Who Will Pay?

Column 2018-2 (10/22/18)

Our world is filled with conflicts. In the realm of politics and government these conflicts run rampant. Most of these conflicts are fueled by emotions rather than facts and reason.

One of the core conflicts is, Who should own the wealth? Before considering this conflict we need a common understanding of what wealth is.

Everything of value is part of our wealth. Contrary to a popular belief there is no such thing as inherent value. Individuals value certain things because of the belief that those things will some how contribute to the individual’s satisfaction.

Individuals seek to increase their satisfaction. Anything that an individual believes will increase his satisfaction has value to him. Anything that can be used to produce or preserve those valuable things also has value. Thus, consumer goods and the production goods that can produce consumer goods are all part of our wealth.

Most people can’t afford to own the production goods needed to produce the consumer goods they want. They depend on production goods provided and owned by others.

The only way to increase our standard of living is to make better production goods that in turn make workers more productive. Someone has to pay for developing and providing these better production goods. Even if we don’t develop better production goods, someone has to pay to replace the old ones when they ware out.

Not all invested wealth belongs to the rich. Much of it does. Diverting wealth from investment to consumption spending depletes the investment in production goods which is indispensable to prosperity. It is the equivalent of eating the seed corn.

It is possible to tax away investment for several years without obvious consequences. Sooner or later productivity and prosperity will start to slip away. It may not matter who owns the investment in production goods. It is vital that some postpone consumption and invest in production goods.

Taxing the rich investors isn’t painless for everyone else. When investment decreases, the poor and middle class will feel the pain from decreased productivity long before the rich do.

Those who have the least are hurt the most when productivity declines. Most rich people could still live very well if their incomes were cut in half. What would happen to the poor and middle income people if they lost half of their income?

There is another way to pay for excessive government spending, for a while. To some extent the US government is already using it. Governments have unlimited capacity to create new money. They don’t even have to print it. Just punch a few keys on the computer.

There is one small problem. Government has zero ability for avoiding the consequences from creating new money. The new money gets its value by sucking it from the existing money. The price of everything goes up. Create enough new money and all the money becomes worthless. This is nothing more than an indirect way of diverting wealth from investment to consumption spending.

Zimbabwe performed that magic a few years ago. Venezuela is doing its best to join the club. A recent article reported that price inflation in Venezuela is rolling along at about 48,000 percent per year. Suppose that report is wrong and the inflation rate is only 24,000 percent. Would it make any real difference?

So far the government's solution is to issue new Bolivar bills with five fewer zeros. A million old Bolivars become 10 new ones. This will not do a thing to solve the underlying problem of overspending by government. And, yes, it can happen here.

The people who call themselves socialists want the US government to provide trillions of dollars worth of more “free” stuff. Paying with taxes on businesses and the rich will be a disaster. Paying with new money will likely turn out even worse. Will anyone scream STOP?

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Copyright 2018

Albert D. McCallum

What Is In a Word?

Words are important. Imagine a world without words. How would we communicate with each other? For one thing you wouldn’t be reading this column. Okay, so maybe there would be some benefits from not having words.

Merely having words isn’t enough. What if I urged you to buy a gzajoxx? (Do you have any idea how difficult it is to create a word that doesn’t exist? The first two words I tried, Google found more than 6,000 times. Even “gzajoxx” appeared on three web pages, mainly as a license plate.).

Unless “gzajoxx”, or any other word, means the same thing to you and me, the word is useless for communication between us. How much of the conflict in the world exists because recipients of words don’t interpret them to mean what the senders intended?

Today I will consider an old word that is experiencing a rebirth: socialism. After the collapse of the Union of Soviet Socialists Republics few, if any, rose to defend socialism, let alone advocate heading down the socialist road.

Socialism that had endlessly produced nothing but poverty, misery and servitude seemed to be dead and buried forever. Someone is bound to claim socialism has succeeded in the Scandinavian countries. Before considering that claim let us consider the definition of socialism.

The American Heritage Dictionary defines socialism as: “Any of various theories or systems of social organization in which the means of producing and distributing goods is owned collectively or by a centralized government that often plans and controls the economy.”

Thus, the Scandinavian countries are no more socialist than the USA. Private businesses own and control most of the production in Scandinavia. These businesses are taxed less severely than US businesses and subject to regulations no more severe than those endured by US businesses.

If Scandinavia is socialist so is the USA. The socialists can declare victory, shut up and have a party.

Interestingly today’s self proclaimed socialists make little if any mention of government seizure of all businesses. Thus, whatever they are, they are not socialists. What are they?

The ones I have noticed simply call out for expansion of the welfare state. They want more free stuff from government. They demand “free” college and medical services for everyone. They want a huge increase in the minimum wage. There is nothing new about any of this. It is the same old drum beat with a new name for the band.

There is one thing the neosocialists don’t care to talk about. How will a government which is already out spending it income by a trillion dollars a year pay for more free stuff? That is right. Free stuff isn’t free. Someone has to pay for it.

The only answer I have heard is tax businesses and tax the rich. I haven’t heard any numbers mentioned about how much money can be collected this way, or what the consequences will be.

Perhaps they should check with Scandinavia on this. The Scandinavians have learned that it isn’t a good idea kill or drive away the geese that lay the golden eggs. Over tax a business and it will leave or fail. Either way the golden eggs that pay for the welfare state are gone.

Tax the rich and they too will find a way to leave. Thus, countries such as Sweden and Denmark pile the taxes onto the middle class and poor. Most of them don't have the option of leaving. So, they stay and pay for their”free” stuff. It is easy to understand why the neosocialists don't want to talk about paying for the “free” goodies.

When someone claims to be a socialist, check out what they really want, and how they will pay for it. The new socialism appears to be the redistributionist welfare state on steroids.

aldmccallum@gmail.com

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Copyright 2018

Albert D. McCallum

What Is Social Justice?

Column 2017-16 (5/8/17)

There is nothing new about using deceptive slogans and buzz words to sell ideas. This tactic is often focused on selling bad ideas. Thus, the term “social justice” has been revived and inflicted upon us.

Social justice isn’t a new idea. It is merely a rebranding of an old idea. Who could possibly oppose something as high sounding as “social justice?” To oppose social justice must be support for social injustice. Who would dare do that?

The first line of Wikipedia’s entry on social justice states.: “Social justice is the fair and just relation between the individual and society.“ Any definition that relies on two totally ambiguous words isn’t a good start. “Fair” and “just,” like beauty exist only in the eye, or mind, of the beholder. That which is fair and just to one may be oppression and tyranny to others.

Today’s social justice crusaders lean heavily on the claim that social justice decrees that individuals are entitled to certain things, such as medical services, education, and housing. There is no limit on what can be added to the list.

Calling such entitlements social justice is supposed to ward off nasty questions. No one is supposed to ask why the entitlement exists, or who will pay for it. Social justice might be best described as armor for bad ideas. The armor doesn’t do a thing to improve the idea.

We only have two things for our use, unprocessed natural resources and human effort. Everything else is produced by combining these two resources. Most natural resources aren’t very useful before they are processed with human effort.

Everything we have is a product of human effort. Even the air you breathe isn’t of much use unless you expend your energy inhaling it.

Calling something an entitlement doesn't bring it into existence. People must produce it. If the person using the entitlement doesn’t produce it, or produce something to trade for it, someone else must.

Unless someone volunteers to produce or pay for the entitlement, someone must be forced to produce it or pay for it. Forcing someone to serve another is involuntary servitude, also called slavery.

Those who advocate entitlements are calling for slavery. Calling entitlements social justice is at the most a thin mask for slavery.

Anyone who wants to advocate slavery is free to do so. They shouldn’t expect sympathy when they crawl off to a safe space to avoid the criticism they earned. Neither should they expect the taxpayers, or anyone else, to pay for the safe space. In other words, safe space isn’t an entitlement.

A true human right must be equally available to everyone. Anything that forces one to serve another can’t be a universal right. It is only a special privilege that forces some to serve others.

The only right that can be shared by all is liberty. Everyone can be free to live as they choose and interact with those who are willing. Freedom doesn’t include the right to commit aggression against anyone. Aggression destroys the freedom of the victims.

Individuals charitably using their own wealth do far more good than politicians and bureaucrats doling out wealth seized from others. Some wealthy people claim they aren’t paying enough tax. If they really believed that, they would shut up and start writing checks.

Life will never be completely fair and just by anyone’s definition. Voluntary cooperation will produce more fairness and justice than will ever come from “do it my way or I will hurt you” government. Totalitarian politicians will disagree with this conclusion.

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What Will Balance the Federal Budget?

Column 2017-15 (5/1/17)

Balancing the government’s budget has long been a hot topic of discussion. Still the deficit continues on the same trajectory, one step down and two steeps up.

 Most of the discussion focuses on two possibilities, raise tax rates or cut spending. Unfortunately politicians usually prefer to cut tax rates and increase spending. So far this plan has only produced oceans of red ink. The last eight years have more than doubled the ink supply.

The accumulated debt is around $20 trillion. That doesn’t include the unfunded promises for future spending such as Social Security and Medicare. The cost of the “entitlements” is estimated to be $100 trillion or more beyond estimated tax revenue.

If we continue on the present course there is a financial train wreck coming. Unfortunately warnings of the coming crash have echoed for so long that many people no longer take them seriously. This head in the sand approach won’t make the financial wreck any less of a disaster when it happens.

On rare occasions someone raises his voice to offer another way to eliminate the deficit. So far those voices have barley made a ripple in the D.C. swamp.

That other way is easy to describe. Also in theory it could work. The big question is, Will it work in D.C?

The first step in the plan is to concede that cutting spending is politically impossible. Thus. forget about cutting spending. Also forget about raising tax rates. We are past the point where higher tax rates begin to decrease revenue rather than increase it.

There is only one option left. Increase the wealth available to tax. In other words we must increase productivity. Government is good at decreasing productivity, but mostly useless at increasing productivity. This may seem depressing. In this case it is the only reason that plan could work.

Economists who study productivity have concluded that without the burden of excessive regulations productivity and incomes would be at least twice what they are. This sounds believable. If over the last 70 years productivity had increased 1 percent a year more than it did, incomes would be double what they are.

This would have doubled tax revenue. That is enough to eliminate the federal deficit and provide a tidy surplus. Of course that would have happened only if spending didn’t exceed current levels. That is the fly in the ointment.

Unspent money drives politicians mad. If there had been more money available, Who wants to bet that spending wouldn’t have increased as much as tax revenue did?

Why did I bring the plan up at this time? President Trump has promised to drain the swamp of regulations. If he actually does we will have a real life test of the plan. I doubt that much drainage will happen. Perhaps there is a chance that it will.

If the regulations are dumped and increased revenue rolls in, what government does will be up to the voters. If voters continue to demand more spending on more “free” goodies, that is what the politicians will deliver. The spending orgy will continue until the well runs dry. I don’t know how many decades it be until the end. However long it takes it will happen.

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Copyright 2017

Albert D. McCallum

Preventing Diploma Abuse

Column 2017-14 (4/24/17)

Abuse prevention is much in the news. Certainly there is plenty of abuse to be eliminated. Still, I was surprised to read of an abuse that had never crossed my mind. How could I have missed it? How did so many others miss it?

 

Chicago mayor, Rahm Emanuel, is leading the charge to prevent diploma abuse. We can now add diploma control to gun control as a hot school issue. Chicago’s plan doesn’t yet require a permit to carry a diploma. I’m sure there will be time for that later.

I’m not sure how Chicago discovered graduates were abusing their diplomas. Give credit where credit is due. Results, not methods, are what matters most.

After years of urging everyone to earn a high school diploma, Chicago has discovered that graduates need government guidance on how to use that diploma. Believe it or not some graduates might actually use a diploma to get a job. If graduates can get away with using a diploma to get a job, What next? Will they find a way use a diploma to get drugs?

To get a diploma the student must provide proof of acceptance by: 1) A four-year college; 2) A community college; 3) A branch of the armed services; or 4) A trade school or program. That is it. There are no other options.

No where does it say the student must participate in his chosen option. Community colleges accept just about anyone. The student can gain acceptance, collect his diploma, and then skip college. Why should the student have to jump through the hoop? Why should colleges be bothered to process applications from students who have no intention of enrolling?

It is the height of arrogance for government to pretend to know best how a graduate should use a diploma. With 18 million or so recent college graduates unable to find jobs in their field of study, it is ridiculous to be pushing more into college.

For many jobs on the job training is the best way to learn a skill. Yet government pushes individuals into formal education and debt. At the same time minimum wage laws prevent trainees from accepting low wages while learning. Any wage is better than no wage plus debt.

While on the subject of schools this seems to be an appropriate time to revisit the silliness of zero tolerance. In case you missed it, zero tolerance is still thriving. Its implementers apparently are immune to embarrassment.

A five years old girl was suspended from school for pretending a stick was a gun. A four years old boy got the boot for having an empty .22 caliber shell casing. Perhaps the zero tolerance enforcers felt the need to demonstrate that they are gender neutral.

When I was in school it didn’t bother anyone when I bought ammunition during lunch time, brought it back to school, and took it home on the bus. Maybe it was a bit over the top when we used real hand guns on stage in our senior play. No one complained though, including the teacher directing the play.

If anyone did this today the school would be locked down and attacked by a SWAT squad. Life was simpler in the age of dinosaurs.

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Copyright 2017

Albert D. McCallum

Can Government Be Successful?

Column 2017-13 (4/17/17)

It is easy to find government's failures. Its successes are a bit harder to smoke out of their holes. I recently found one of the successes in the most unlikely of places, an op-ed from the “New York Times.”

The success story comes from Pagedale, Missouri, a community of about 3,300 near St. Louis. You know that the success has to be spectacular to get noticed far away in New York city.

Pagedale has its own court which costs about $90,000 a year. Fines and cost collected by the court exceed a quarter million dollars per year. That is nearly a 300 percent return on investment. If that isn't success, What is? If a business hauled in that kind of profit, someone would be screaming for a Congressional investigation.

The dastardly deeds that can get the city into a pagedalions pocket include not walking on the right side of crosswalks; barbecuing in the front yard, except on national holidays; and failing to have a screen on every door. It is also a violation if the enforcer does not like the look of a home owner’s drapes or if the window blinds are not neatly hung.

The Pagedale court handled 5,781 cases in 2013. That is about 1.75 cases per resident. The money collected adds up to about $75 per resident.

Policing for profit wasn't invented by Pagedale. Speed traps have been around almost as long as automobiles. Michigan still has a law enacted to cut down on speed traps. The law banned speed limits of less than 25 miles per hour. It has been amended to create a few exceptions. Still, most speeding violations are much about revenue and little about safety.

Code violations and speed traps are small potatoes in government's quest for other people's money. The big leaguers play at the asset forfeiture table. Why bother with hundreds of dollars when tens of thousands, or even millions, are there for the taking?

In civil asset forfeiture the enforcers skip over people and go straight for the loot. They file a claim that certain assets may have been involved in a crime. The next steep is seizure of the assets. The owner can attempt to get his presumed guilty assets back if he can jump through all of the right hoops.

The first hoop usually is posting bond for the privilege of trying to reclaim his own property. To its credit Michigan did eliminate this hoop. Posting bond can be a challenge when all of the owner's money and other assets have been taken from him.

The national government has developed a nasty habit of seizing bank accounts for the dastardly deed of the account owner making too many deposits of less than $10 thousand. A sheriff in Florida took cash from anyone caught in his county carrying more than a hundred dollars. He claimed that anyone carrying $100 or more must be dealing in drugs.

In most cases of civil asset forfeiture no person is even charged with a crime, leave alone convicted. Civil asset forfeiture should be abolished. A criminal conviction should be prerequisite to forfeiture. Unfortunately abolition isn't going to happen soon.

Squeezing the the profit from fines and forfeitures would greatly discourage enforcers from pursuing money instead of criminals. No one involved in collecting fines and forfeitures should be allowed to benefit from the collection.

All fines and forfeitures should be put in a separate fund where they couldn't be spent by or for government. The money could be used to reduce taxes, compensate crime victims, or some other worthy purpose. With the profit removed from fines and forfeitures, don't expect the fund to ever grow large.

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Copyright 2017

Albert D. McCallum

Is Capitalism Good?

Column 2017-12 (4/10/17)

     Advocates for capitalism passionately defend the word. Seldom do they bother to offer a coherent definition of what they are defending. To them the definition is obvious. The definition of capitalism is also obvious to its opponents. Few stop to ask, Do the definitions in the minds of the two sides have anything in common?

     What is capitalism? Even more basic, What is capital? We work and produce to provide the things we want to use. The tools, equipment, materials, etc. used to produce consumer goods are called capital. Without capital we wouldn't be able to produce much of anything. All we would have to work with would be our bodies.

      Try to imagine people living without any capital. About as close as we can get would be naked hunter-gatherers foraging with their bare hands. Life without capital wouldn't be good. Even the most primitive tribes have at least a few tools. How can capital be a bad thing? If capital isn't bad, Why is capitalism bad? 

     Communists, socialists, fascists and just about everyone else seeks to accumulate capital. If we call them all capitalists, the word "capitalists" won't mean much of anything. What does capitalism mean?

     The advocates for capitalism probably have in mind a highly efficient, smoothly running economy based on freedom and voluntary cooperation. Unfortunately they assume that the word capitalism creates this image in everyone's mind. It doesn't.

      The advocates for capitalism commonly imply that our existing economy is capitalism. Opponents of capitalism can be forgiven if they look at our existing economy and conclude that it is what capitalism is. It is also understandable if they don't like the the crony capitalism they see.

     Those who insist on using the emotionally charged and nearly meaningless word “capitalism” are largely responsible for the confusion. Or, perhaps they really want to defend crony capitalism, If so they are battling on behalf of the indefensible.

      What kind of economy is worth defending? Adam Smith answered that question more than 240 years ago in "An Inquiry Into The Nature and Causes of the Wealth of Nations." After considering numerous economies from various eras Smith concluded that the wealthiest nations were those where government interfered the least with the economy. In other words, freedom is essential for prosperity.

      Experience since Smith wrote further confirms that Adam Smith was right. We ignore his wisdom at our peril. Instead of quibbling over the meaning of vague words, such as "capitalism," advocates for a strong, productive economy should focus on increasing understanding of freedom in the marketplace and how that freedom works for everyone.

      Some will complain that this is too materialistic, we don't need to be more productive. This is short sighted. Those who don't want to consume more don't have to. If we increase our productivity we can produce what we now have with less effort.

       If the poet can sustain himself with 20 hours of work instead of 40 he has 20 more hours to write poems. Those who aren't into poetry can give more to the less fortunate or just relax. Much of the increase in productivity we now enjoy goes into increased leisure time. Most people no longer work 80 or more hours a week.

      Freedom in the marketplace only requires that we be free to produce, buy, and sell as we choose. Individuals wouldn't need government approval to work and produce. Government wouldn't write the specification for the vehicles, appliances, etc. that we make and use. I recently read that there are nearly 100 US government regulations on how to make furnaces and air conditioners.

      It is absurd to even suggest that we live in economic freedom. Unless we want to watch the US waste away we must bring more freedom back to the marketplace.

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Copyright 2017

Albert D. McCallum