Tag: popular faith

–Quick prediction for the next two years

The debt hawks are to economics as the creationists are to biology.

Here is a quick, overly simplistic prediction about what is likely to happen in the next two years. If you disagree (or even agree), feel free to add your own predictions.

1. The Democrats, fearing the weak economy will cost them the House and Senate, urgently will try to stimulate the economy before November.

2. However, stimulating the economy requires federal spending and/or reduced taxes, both of which add to the federal debt. Republicans, not wanting the economy to recover before the November elections, will object to any increases in the federal debt, falsely claiming it’s “unsustainable” and “our children will pay for it.”

3. Every stimulus plan put forth by the Democrats will be met with the threat of a Senate filibuster, plus objections by the media, the Tea Party and all others who have been hypnotized by the debt hawks.

4. The Democrats, paralyzed with fear about the federal debt, then will talk about increasing federal taxes on the “rich,” so as to be revenue neutral. This will add to the Democrats’ stigma as the “tax and spend party.” Small business owners, the primary economic engine in America, will find themselves defined as “rich,” so will become even more reluctant to hire and invest. Worse, because revenue neutral plans do not add money to the economy, they will not prove to be stimulative.

5. The economy will not recover significantly, and may even regress. The voters and the media will blame the Obama administration for not creating more jobs, but will offer no non-debt solutions, as there are none. Voters, wanting stimulus without deficits (in other words, magic), will vent their frustration on incumbents, giving Republicans enough representation in both Houses to stifle any Democratic initiatives, but not enough representation to advance Republican initiatives. Further, since the Republicans have been vociferous about deficits, they will have left themselves no way to stimulate the economy.

6. Within two years, President Obama will blame the lack of economic growth on Republican recalcitrance, thereby setting the stage for a Democratic comeback in 2012.

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

No nation can tax itself into prosperity

–There is no wasteful federal spending

The debt hawks are to economics as the creationists are to biology.

As usual, some stimulus spending has been criticized because it is “wasteful” and doesn’t create jobs. Here are a couple examples published recently:

“ $1.9 million spent to photograph ants has created two jobs.. Other ant research stimulus projects: $451,000 has created one job, $276,000 created six one-hundredths of a job, and $800,000 created no jobs. The $144,000 spent to study the behavior of monkeys on cocaine created four-tenths of a job. To study why monkeys respond to unfairness cost $677,000 – and has created no jobs yet.”

I am reminded of former Wisconsin Democratic Sen. William Proxmire, who published his monthly “Golden Fleece” awards for what he considered wasteful spending. He often was criticized for opposing basic research he did not understand, for instance NASA, SETI and the Aspen Movie Map. Many worthwhile, federal research projects have been killed because some politician thought they were frivolous. This is especially true of basic research, where the ultimate benefits are yet to be determined.

The notorious Mansfield Amendment prohibited the Defense Department from carrying out “any research project or study unless such project or study has a direct and apparent relationship to a specific military function.” Such Congressional meddling in research virtually eliminates discoveries based on serendipity.

Whether or not you consider ant research to be wasteful, it is highly unlikely that $1.9 million created only two jobs. Let’s speculate on where that $1.9 million might have gone. Photographers, photographic equipment, rent, researchers, travel, computers, chemistry equipment – all of which helped various businesses and people. Then those businesses and people spent the money they received on things like food, clothing, shelter and transportation, all of which helped more people and businesses. And on and on and on. In a similar vein, the monkey research expenses were paid to people and businesses.

In short, when the government spends money, that money costs you nothing. (Taxes do not pay for the spending of a monetarily sovereign nation.) In fact, that spending adds money to the economy, and that money circulates throughout the economy, stimulating as it goes. Every time the federal government spends, people and businesses benefit, and in turn these people and businesses spend, which benefits more people and businesses. Ultimately, all federal spending creates jobs.

There always will be a politician who tries to look heroic and prudent, by pointing out what he considers to be wasteful spending. While state and local governments, which do not have the unlimited ability to create money, can spend wastefully, it almost is impossible for any federal spending to be wasteful, even in cases where the original expenditure seemed frivolous in some eyes. Even spending for the notorious Alaskan “Bridge to Nowhere” would have benefitted the economy by pumping money into the hands of people and businesses.

Good rule of thumb: The more federal spending, the healthier the economy. Reduced growth in federal spending has resulted in nearly every recession and depression, and increased federal spending dragged this economy out of the recession.

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

No nation can tax itself into prosperity

–The fallacy of taxing the rich

The debt hawks are to economics as the creationists are to biology.

Cynical populist politicians try to gather votes by playing Robin Hood. They think taxing the rich will make them popular with poor, and sadly, they are right. As the poor don’t realize, but readers of this blog have learned, TAXING THE RICH actually hurts everyone, especially the poor. Read the following article By JEANNINE AVERSA, AP Economics Writer, dated Aug 1, 2010
=====================================================================

“WASHINGTON – Wealthy Americans aren’t spending so freely anymore. And the rest of us are feeling the squeeze. […] Economists say overall consumer spending has slowed mainly because the richest 5 percent of Americans — those earning at least $207,000 — are buying less. They account for about 14 percent of total spending.
[…]
“President Barack Obama wants to allow the top (tax)rates to increase next year for individuals making more than $200,000 and couples making more than $250,000. The wealthy may be keeping some money on the sidelines due to uncertainty over whether or not they will soon face higher taxes. […] Think of the wealthy as the main engine of the economy: When they buy more, the economy hums. When they cut back, it sputters. The rest of us mainly go along for the ride.

“Earlier this year, gains in stock portfolios had boosted household wealth. And the rich responded by spending freely. That raised hopes the recovery would strengthen. […] The affluent went back to tightening their belts in June after months of vigorous showing. Data from MasterCard Advisors’ SpendingPulse showed luxury spending fell in June for the first time since November. […] “It isn’t a good omen for the consumer recovery, which cannot exist without the luxury spender,” said Mike Niemira, chief economist at the International Council of Shopping Centers.

“[…] And it helps explain why economists expect the rebound to lose momentum in the second half of the year. Especially if the rich don’t resume bigger spending. “They are the bellwether for the economy,” says Mark Zandi, chief economist at Moody’s Analytics. “The fact that they turned more cautious is why the recovery is losing momentum. If they panic again, that would be the fodder for a double-dip recession.”

“That’s because whether they’re saving or spending, the wealthy deliver an outsize impact on the economy. What’s not clear is whether they will remain too nervous to spend freely again for many months. That’s what happened when the recession hit in December 2007 and then when the financial crisis ignited in September 2008.

“As their stock holdings and home values sank, the affluent lost wealth. Their jobs weren’t safe, either. Bankers, lawyers, accountants and mortgage brokers were among those getting pink-slipped. Those who did have jobs feared losing them. Neither group spent much. Instead, Americans’ savings rate spiked. And most of the increase came from the richest 5 percent, according to research by Moody’s Analytics. In the first quarter of this year, stocks rebounded, layoffs slowed and the rich were spending again. But now the rich are building up their savings and splurging less on discretionary items. That’s starting to show up in softer sales at upscale retailers, such as Neiman Marcus and Saks Inc.

“’The affluent — as their wealth goes down — they’ll become more and more conservative,’ predicts David Levy, chairman of the Jerome Levy Forecasting Center.”

So, if you feel raising taxes on the rich is harmless, think again.

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

No nation can tax itself into prosperity

–Return the Statue of Liberty

The debt hawks are to economics as the creationists are to biology.

Arizona patriots have spent, and apparently will continue to spend, enormous amounts of money, to track, arrest, try, jail and deport illegal immigrants. In addition, the ongoing legal costs to create and defend in court, the various anti-immigration laws, are substantial.

All this money is spent because of the perceived economic drain on legal taxpayers, for schools, medical facilities and other welfare and human services support programs, the belief illegal immigrants take jobs from American citizens and the belief illegal immigrants are responsible for illegal drugs in Arizona.

An Arizona law (mostly overturned) would have allowed police to demand proof of legal residence from those stopped or arrested, when there was “reasonable suspicion” that they are in the country illegally.

What constitutes “reasonable suspicion”? What factors, for instance in a traffic stop, would give a police officer “reasonable suspicion” that a person was an illegal alien? Skin color? Accent? Are white people exempt? And if the officers “reasonable suspicion” were wrong, would an innocent person be detained? Will every person in Arizona now be required to carry official citizenship papers or a birth certificate, (ala Nazi Germany) in case a police officer has a “reasonable suspicion about him/her?

Pro-immigrant groups say Arizona’s expensive efforts merely are a manifestation of bigotry, and are not supported by economic considerations. For instance, the words and actions of Sheriff Joe Arpaio from Maricopa County, Arizona do bear a strong resemblance to the words and actions of “Bull” Connor, the notorious bigot from Birmingham, Alabama, who claimed he merely enforced Alabama’s segregation laws.

With all the emotional shouting, facts are not being heard. Perhaps it all begins with a simple question: What is the real difference between an illegal immigrant and a legal immigrant? While much has changed recently, a REPORT completed for the year 2004 is instructive. Summarized, it indicates that on balance, illegal immigrants provide an overall economic benefit for Arizona.

While we’ve heard no outcry against legal immigrants, it’s may be possible illegal immigrants are even more beneficial. They are more likely to be of working age, more likely to work (they came here to earn money) and possibly less likely to commit crimes (for fear of deportation).

A chart on p. 58 of the above report says: “Fiscal costs of immigrants in 2004 were an estimated $1.4 billion. Tax revenues attributable to immigrants as workers were approximately $2.4 billion, resulting in a net fiscal gain of approximately $940 million.”

It is quite common, when a nation experiences difficult economic times, for the citizens of that nation to look for scapegoats and especially to develop xenophobia. I suspect that is what has happened in Arizona and in the several other states considering tough, anti-alien laws. It’s become so crazy, some Republicans want to deny citizenship to U.S.-born children of illegal immigrants!

Sadly, during times of stress, some “patriots” forget our heritage: “Give me your tired, your poor, your huddled masses yearning to breathe free, the wretched refuse of your teeming shore; send these, the homeless, tempest-tost to me. I lift my lamp beside the golden door.“ Shall we return the Statue of Liberty?

Or better yet, perhaps we simply should stop making the path to citizenship so darn difficult.

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

No nation can tax itself into prosperity