendent meaning of its own describing a moral truth that center-right voters need constant badgering on and “scumbag conservatives” have yet to discover at all.

Are income unequal in America?  Yes, no one can deny that.  Are incomes static in the United States?  No, and that is never mentioned when talking about these so-called “economic inequalities”.  Thomas Sowell covers it more adequately than I ever could in his book, Economic Facts and Fallacies, but let me give it a whirl.

Studies revealing an ever increasing gap in income among Americans never take into account that individuals (or families) who started off in the lowest bracket may have moved themselves up a few brackets by the time the next study is run.  Sowell has the numbers, but a large portion of those in the bottom bracket find themselves moving up the scale and comparing the snapshot of two separate studies fails to take that into account.  It does, however, fit the template for decrying capitalism and heralding socialism (or whatever it is liberals call it these days).

The following quote from the editorial proves the point (they are using an essay by Tony Judt from the New York Review of Books to support their arguments):

Since 1973 inequality in take-home pay increased in the United States and Britain more rapidly than in any Western nation. In 1965 [sic] the CEO of General Motors earned 66 times the pay earned by the typical GM worker. Today the CEO of Walmart earns 900 times the wages of the average employee. One sign of the degree to which the United States has become economically stratified: The wealth of the family of the founder of Wal-Mart in 2005 equaled the wealth of the bottom 40 percent of Americans.

See?  In 1968 the CEO made 66 times the “typical” GM worker (for all we know they have included the lowest paid mail clerk in their calculation of the typical worker).  Today the CEO of Wal-Mart makes 900 times the wages of the average employee (again, who is included in the “average” employee group, mid-level execs making $200,000, or more per year – Obama’s definition of rich, by the way).

Do you see what they do here?  In 1968 it’s 66 times the “typical” worker.  In 2010 it’s 900 times the “average” employee.  We are supposed to read those two numbers and be shocked with righteous indignation.  But how many of the workers from 1965 are still making what they made then (if they’re still working)?  Or, if you prefer, compare the amenities of the 1968 worker with the 2010 worker.  I’ll bet most of us would chose the 2010 amenities over the 1968 amenities (even if the cars were cooler in the ’60s).

Additionally, there is an assumption by many who bemoan the “economic inequality” that there is some sort of cap on total income possible.  For example, 100 people working may only have access to $100,000 therefore the right thing to do would be to pay everyone $1,000 so everyone is equal.  But that isn’t how it works with capitalism.  There is no ceiling on what can be earned and creating wealth ultimately leads an ever increasing pie from which to slice the various incomes.

Those who defend the status quo say that the rich are already paying a high proportion of tax revenues. But that’s because they have secured for themselves a high proportion of the nation’s income. In 2005, the top 1 percent of wage earners took in 21.1 percent of the national income.

How much of the national income tax did the same group supply?  According to National Taxpayer’s Union, the answer is 39.38 percent.  But the Herald won’t bother to point that out (if they even knew), and if they did point it out they would probably find a way to spin it to make it sound like paying for nearly 40% of the federal government is not enough for the top 1% of wage earners.

Wide economic inequality has pernicious social effects. Judt’s essay is accompanied by a graph showing that social mobility — the opportunity to improve one’s lot — is far more depressed in the United States than in Poland, Canada, Germany and Scandinavia. Only the nearly impermeable class system in Britain keeps people down to the degree that economically repressive conditions in the United States do.

Okay, this is harder to dispute but only because after looking at the graphs that they reference, I didn’t see any source information.  I am not an economist, nor do I have the time or the skills to assess how the information was gathered and put together, etc.  However, speaking circumspectly, how far apart are the two poles in Scandinavia?  I suspect it would take a lot less to move from point A to point C in Sweden than it would in America.  Or, how about the effects of massive social welfare programs – as is the case in most of the above-mentioned countries – inhibiting the desire to even be upwardly mobile?  Sedate the masses with just enough opium in the form of social programs and gradually they will have no desire to live their lives freely anymore with one possible aspiration being moving up in life.

Economic inequality has other consequences. Poor health, mental illness, crime and low life expectancy closely track levels of economic inequality. The United States has by far the highest health care expenditures among a host of industrial nations but among the lowest life expectancies. Life expectancy is higher in Bosnia.

Okay, I’m dragging this out a little too long, but I’m going to finish this just because I have a computer, an internet connection, and I live in America.  Is it possible that poor health, mental illness, crime and low life expectancy is a cause, rather than an effect, of “economic inequality”?  In other words, is it possible (or reasonable) to ask the question: are these circumstances in your life because of your economic condition or are they causing your economic condition?  Or possibly, do you choose a lifestyle that leads to poor economic output?  I know, both of those questions are terribly un-politically correct.

No wonder tea partiers and leftists are both angry at the present system. They are both looking for a way to address the long-building trend that is skewing the economy toward the wealthy few. Tea partiers say we need to cut taxes, even though lower revenue would further degrade our schools and other necessary services, worsening economic inequality and closing off opportunity.

(At least the Herald refrains from using the more derogatory terms for people choosing to affiliate with the TEA party movement.)


The Herald assumes that government schools are the only way to educate our kids (poor or otherwise).  The Herald assumes that government services are “necessary”.  If you accept their premise, then it makes sense to reach the conclusions that they do.  I do not accept their premise (and nor should you!).  In fact, I would argue that much of this bemoaned “economic inequality” has been exacerbated (or even caused) by the very institutions that the Herald claims are the only way to salvation for those of initially poorer means.

(Last paragraph, I promise.)

The tax and social policy of the Obama administration is designed to close the income gap. President Obama’s health care bill has been described as one of the great economic equalizers of recent decades. The billionaires who have impoverished the public sector by scarfing up resources and closing off opportunity for the many must be laughing at tea partiers so eager to impoverish their own world in order to gild the already gilded world of the few.

Ha!  Obama’s tax and social policy are designed to do something, but I don’t think that he really cares about closing the income gap.  At the end of Obama’s policies, all we’re really going to end up with is a power gap.  I know I don’t listen to many Left-leaning commentators, but I haven’t heard anyone tout the president’s health care bill as “one of the great economic equalizers of recent decades” (at least, I haven’t heard that as a good thing).

Please, please, please….tell me specifically how the billionaires are impoverishing the public sector (an by public sector do they mean, poor individuals or the government social programs that they hold so dear)?  And show me how the billionaires of the world have scarfed up all the resources.  I still have access to quite a bit of resources and I am a long way off of a billion dollars.  In fact, I have yesterday’s billionaires to thank for many of the things that I take for granted today (cars, tv, cell phones, computers, inexpensive electricity, etc.).  Your cherished government did not create those things; they did not produce those things; and they certainly didn’t just give me those things (although I’ve wondered if going on welfare might help me to procure the latest models).

If you’ve made it this far, bravo (or should I say, “Why have you wasted your time?”)  Either way, I’m grateful.  Any suggestions on how to carry this message to people who consume their news casually and are easily mislead by the nincompoops on the Herald editorial board?

The GOP is now governed by utopians who abhor “socialism” and who contend that free markets are the sole answer to social and economic difficulties.All utopias are corruptible.

via All utopias are corruptible: Rutland Herald Online.

I may be fairly new to public discourse in politics, but I find it more than a little strange that the word, Utopian, is used to describe the GOP.  True, the GOP champions a free market economy. True, many GOP members think that a free market would accelerate growth and alleviate so-called economic, or social, injustices. However, a cursory study of free market thinkers like Thomas Sowell (Basic Economics 3rd Ed: A Common Sense Guide to the Economy) will reveal to the careful reader that proponents of the free market economy know and accept that nothing in this world is perfect and that it is precisely because of this view of the world that the GOP would champion a free market economy as the best answer to that imperfection.

A free market is best positioned to respond to the problems of poverty, hunger, and disaster because its design allows the flow of resources to go where they are most needed without the yoke of regulation slowing down the process.  Light regulation at best is what the conservative GOP member believes the role of the government should be. The GOP, or at least its rank-and-file, is about keeping the market as free as possible so that individuals can choose their paths according to their own free will with little or no interference from the government (or state). What has happened under both Republican and Democrat controlled governments in the United States over the last 50 plus years would hardly be a testament to the promotion of free markets, but there could be very little argument that the Republicans are a more likely champion of the free market than the Democrats.

The letter writer’s view of the GOP as somehow Utopian is informative, most likely, of where he gets his information. It is certainly possible, given the constant vilification of Republicans and their ideas, that a casual consumer of the news would believe the party of the GOP to be Utopian in its zeal to promote the free market. What seems to be absent in the analysis of the GOP is the perspective of conservative thinkers like Sowell, Walter Williams, or Dennis Prager (to name just a very few). None of these men is a shill for the GOP and they would likely be the first to let you know when elected officials began to stray from the objective of promoting a free market. Additionally, as a casual observer of politics (albeit definitely on the conservative side of the spectrum), I have noticed that the diversity of ideas for governing seem to be on the Republican side of the aisle rather than the Democrat side of the aisle (most notably on immigration reform from a few years back).

On one point, the letter writer and I can agree and I wish he would apply the scrutiny to the Democrat party: All utopias are corruptible. No statement could be more true and more timely in the wake of massive government intervention in health care, the auto and banking industries, and the college student loan industry. The Democrats believe that the state is the panacea (or at least the vehicle for the antidote) for the world’s ills and most Democrats subscribe to this vision of government as a Utopia. Again, most GOP members recognize the truth that the world is an imperfect place filled with imperfect people. We won’t run from this truth. Rather, we choose to accept it and apply the best possible systems for dealing with an imperfect human race. In this case, the free market.

The fourth straight rise in exports was an encouraging sign that the global economy has started to recover from a severe recession that began in the United States and quickly spread to other parts of the world. But many economists expect the deficit to rise in coming months on the back of a rebounding U.S. economy, which will start importing more foreign products.

via Trade deficit narrows to $30.7B: Rutland Herald Online.

I like economics, but I am only a novice economist.  Either way, here is my take on this bit of news:

Don’t confuse the trade deficit with the budget deficit.  The former being relatively benign and the latter being malignant.  Trade deficits are a sign of a good economy.

Just because we use the word deficit to describe levels of trade with other countries does not mean that it is a bad thing to be importing more than we export.  In fact, it is a good thing.  Our trade deficit with other nations signifies that our market is strong and desirable for the buying and selling of products.  Now, that is at least in some part because we have a reliable environment of lawfulness that ensures security for the products and the retailers.  However, it traditionally signifies that the U.S. dollar is a prize possession.

This article says that the dip in the trade deficit is a sign that the global economy is recovering and that it will likely go back up when the U.S. economy begins its recovery.  When the U.S. economy recovers, then yes, the deficit should go higher.  I would caution, however, against believing that the global economy is improving.  The reason for a drop in imports is probably a result of a weakened confidence in the U.S. markets and more specifically the value of the U.S. dollar.

The weakened confidence in our market and our dollar is likely a leading indicator of the downward direction of our economy.  Despite what Barack Obama, Joe Biden, and Robert Gibbs tell us, the economy will continue to falter and sputter and even get worse until the shackles come off of the engines that drive the U.S. markets: capital, ingenuity, and risk (with a little hard work thrown in for good measure).

With the government controlling what banks can and can’t do, we have serious problem creating the capital necessary for investment and growth.  With the government prepared to raise taxes on capital gains (among many other taxes) ingenuity is stifled because people have fewer avenues for creating wealth.  And with the threat of an ever-increasing regulatory environment, risk has become all but impossible to take as a means to putting ingenuity into action.

So, not that many of you care what the trade deficit is, but don’t be fooled into thinking that it is a good thing for the immediate future of our own economy.

Recommended reading: Basic Economics by Thomas Sowell

So, there is much controversy surrounding the President’s address to the students.  I confess, I don’t like it one bit, but not because of his political affiliations.  It is because of his ideology and talking directly to students without their parents foreknowledge fits his modus operandi.  Of course, the lesson plans established by the Department of Education were outrageous, but enough about that.

Here is a quote from his speech (at least the printed remarks):

But at the end of the day, we can have the most dedicated teachers, the most supportive parents, and the best schools in the world – and none of it will matter unless all of you fulfill your responsibilities. Unless you show up to those schools; pay attention to those teachers; listen to your parents, grandparents and other adults; and put in the hard work it takes to succeed.

via Raw Data: Obama Speech to American School Children – Political News –

Now, based on his words alone I am with him 100%.  In fact, this is something that we don’t hear enough about in the education world.  Personal responsibility on the part of the students is exactly what ought to be stressed by everyone from the President down to the lowest man (or woman) on the government payroll.

Matching his rhetoric to his actions is something entirely different.  Is some one who speaks so eloquently about the need for personal responsibility really going to advocate for a government-knows-best health care system?  Is someone who cherishes personal responsibility as a noble virtue going to bail out banks and auto companies with other people’s money?

Rush Limbaugh spoke about this on his radio program today.  Thomas Sowell talks about it from a slightly different angle in a recent column.  Both men are probably more qualified than I am to analyze the complex world of national politics, but I didn’t need their help in coming to similar conclusions.  This speech, while good on the surface, lacks substance from the man who uttered the words.  In other words, show me the responsibility in Obama’s agenda and maybe I’ll become a believer in the hope and change he’s peddling.

I cannot think of anything that the government operates more efficiently than the market does.

Thomas Sowell appearing on Uncommon Knowledge