Author: Rodger Malcolm Mitchell

MBA Northwestern, business turnaround expert, economist

–License and tax marijuana

An alternative to popular faith

Finally, a good idea from government:

5/28/10: (CBS/ AP) “Local governments in California and other Western states have tried to clamp down on medical marijuana, but Oakland has taken a different approach: If you can’t beat ’em, tax ’em. After becoming the first U.S. city to impose a special tax on medical marijuana dispensaries, Oakland soon could become the first to sanction and tax commercial pot growing operations. Selling and growing marijuana remain illegal under federal law.

“Two City Council members are preparing legislation expected to be introduced next month that would allow at least three industrial-scale growing operations. One of the authors, Councilman Larry Reid, said the proposal is more of an effort to bring in money than an endorsement of legalizing marijuana use – although the council has unanimously supported that, too.

“The city is facing a $42 million budget shortfall. The tax voters approved last summer on the four medical marijuana clubs allowed under Oakland law is expected to contribute $1 million to its coffers in the first year, Reid said. A tax on growers’ sales to the clubs could bring in substantially more, he said. “

Cigarettes, liquor, gambling. All are addictive. All are harmful. All are legal. All are taxed. Why not drugs? Prohibition didn’t work. In fact, it may have increased the use of alcohol. Similarly, the “war on drugs” is an abysmal failure, causing more gang activity, smuggling, murder and other hardship than it prevents. Outlawing something people want never works. That’s why Oakland has a great idea.

Not only will this reduce crime and addiction, but it will bring the city much-needed revenue. Unlike the federal government, state and local governments are unable to create money at will, and so must rely on taxes and other sources.

Unless the righteous federal government messes things up, this will work, and will be followed by legalized (and licensed and taxed and controlled) poppy products.

Rodger Malcolm Mitchell
http://www.rodgermitchell.com

No nation can tax itself into prosperity

–Committee For A Responsible Federal Budget

An alternative to popular faith

On May 19th, I received the following Email from the Committee For A Responsible Federal Budget:

“Dear friend, I am excited to share with you the latest CRFB initiative that I believe will quickly become a critical tool in educating the public regarding the fiscal outlook and motivating policymakers to take responsible action to put the country on a sustainable course. Today, we are publicly launching our “Stabilize the Debt” budget simulator (http://crfb.org/stabilizethedebt/).

“The ‘Stabilize the Debt’ challenge continues CRFB’s distinguished tradition of engaging policymakers, opinion leaders, the media, and the public in deliberating and discussing what it takes to be fiscally responsible. This new online endeavor is part of our long tradition of developing timely “Exercise in Hard Choices” exercises, and we are excited about our newest version.
[…]
“‘Stabilize the Debt’ challenges the user to think about reducing the debt in the longer term and maintaining it at a sustainable level, as opposed to simply balancing the budget for a single year. It promotes thinking about the need for both medium- and long-term term fiscal goals and how to attain them. It uses the goals from the Peterson-Pew Commission on Budget Reform from the Red Ink Rising report of stabilizing the debt at 60 percent of GDP by 2018 and keeping it low.

“I encourage you to take the challenge and share with all your friends. Since Congress appears unlikely to produce a budget this year and have the needed debate over fiscal priorities, this simulator can fill that void by enabling Americans to discover and discuss the difficult choices that must be made and engage in a nationwide dialogue on how best to put the country on a sound fiscal course. Sincerely, Maya MacGuineas, CRFB President

“For press inquiries, please contact Kate Brown at (202) 596-3365 or brown@newamerica.net.”
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Not having had Ms. MacGuineas’s Email address at the time, I wrote the following letter to Ms. Brown on May 19th. And again on May 20th. And May 24th. And May 27th. To date, no answer, which is normal for all debt hawk organizations. Knowing they have no data to support their claims, they simply ignore requests for data, even when, as you’ll see, I offered to promulgate their beliefs:

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“Ms. Brown,

If you can supply historical, statistical evidence that the U.S. federal debt and deficit need to be reduced or are not sustainable, or that the federal debt needs to be stabilized at “60 percent of GDP by 2018,” I would be glad to post this data on my web site, https://rodgermmitchell.wordpress.com. I also will mail this information to my list of 100+ economics professors, 50 newspaper and magazine columnists, and 30 newspaper and magazine editors around the country.

Rodger Malcolm Mitchell”
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Try it yourself. Write to any debt hawk organization or any debt hawk politician or economist, and ask for data to support the idea that the debt is too large. In the unlikely event you receive anything that constitutes evidence, please forward it to me.

Subsequently, I did find Maya MacGuineas’s Email address and wrote to her and Ms. Brown. For your interest, here is a calendar of my requests to supply evidence and my offer to send this evidence to economists and the media all over America:
May 19: Wrote to Ms. Brown
May 20: Wrote to Ms. Brown
May 24: Wrote to Ms. Brown
May 27: Wrote to Ms. Brown
May 28: Wrote to Ms. Brown & Ms. MacGuineas
June 1: Wrote to Ms. MacGuineas

Rodger Malcolm Mitchell
http://www.rodgermitchell.com

No nation can tax itself into prosperity

–Unelect incumbents

The state of Illinois is the most dishonest state in America. I challenge you to find a more crooked bunch of politicians anywhere in the nation, if not the world. From Chicago’s Mayor Daley (mayor for life, who sold the parking meters and the Skyway, but where’s the money?), to the aldermen (who require bribes for any service), to Cook County president Todd Stroger (who was put in office by his father after his father died), to Governor Pat Quinn (the #3 guy in Illinois), to Michael Madigan (who really runs Illinois — into the ground), to John Cullerton (the Senate President and #2 guy) to State’s Attorney Lisa Madigan (who never will investigate her dad Mike’s backroom deals), to all the compliant Illinois House and Senate politicians (who have given Illinois the worst credit rating of any state), I dare you to find a more nefarious bunch of scoundrels.

Is it any wonder so many of our governors and aldermen wind up in jail. Sadly though, most of them don’t go to jail, so we are left with these criminals, running our lives with our tax money.

Yes, there are a few honest pols out there, just as there are a few unarmed gang bangers, but there is no way for even a studious voter to identify them. So, we are left with one choice. Throw them all out and start over. That is, unelect incumbents.

Thus, readers can try to meet the challenge of proving their political leaders are as dishonest or more so, than those I’ve named. I dare you. Or you can use the space to add to the legends of Illinois incumbents.

And next fall, remember to throw the rascals out. Do it even when the other guy seems as bad, because history proves, the more time in office, the more crooked they become (Hello, Mayor Daley).

Remember, there is only one solution. Unelect incumbents.

Rodger Malcolm Mitchell

–David Malpass: Less money = more money

An alternative to popular faith

On May 26, 2010, the Wall Street Journal published an article by David Malpass*, which began : ”When Ronald Reagan became president, the world had too much inflation, i.e. too much money chasing too few goods. Economists argued for higher taxes to sop up extra demand. Instead Reagan chose to cut tax rates to encourage more output and pursued an strong dollar policy. The result was more goods and better balance between the supply and demand for the dollar. The malaise ended 18 months into his administration, with inflation declining gradually for nearly 20 years. We now face a different, equally severe problem – too much government spending and debt.”

See anything wrong with this? Forget, for a moment, the inaccurate definition of inflation (“Too much . . . too little . . .” See: INFLATION ) and think about the overall substance of the paragraph. He begins at the right place (Cutting tax rates) and ends at the right place (encourages more output), but wanders aimlessly and illogically in between.

First, there is no way cutting tax rates can end inflation, simply because cutting tax rates increases the supply of money, and increasing the money supply never has been considered disinflationary by any economist. However, because cutting tax rates increased the money supply, this did encourage output. So, all right, Malpass may have been a bit confused, but at least he arrived at the right conclusion. More money = more production.

But then, in the article, he wanders off again, claiming: “[…] too much government spending and debt.” Huh? After WWII, the Reagan administration began the greatest debt growth in U.S. history, and it was this debt growth that created the mighty engine of economic growth in the 1980’s.

Malpass spends the rest of his article decrying the federal deficit and debt he helped create (“nosebleed levels,” “debt the size of the Grand Canyon”), and even throws in a couple of non sequiturs about bill length (“health care reform . . . a whopping 2,700 pages,” “financial reform . . . 2,000 pages”), while as usual with debt hawks, not providing any evidence whatsoever that federal debt and deficits have an adverse effect on our economy.

He claims the debt and deficit are “starving small business of capital” without telling how an increase in federal money creation could starve anyone of money, and he finishes with this telling statement: “[…] true leadership requires . . . reducing government spending substantially enough to convince the private sector to invest again.”

So, he wishes us to believe that if the government pays less money to soldiers, military equipment manufacturers, doctors, nurses, hospitals, road and bridge and dam builders, farmers, poor people, teachers, home builders, railroad personnel, security-related firms and to all the other businesses selling to the government, the private sector somehow will have more money for investment.

And once again, this is the way our leaders have managed to guide us into an average of one recession every five years.
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*David Malpass was deputy assistant treasury secretary in the Reagan administration, and is president of Encima global LLC, and a Republican candidate for U.S. Senate in New York.

Rodger Malcolm Mitchell
http://www.rodgermitchell.com

No nation can tax itself into prosperity