American-Manifesto.com In Defense of American Exceptionalism

In tonight’s State of the Union address, Pres. Obama called on Congress to raise taxes on the wealthy.  He wants them to “pay their fair share.”  Set aside the moral issues of redistributive taxes (it is a form of slavery to assert ownership over the value of someone else’s economic output - but that’s for another day), let’s look at the economics involved.

Taxing the rich reduces innovation, jobs and economic growth.  How?  Look at a company that started small and got big - Facebook.

When Facebook began it was just a couple people.  But once it got going, that didn’t last long.  They needed programmers.  The programmers needed computers, desks, offices, and office supplies.  The programmers’ computers had operating systems and development tools and databases.  Facebook also needed servers, data centers, back up power sources, server racks and cooling systems.

Facebook could buy those things because rich people had the money to invest in a risky start up.  Those things were available for Facebook to buy because other people previously invested in capital-intensive companies to make those things.  Computers, software, desks, lamps, servers, data centers, office buildings, etc. don’t build themselves.  They require allocation of existing capital.

When government raises taxes (on any group, but particularly the wealthy), it reduces the pool of money available to build computers, software, desks, and lamps, or to invest in new, innovative ideas like Facebook.  That means goods that are never built, innovative companies that die for lack of investment and jobs that are never created.

Of course the rich have the money to pay higher taxes.  But it’s the rest of us that pay the price.

Jim Pethokoukis on why Mitt Romney’s 15% tax rate is actually too high:

We shouldn’t tax what we want more of. And the real problem with the capital gains tax isn’t the rate or how it is structured, but what is taxed: gains on investments, which are savings put to work. Economists of all stripes have been saying Americans have consumed too much and invested too little over the past decade. So why would we want to tax investment even heavier, as the Obamacrats want to do?

Or put another way, you can use your money to consume goods now, paying a 6%-or-so sales tax in the process, or you can risk your money by investing it and then pay a 15% tax capital gains tax, plus the metaphorical “inflation tax” followed by a 6%-or-so sales tax when you use the money to consume goods. That is raw deal for investors.

Homicide has dropped of the list of the top causes of death in the U.S. at the very time that gun ownership is expanding.  Want some antacid on the side, guys?

It seems the geniuses in Philly’s city council plus Mayor Nutter have decided a really good way to make Philly more competitive is to make it more expensive to hire people.  They have decided to prohibit companies from asking about an applicant’s criminal history until after their first interview. The only exception is for law enforcement position.

Here’s a quote from the city’s FAQ.

even where such mandates [federal or state background check requirements] exist, most employers will be able to comply with both Ban the Box and the state or federal law by waiting until after the first interview to make criminal history inquiries; unless the state or federal law specifically requires that the inquiry be made on the employment application or during the first interview, employers are required to comply with Ban the Box.

Translation: even if you are required by law to perform a background check for a position where a criminal conviction will be an absolute disqualifier, you have to spend the money to process the application and perform an interview before you can ask whether the applicant has a criminal record.  Of course, this won’t actually stop an employer from refusing to hire someone with criminal conviction.  It will only raise the cost of doing business in the city.  Brilliant.

A government, like a family or a corporation, can support some number of economically unviable undertakings.  But at some point, no matter how pleasurable or good intentioned they are, piling on too many economically unviable endeavors threatens those that are viable.  The problem with Progressivism is that it cannot, even in theory, limit itself to a non-damaging number of unviable undertakings.

One of Progressivism’s foundational beliefs is that “experts” should manage the economy and people’s lives by regulating, restricting, encouraging and subsidizing some things but not others, based on what the “experts” deem to be in the best interests of the nation.  This means, of course, that decisions will be made for political and ideological reasons rather than economic ones (even granting the benefit of good intentions and the absence of corruption other than the intellectual variety).

Assume for the moment that this management of people and the economy is initially inefficient but sustainable, by being of limited scope.  What happens?  The corporations and individuals involved in activities favored by the “experts” gain an advantage and thus begin to accumulate wealth and power in a proportion greater than they would have otherwise.

This has two effects.  First, it attracts more companies and individuals to the favored activities in search of money and power.  Second, is that it encourages the already powerful and connected, in addition to those seeking to gain wealth and power, to demand that the scope of things being managed by the “experts” be expanded so they can capture the advantages for themselves.

And so the death spiral begins.

Over time, decisions are increasingly made by “experts” without regard to their economic viability.  The expansion of the scope of the “experts’” control quickens.  Money and power flow to the well connected.  Soon enough the “experts” in one part of government are encouraging things that “experts” in another part of government are discouraging.  The taxes needed to support the system suck money from the independent private sector and flow to the “experts”, the bureaucrats and their cronies in the parasitic private sector (those favored by the “experts”).

As the economically unviable activities expand, they begin to crowd out the viable ones, producing calls for more action, which further accelerates the death spiral.  At some point, the economically viable activities in the independent private sector are simply unable to keep pace with the demands of the unviable endeavors required by the “experts” and collapse becomes inevitable.

By collapse, I don’t mean society falls apart and it’s every man for himself.  What I mean is: Greece and the rest of Europe (which will be us before long).  The bill comes due, the debt has to be paid, government austerity becomes a requirement, the cronyism and unviable projects have to be unwound.  In short, Progressivism has to be undone.  To the previously favored, the cronies of Progressivism, it is shocking and painful.

Because Progressivism has no internal ideological check, there is no line within it that says “here and no further” in its drive to regulate and manage.  In other words, once Progressivism takes root it will inevitably destroy itself.

If higher tax rates are the answer to our debt crisis, why is Europe in such serious trouble?

In one my classes today, our professor asked how many of us were gun owners.  I’ll spare you the details but it was a logical, if surprisingly blunt, question given the subject of the class that day.

4 out of 14 students answered yes.  Of the 4 gun owners, two were women.

If this is a representative sample, that would mean something like 45 people in my class (about 30%) are gun owners, including a couple dozen women.  For an overwhelmingly left-leaning law school in the northeastern U.S., that is not so bad.

We’re winning.

One thing that’s abundantly clear is that the left does not value economic growth.  The younger lefties, particularly, don’t seem to comprehend that their high standard of living today is the result of growth and can only be sustained with continued growth.  They fail to understand that many of the things they take for granted are the result of growth.  Here are just a few quick examples of the products of growth of the last few decades:

• iPhones
• Google
• Laptops
• Email
• The Internet
• High Speed Internet at Home
• Ubiquitous Air Conditioning
• Flatscreen TVs

Not only are they the products of growth but they are often engines of further growth.  When you reduce growth, you reduce the standard of living.

The subject of campaign finance restrictions came up in one of my classes recently.  Quite a few people, leftists of course, just couldn’t grasp why restricting campaign contributions is a restriction on speech.  I’d like to offer a set of questions to demonstrate why money is speech.  If your answer changes from yes to no at some point, you need to think about principled difference exists between these.

• Can I go to Congress in person and speak to my Congressman about an issue?
• Can I go to Congress in person with my attorney and speak to my Congressman about the issue?
• Can I go to Congress in person with my attorney, whose fee I am splitting with a friend, and speak to my Congressman about the issue?
• If my friend is going to Congress in person with his attorney, can I save myself a trip, split the fee for his attorney, and let them speak to our Congressman about the issue?
• Can I skip the trip and just tell my attorney to write a letter to my Congressman about the issue for me?
• Can I tell my attorney to write a letter to the editor about the issue for me?
• Can I tell my attorney to write a commentary piece for publication about the issue for me?
• Can I place the commentary in the newspaper as an open letter by taking out a full page “advertisement”?
• Can I skip the attorney and place a typical advertisement about the issue in a newspaper?
• Can I skip the advertisement and post a 2 minute video of me, individually, discussing the issue on You Tube? 5 minutes? Movie length?
• Can I hire someone to produce a 2 minute video about the issue to post on You Tube? 5 minutes? 60 minutes?  Movie-length?
• Can I hire someone to produce a 2 minute video about the issue and pay a TV station to run it as an advertisement?
• Can I hire someone to produce a movie-length video about the issue and pay a TV station to run it as an infomercial?
• Can I split the cost with a friend to run the video advertisement? The infomercial?
• Can I pool my resources with a group of people to run the video advertisement? The infomercial?
• Can the same group of people, having incorporated, place the same advertisement about the same issue in a newspaper? Run the same video advertisement?  The same infomercial?
• Can I skip the items above and just give the money to a candidate who agrees with me on the issue?
• Can I pool my resources with a group of people to give money as individuals to a candidate who agrees with me on the issue?
• Can the same group of people, having incorporated, give money to a candidate who agrees with them on the issue?

Jon Corzine, the leftwing former governor of New Jersey, whose high tax, big spending, overly regulatory policies helped drive the state towards bankruptcy, has now driven his investment firm into bankruptcy because he over-invested in the bonds of European countries that, as a result of following his preferred leftwing high tax, big spending, overly regulatory policies, have now defaulted or are expected to default on their debt.

While I have a certain amount of sympathy for people who get tear gassed (I know from personal experience what it’s like), I can’t help but note a certain irony.

These are not libertarians demanding to be left alone.  These are people demanding bigger, stronger government.  They failed to understand the longstanding conservative warning that “a government that’s strong enough to give you everything you want is strong enough to take everything you have.”  It is hopelessly naive to believe a government that will take money from one group (recall that all taxation, while not theft, occurs at gun point) to give to another will hesitate to bust a few heads.

It’s also worth noting that the protesters were given ample warning to disperse.  Note also toward the end of the video, the chants of “Rise up!”.

Yeah, folks they’re just like the rest of us.  Just like us.  (And this guy too.  Just like us.)

If it passes, Obama’s so-called jobs plan has no chance of working.  He seems to think businesses and consumers are going to make long term hiring and spending commitments based on short term incentives.

If you run a business and reach the very reasonable conclusion that the tax and regulatory climate is going to be ugly for the foreseeable future, do you really think a small tax break is going to entice you to commit to a new employee?  If you are a consumer and you think your job is unsteady or your income growth over the next few years is limited or that, even if your income grows, you are going to be nailed on taxes, are you likely to start spending?

We don’t need a “jobs” program, we need a “get government out of the way” program.  When business and consumers are confident that government won’t punish success by taxation or prevent success to begin with by regulation, the economy will prosper.

During the fight over the debt ceiling, I kept hearing from the left that the rich need to pay their fair share.  Setting aside the fact that the top 5% earn 35% of income but pay 60% of taxes, and the fact that higher tax rates on the wealthy produce less tax revenue, I expect the poor to do their fair share:

• that the poor work their fair share of hours
• that the poor put in their fair share of years in school
• that the poor avoid their fair share of out of wedlock births
• that the poor engage in their fair share of long term behavior at the expense of short term gratification

How about you get your house in order before you make demands on the rest of us?

As I have mentioned many times, I am not a fan of political parties.  I am more sympathetic to the Republican Party because it sometimes does the right thing on taxes, spending, regulation and freedom, in contrast to the Democrats who invariably get it wrong.  But I generally view political parties as unhelpful, if unavoidable.

Given the Dems unwavering commitment to high taxes, stifling business regulation and reduced personal freedom, I’ll admit to having a more pointed dislike for the Dems.  Thus I thoroughly enjoyed Richard Miniter’s Forbes piece arguing that the Democratic Party is in deep trouble.

This week’s fight over raising the federal debt limit exposes a key weakness in the warfare-welfare state that has bestowed power onto the Democratic Party: Without an ever-growing share of the economy, it dies. Every vital element of the Democrats’ coalition — unions, government workers, government contractors, “entitlement” consumers — requires constant increases in payments, grants and consulting contracts. Without those payments, they don’t sign checks to re-elect Democrats.

Like it or not, Obama is not the new FDR, but the new Gorbachev: a man forced to preside over the demise of a political system he desperately wants to save.

He thinks the Dems are toast.  I’m not convinced of that, unfortunately.  There will likely always be a market for people who want to run other people’s lives and give away other people’s money.  But I do think that parts of their coalition are in for a bit of a reckoning in the not-so-distant future.  The money they have been accustomed to receiving in consistently increasing quantities is running out.

I can’t predict which parts of the Dems coalition of beggars and busy bodies is going to lose their free lunch but some of them will.  They are going to have to relearn what it takes to engage freely in capitalism.  Like detox, it will be painful in the short term but they will be healthier in the long run.

Apparently, before he was sent to a watery grave, Osama bin Laden complained that Al Qaeda had an image problem: it didn’t appear religious enough.  So, Bin Laden proposed renaming Al Qaeda to “Restoration of the Caliphate Group.”

This is buried in the middle of an AP piece but it is, I think, quite significant.  The Left has been arguing for years that Bin Laden and company were fighting us because we support Israel and have troops in the Middle East.  The Multi Cultists on the Left have expressly denied that Al Qaeda specifically and Islamists in general want to destroy Western Civilization.  For reasons which elude me, the fact that these groups are very open about their goals doesn’t seem to be sufficient to convince the The Left that the Islamists want to destroy Western Civilization.

This is a useful reminder of how dangerously wrong the left really is.

“There’s this kind of stereotype or myth that the deep blue states are more economically restrictive but more personally free. But the data doesn’t actually bear that out . . . Liberals tend to want to constrain your freedom in all areas.” [Emphasis added.]

William Ruger, co-author of Freedom in the 50 States study, as quoted in the Boston Herald.

Lefties constraining our freedom?  Never saw that one coming.

The latest estimate of unfunded federal liabilities is $62 trillion over the next 20 years.  According to USA Today, that’s $534,000 per household (I’m not sure how they are defining household).

My math puts that at $200,000 per person over the next 20 years, or $10,000 per person per year over the next 20 years.  That’s not per tax payer, by the way.  That’s per person.  Have a family of three?  You’re on the hook for $600,000.

But it gets better.  That $62 trillion is “unfunded” and not part of the “normal” budget.  So that’s $10,000 per person per year on top of the federal-state-local income, payroll, excise, capital gains, sales, property (and more) taxes you are already paying.

Paul Ryan’s plan is looking better every day.

Baby Manifesto Toddler Manifesto Little-Girl Manifesto has show-and-tell at school today.  The theme is “something patriotic” so I picked up a small U.S. flag for her to use.  Before we left for school this morning she was walking around waving the flag, then handed it to me and told me to hold it up.  She then proceeded to recite the Pledge of Allegiance with only a little help.  Not bad for a not-quite-three year old!

See if this sounds familiar.

Government creates a subsidy for a favored industry.  This attracts more businesses than the market can support.  The subsidies are used up and industry cries “Waaaaaah!  Save us!  We need more subsidies or we’ll go out of business.”  The taxpayers get soaked in the beginning and soaked in the end.

Could be housing.  Or Amtrak.  Or Agribusiness.  But this time it’s solar.

In the aftermath of Obama’s recent proposal that Israel’s borders should be redrawn to something resembling its 1967 borders, I have seen several commentators argue that we have not been an honest broker between the Israelis and Palestinians.  They mean, of course, that we have favored the Israelis over the Palestinians.

If you consider the conflict solely in ethnic or religious terms, then it’s true - we have had a clear bias towards Israel.  On the other hand, if you consider the conflict to be one between a democratic, dynamic, free and successful culture versus a violent cultural disaster that has done nothing but fail in ever more spectacular fashion, then the bias towards Israel seems to resemble something more like common sense.