Month: June 2021

John Stossel Demolishes Popularly Believed Myths about Capitalism

It is sad but true that most people believe that free markets represent a zero sum game. Winners only win to the extent that other people lose. In reality, nothing could be further from the truth. In a free market, entrepreneurs win by creating new goods and services, thereby making society richer. Moreover, entrepreneurs typically retain only a fraction–around 2%–of the added value they create.

In the video below, John Stossel discusses these and other widely believed myths about capitalism.

John Stossel debunks myths about capitalism

JFB

Progressive Good Crime

Coinciding with the Biden Administration’s push for higher taxes on wealthy individuals and a greatly expanded IRS, ProPublica published documents that purport to show private tax information of several high profile billionaires including Jeff Bezos, Bill Gates, Michael Bloomberg and others. 

Leaking these documents is, of course, illegal. And just like the Lois Lerner episode, no one will be punished for committing this crime. That’s because in the progressive mind this is Good Crime. Chances are, the perpetrators will never be revealed. 

ProPublica has said that it doesn’t know the source of the documents. Fat chance of that, by the way. If ProPublica doesn’t know its source, there is be no way they could have authenticated the documents or determined their accuracy. But they printed the documents anyway, undoubtedly because it furthers the story—fiction really—that the rich don’t pay their “fair share”. 

Among other stunning revelations, the documents, if accurate, show that (1) wealthy individuals (like everybody else) didn’t pay income taxes when their reportable income was zero; (2) wealthy individuals (like everyone else) didn’t pay capital gains taxes in years when they didn’t realize any capital gains by selling assets, and (3) wealthy individuals used plenty of lawyers and accountants to make sure that they legally minimized their tax bills. Which is to say that the behavior of these individuals was both legal, proper and rational. 

On the other hand, amid all the faux indignation, it should be noted that the documents that were leaked were leaked illegally. In so doing the leakers (1) violated the privacy of those whose documents were leaked and (2) demonstrated for the umpteenth time the gross incompetence of the IRS when it comes to guarding citizen privacy. More likely it is worse; the IRS simply followed the orders of its political masters to weaponize the agency, as in the recent case of Lois Lerner. Which is not to leave out Richard Nixon and Lyndon Johnson. 

As to the substance of the matter: Congress is supposed to determine tax policy. For some reason or other all those lefties wailing about “saving our democracy” don’t seem to think much of our democratic processes.  If they did they wouldn’t be cheering on the clearly illegal leaking of documents designed to gin up outrage against success while running around the legislative process. 

As it turns out, progressives are at least half-right when they assert that the rich do not pay their fair share of the tax burden. The rich pay far too much. It is the middle class that is undertaxed. 

Consider the following statistics, using the latest available data. In 2017 the top 50% of taxpayers paid 97% of all federal income taxes. They bottom 50% paid the remaining 3%. The top 1% paid 38.5% of individual income taxes; the bottom 90% paid only 29.9%. The top 5% paid 59%; the top 10% paid 70%. As these numbers make clear, the tax income burden is shouldered by the wealthy, not by the middle class. These data are available in greater detail here. 

The middle class, as it turns out, is by far the greater net beneficiary of federal largesse. Lower income Americans on balance receive net cash benefits from the government. That is offset by the junky schools they have to put up with and inadequate police protection in poor neighborhoods. All the cash payments do is create a permanent dependent class. This is the vote buying operation that is the hallmark of progressive politics (tax, spend and vote). It remains firmly in place, and has so since the days when it was instituted by FDR. 

If progressives were truly interested in tax fairness, which they manifestly are not, they would specify ahead of time what tax shares would constitute fairness for the different deciles of the income distribution. But of course they never do that. Moreover, there is a simple way to ensure that everybody pays the same tax rate. The tax code could be amended so that everyone earning $25,000 per year or more would be required to pay 17% of their income in tax. No exemptions, no deductions. Period.

The mere hint of a flat tax where everybody pays the same rate would have progressives screaming bloody murder along with tax lawyers, accountants and lobbyists. I should say other lobbyists. The reason is simple. Progressives are not interested in either tax fairness or tax efficiency. What they are really interested in is command-and-control of the nation’s economy. Progressives want to use the police power of the federal government to commandeer private resources so that they can regulate and transform America into a little socialist utopia. No matter how long they have to goose-step their way toward the goal.  

JFB

Peak Biden?

When President Biden released his budget proposal this past Friday he listed his priorities in the following statement. (The budget document can be found here.)

Biden’s list of priorities is typical in that it studiously avoids talking about trade-offs. Everything is a priority. Not only that, the priorities are expressed in focus group tested aspirational language meant to please the progressive base while remaining vague enough to avoid measurable results. Biden will for instance, take action, control, provide, tackle, advance, reform and restore. From a policy perspective this is meaningless blather. 

Which begs the question: Why did the Administration decide to release this on the Friday afternoon before Memorial day when it would receive minimal coverage? Larry Kudlow provides a plausible explanation. The accompanying numbers in the tables of the OMB budget release give away the game. 

In its own budget documents the Biden Administration admits (1) that it is planning for an increase of $14.5 trillion in accumulated debt by the year 2031; (2) it assumes that federal government outlays will increase to 24.5% of GDP through 2031 versus a long term average of about 19.3%, and (3) after a Covid re-opening spurt, real GDP growth will range from 1.8% to 2% from 2023 through 2031. 

Let’s think about the implications of all this. The Biden Administration intends to spend gargantuan amounts of money, in the process greatly expand the size and scope of both the federal government and the national debt. For its efforts the Biden Administration projects that it will match the Obama Administration recovery. So how does the Obama record stack up?

1.Measured by real GDP growth, job creation or wage expansion, the Obama record was somewhere between subpar and pretty miserable. 

2. From the expansion that began in June 2009, real GDP grew at only 2.1% per annum, the slowest growth rate during an expansion since 1949. 

3. Net job creation grew by 8.6% during the Obama years.  Total employment grew by more than that, and sometimes substantially more, in 5 of the prior 10 expansions since 1949. 

4. Similarly, inflation-adjusted wages increased by more in 5 of 10 prior recoveries since 1949. More detailed data is available here. 

So here we have a situation in which the Biden Administration intends to upend much of American society by (1) significantly  raising marginal tax rates, (2) substantially re-regulating great swaths of the economy, (3) launching new fronts in the culture wars and (4) using federal power in an attempt to equalize outcomes across groups defined by race and sex rather than by effort and opportunity in complete contravention of the bedrock Constitutional principle of equality before the law. 

And for all this, by its own admission, the Biden Administration expects the results to be mediocre at best. Actually, the Administration’s policy agenda virtually guarantees poor results if the Congress is foolish enough to pass it.  

The likely result of all this is that economic performance will fall short of even the low expectations of the Administration. Add to that a widening gap between promises and results and the stage is set for rising populist discontent, increased racial tensions, decreasing civility and further erosions of individual freedom. 

But think of the bright side. This could be Peak Biden.

JFB