Obama’s State of the Union: You’re just part of his “blueprint”

This originally was published in the Boulder Daily Camera on Saturday, January 28, 2012.

For refutations of the President’s flawed claims and statist economic plans, see the Cato Institute‘s website, blog, and YouTube channel.  Regarding Obama’s “Buffett tax” on millionaires, the Associated Press explains that the wealthiest Americans already “pay a lot more taxes than the middle class,” including secretaries

To understand Obama’s statist fervor, ask yourself: Are you a machine cog?  Surely not. But like many politicians, Obama disagrees, at least tacitly. How? Linguist George Lakoff explains how metaphors are key to understanding political discourse.  In his speech, the President expressed his desire to “lay out a blueprint for an economy.”  At least twice he’s mentioned starting a health care “system” from “scratch.” This speaks volumes.

“The economy” refers to people producing and exchanging goods and services. In a freed economy, government respects people’s right to trade voluntarily. But Obama sees the economy as a machine to be manufactured, or a cake to be baked.

Obama has the same conceit that better economists have warned about for centuries. Describing the “man of system,” Adam Smith wrote: “He seems to imagine that he can arrange … members of a great society with as much ease as the hand arranges … pieces upon a chess-board.” “Socialists look upon people as raw material to be formed into social combinations,” wrote French economist Frederic Bastiat in 1853. Or, as 1974 Nobel laureate F.A. Hayek wrote, “The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.”

Boulder & Denver bike-share: boon or boondoggle?

B-cycle is Boulder’s new bike share program. Denver’s B-cycle program is a year old. Does “B” stand for boon or boondoggle?  The Boulder program’s start-up costs included half a million dollars taken from taxpayers: half collected by the City of Boulder, half from federal “stimulus” funds.  Denver B-cycle received $210,000 from the “stimulus.”  Yes, B-cycle’s bikes and technologies do sound impressive. But if it’s a true boon, then it should have been able to raise sufficient start-up funds from investors, sponsors, and donors.

Some might argue that private funding could not have built B-cycle. But as economist Henry Hazlitt would say, B-Cycle “has in fact been built by private capital – the capital that was expropriated in taxes.”  We won’t see the goods, services, and non-profit ventures that never materialize because governments took money by force from people who would have spent it differently.

Potentially expensive bike maintenance may deter private investors from investing in bike-share ventures. As law professor Steve Clowney describes: “No individual bears a significant portion of the costs if they damage a bicycle … users have little incentive to take care of the bikes.”  The New York Times reports that sustaining Paris’s bike-share requires the repairing “some 1,500 bicycles a day,” or seven percent of its fleet.

Or maybe Montreal’s experience deterred investors. Because of high start-up costs, “the non-profit agency that runs the city’s bike-rental program … is running a $31.7 million deficit,” reported the CBC.

Voluntary donations, sponsorships, and investments should fund B-cycle. It should be a revenue source for Boulder and Denver, not an expenditure of taxpayers’ money. For example, they could charge B-cycle for placing “B-stations” on city-owned land.

A version of this article was published in the Boulder Daily Camera on May 21, 2011.

Thanks to Marc Scribner at the Competitive Enterprise Institute for his post on Washington DC’s bike-share program.

The Henry Hazlitt quote is from his excellent book, Economics in One Lesson, which the Foundation for Economics Education has put on-line.

Men’s suits at 1910 prices! … In gold, not U.S. dollars.

A man’s suit costs about the same today as it did 100 years ago. Not in dollars, but gold.  For at least a century, an ounce of gold could buy you a quality man’s suit. In 1910 the suit would cost around $25, according to the Morris County historical prices survey. Today an ounce of gold is around $1,400, or a nice suit at Nordstrom.

Why tolerate our government’s monopoly on money? Money is a medium of exchange and a store of value. But our government produces inflation-prone fiat money. The Federal Reserve devalues your earnings by effectively printing more bills. The Fed also manipulates interest rates, which promotes economic booms and busts fueled by malinvestment. A million YouTube viewers learned this from the hilarious rap video, “Fear the Boom and Bust.”

Money wasn’t always like this. My 1935 dollar bill says “silver certificate” across the top and “One dollar in silver payable to the bearer on demand” under George Washington’s portrait.  A dollar was a unit of measure — a specific weight of gold or silver. A dollar was a certificate of deposit for a real commodity with stable value over time – independent of its use as money.

If you like fiat money like today’s U.S. dollar, fine. But that’s no reason to support its having a government-granted monopoly on money. Let dollars compete with other monies, such as those backed by previous metals, in a competitive market, as 2009′s Free Competition in Currency Act would allow.

The Boulder Daily Camera published this article on December 18, 2010.

Further reading:

• What Has Government Done to Our Money? by Murray N. Rothbard. Full text and excellent audio version (you can download the mp3s) on-line at Mises.org.
• “Is the Gold Standard Still the Gold Standard among Monetary Systems?” by Lawrence H. White, Cato Institute Briefing Paper, 2008.

Daily Camera reports misleading statistics on Boulder County incomes

Last week the Daily Camera reported that median Boulder County household incomes had dropped “nearly 12 percent” since 1999.  But the Camera did not mention the less alarming news — that per capita incomes have increased over the same time period by 1.5 percent, adjusting for inflation.  This is according to two reports by the U.S. Bureau of Economic Analysis: “Personal Income for Metropolitan Areas for 2009” and “Local Area Personal Income , 1998-2000.”

This sounds strange, but household income figures can mislead. Higher per capita income can decrease household income.  As economist Thomas Sowell notes, “Increased real income per person enables more people to live in their own separate dwelling units, instead of with parents, roommates, or strangers in a rooming house.”

Per capita income statistics aren’t perfect, either. The city or county could pass more zoning laws that inflate housing prices. These exclude poor people, and hence per capita income increases.

If you want to more accurately compare 1999 with 2009 incomes, look at income mobility, which compares the same flesh-and-blood people each time. For example, the Tax Foundation reports that “nearly 60 percent of households in the bottom income quintile in 1999 were in a higher quintile in 2007.”

But income mobility doesn’t tell the whole story either, as it neglects the value of employee benefits. “Health insurance costs relative to payroll increased 34 percent between 1996 and 2005,” write economists from the RAND Corporation.

A version of this article was printed in the Daily Camera on October 2, 2010.

Thanks to Linda Gorman for the link to the RAND study.

For further reading, I recommend Thomas Sowell’s article “Income Confusion.” He discusses the issue in dept, including income inequality, in his book Economic Facts and Fallacies.

Hollywood hates free-markets: Wall Street: Money Never Sleeps edition

From Reason.tv:

Oliver Stone’s uber-villain Gordon Gekko is back in the new film, Wall Street: Money Never Sleeps, which (surprise!) features greedy capitalists behaving badly. It might remind you of Avatar, Mission Impossible 2 or roughly a zillion other films in which capitalists destroy the environment, concoct killer viruses, harvest organs, and cover up murder in order to feed their lust of profit. Even when capitalism isn’t the primary target, the representatives of commerce are often flat-out repulsive (think Jabba the Hutt).

Perhaps it’s ironic that Hollywood filmmakers practice what they preach against. Sure he palls around with socialist dictators Fidel Castro and Hugo Chavez, but there’s no doubt Oliver Stone hopes to rake in obscene profits with his new flick.

See also Alex Tabarrok’s Wall Street Journal op-ed:  Capitalism: Hollywood’s Miscast Villain – Why the film industry is so good at getting business wrong.

(via Christian Toto at Pajamas Media)

Tax breaks are not tax subsidies

Too often I’ve heard people refer to tax breaks or tax exemptions as “subsidies.” Freeman Editor  Sheldon Richman does a great job explaining the difference.  Some excerpts:

A subsidy is a cash grant from the government. … government intervention enables people to obtain money they were not entitled to; the flip side is that someone else is deprived of money he is entitled to, or that he would have had legitimate access to.

In contrast, when someone is given any kind of “tax break,” he keeps money he is entitled to. … if a person retains some of his own money because of a government action, we should not condemn this as a subsidy.

Subsidies should be opposed. Opportunities to keep one’s own money should not.

Needless to say, government can create great mischief by determining who can and cannot keep his own money. If mortgage interest is tax-deductible but rent is not, government encourages home buying. It is not the government’s function to decide the best way to live and then to use the tax system to manipulate people into living that way. …

No one should be begrudged the opportunity to keep his own money. In the face of a discriminatory tax cut, we should point out that it ought to apply to everyone (who pays taxes), and not just a narrow group of taxpayers. Efforts to widen exceptions may not succeed, since that would defeat the politicians’ purpose, which after all is to manipulate private behavior. But at least we can pound home the point that it’s better for people to spend their own money for their own objectives.

Read the whole article: Tax “Breaks” Aren’t Subsidies in The Freeman, published by  The Foundation for Economic Education

Minimum wage destroys jobs, harms poor and minorities

From the Center for Freedom and Prosperity:

Also check out the chapter on minimum wage laws in Henry Hazlitt’s Economics in One Lesson.

(via Reason.tv)

Free trade: the great prosperity machine

Tom Palmer narrates an excellent video explaining the virtues of free trade.

Read more about great economist and writer Frederic Bastiat.

(Via Reason.tv)

Progressives vs. immigrants: the Bakeshop Act & Lochner v. New York

I’d like to see a book or long article that describes how organized interests gain at others’ expense from political mandates and controls that look benevolent on the surface.  (They probably exist, and feel free to suggest any.)  For example, consider what Damon Root at Reason magazine writes about “progressive” legislation that limits legal work hours:

New York’s 1895 Bakeshop Act … banned bakery employees from working more than 10 hours per day or 60 hours per week. In its 5-4 decision [Lochner v. New York (1905)], the Court nullified this provision for violating the liberty of contract secured by the Due Process Clause of the 14th Amendment. …

George Mason University legal scholar David Bernstein has thoroughly documented, the mainstream version of the Lochner story, which pits evil bosses against viciously exploited workers, bears zero resemblance to the historical evidence. The real origins of the Bakeshop Act lie in an economic conflict between unionized New York bakers, who labored in large shops, and their non-unionized, mostly immigrant competitors, who tended to work longer hours in small, old-fashioned bakeries. As Bernstein observed, “a ten-hour day law would not only aid those unionized workers who had not successfully demanded that their hours be reduced, but would also help reduce competition from nonunionized workers.”

To put it another way, Lochner v. New York secured a fundamental right against arbitrary government interference while undercutting an act of naked economic protectionism.

This is an example of what economist Bruce Yandle calls “Bootleggers and Baptists”:

Here is the essence of the theory: durable social regulation evolves when it is demanded by both of two distinctly different groups. “Baptists” point to the moral high ground and give vital and vocal endorsement of laudable public benefits promised by a desired regulation. Baptists flourish when their moral message forms a visible foundation for political action. “Bootleggers” are much less visible but no less vital. Bootleggers, who expect to profit from the very regulatory restrictions desired by Baptists, grease the political machinery with some of their expected proceeds. They are simply in it for the money.

Examples I can think of include:

Paul Krugman’s partisan economics

Don Boudreaux submitted a great letter to the editor about Krugman’s partisan economics. Good stuff.   My posts about Krugman and health care illustrate why I lack respect for the guy, but Boudreaux’s letter does this quite efficiently.

(Thanks to Justin Longo for the pointer.)