But don’t America’s poor pay an unfairly high percentage of their income in taxes while America’s rich pay an unfairly low percentage? Such, after all, is what is claimed to be found by economists Emmanuel Saez and Gabriel Zucman, each of whom received the American Economic Association’s prestigious John Bates Clark Medal.
No. Saez’s and Zucman’s claims about the burden of taxation across income earners is wildly inaccurate. As GEE [Gramm, Ekelund, and Early] note about the research of Saez and Zucman,
[t]hey count only earned income. They completely ignore transfer payments that make up more than 90 percent of the income of the bottom quintile and 50 percent of the income of the second quintile. By not counting transfer payments as income to the recipient households, they grossly understate income in the bottom two-fifths of the population. So, when they then divide the actual taxes paid by an income amount that is between two and nine times smaller than the real amount, the result tax rates are unbelievably too high….
For the lower part of the income distribution, they choose not to count the largest part of the actual income individuals actually received – namely, transfer payments. At the higher end of the distribution, Saez and Zucman decide to count fictional amounts that the households never received as income. They estimate how much assets by individuals might have appreciated. These assets may include stock, mutual funds, retirement accounts, art collections, or homes. Then they count that amount as if it were income, although the asset owners cannot use it for consumption, savings, or paying taxes because they never received it.
After adjusting household-income figures to include government transfers, but not to include unrealized (and often only estimated) appreciations in capital values, GEE find that income-tax filers in the bottom half of income earners pay, as federal income and payroll levies, on average about nine percent of their incomes. In contrast, income-tax filers in the top ten percent of income earners pay in these taxes on average about 21 percent of their incomes. The average tax-payment figure for income-tax filers in the top one percent is about 28 percent of their incomes. (These figures are all pre-COVID.)
The data simply contradict the popular claim that high-income Americans, compared to lower-income Americans, do not pay substantially higher portions of their incomes as taxes to the federal government.
…..
The picture painted from rich sources of data by Gramm, Ekelund, and Early reveals an American economy that over the past several decades steadily and surely raised the real incomes of Americans across the income distribution. This picture is encouraging. But a word of caution is in order. Most of GEE’s data end in 2017. Although that’s only six years ago, those six years were unusually bad ones for economic prosperity. Starting in early 2018 Americans have been subjected to recurring waves of protectionism – waves started by Donald Trump and continued by Joe Biden. Because no small part of our growing prosperity up through 2017 was caused by our greater integration into the global economy, today’s fever for protectionism – a fever prevalent now across the political spectrum – will surely dim, and perhaps severely darken the economy’s prospects going forward. Also worrisome is the current craze of politicians of all stripes with active antitrust enforcement. By penalizing innovative experimentation with different business models, the recent rise of antitrust activity will join protectionism in stymying economic growth.
Far worse, however, is the terrible precedent set by America’s, and most other governments’, authoritarian posture during COVID. Although COVID restrictions are now largely things of the past, no one can know just how much entrepreneurial energy is still being sapped away by uncertainty about what will happen when another contagious pathogen emerges – as one will. Having learned how easy it is to frighten people into sheepish obedience to diktats that shut down large swathes of the economy indefinitely, governments are very likely to pull such a stunt again. Even just the prospect of enduring yet another fear-fueled authoritarian lockdown might very well be draining would-be entrepreneurs of much of the optimism they need to energize their productive endeavors.
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… is from page 187 of 1982 economics Nobel-laureate George Stigler‘s 1971 essay “Can Regulatory Agencies Protect the Consumer?” – which is reprinted as Chapter 11 of Stigler’s 1975 collection, The Citizen and the State: Essays on Regulation:
The individual consumer has no real defense, given the nature of our political process, which allows compact groups with substantial per capita interests to win out over diffused masses of consumers, no one of whom can effectively combat special interest legislation.
DBx: Yes.
Giving government discretionary power to protect consumers is akin to giving wolves discretionary power to protect sheep.
Here’s a letter to the New York Post:
Editor:
John Thorpe’s case for repealing the Davis-Bacon Act is persuasive (“Ditch this Jim Crow-era mandate that hurts minorities most,” May 31). But he errs when he writes that “unlike minimum-wage laws, prevailing-wage mandates didn’t even come from good intentions.”
In fact, minimum-wage statutes were just as ill-intentioned as was Davis-Bacon’s prevailing-wage mandate. As Princeton economist Thomas Leonard reports about early 20th-century progressives who lobbied for minimum wages,
By pushing the cost of unskilled labor above its value, a minimum wage worked on two eugenic fronts. It deterred immigrants and other inferiors from entering the labor force, and it idled inferior workers already employed. The minimum wage detected the inferior employee, whether immigrant, female or disabled so that he or she could be scientifically dealt with.*
Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030* Thomas Leonard, Illiberal Reformers (Princeton: Princeton University Press, 2016), page 151.
State Farm General Insurance Co. last week became the latest insurer to retreat from California’s homeowners market. The culprit isn’t climate change, as the media claims in parroting Sacramento talking points. The cause is the Golden State’s hostile insurance environment.
The nation’s top property and casualty insurer on Friday said it won’t accept new applications for homeowners insurance, citing “historic increases in construction costs outpacing inflation, rapidly growing catastrophe exposure, and a challenging reinsurance market.”
…..
Insurers aren’t prioritizing short-term profits. They are protecting their customers, investors and creditors. Mr. [Ricardo] Lara isn’t helping Californians by driving away insurers, which will reduce competition and force more customers into a state-established insurer of last resort (backed by insurers) that provides skimpier and more expensive coverage.
Florida last year passed legal reforms to help keep property and casualty insurers in the state. If Democrats in Sacramento believe their climate-change hype, they’ll strengthen the state’s insurance market rather than tilt at windmills.
Prompted by the enthusiasm for socialism among today’s young people, Mike Munger makes an excellent point about the translation-into-English of Ludwig von Mises’s pioneering 1920 paper “Die Wirtschaftsrechnung im sozialistischen Gemeinwesen.” Two slices from Munger:
With a prescient recognition of the core of the problem, Ludwig von Mises wrote an article entitled “Economic Calculation in the Socialist Commonwealth.” The challenge of the paper was to require advocates of socialism to apply their critiques of capitalism—including concentrations of power, lack of information, and scarcity to a planned economy, and to show specifically how planning might do better.
Mises expanded and refined his argument in his 1922 book, Socialism. Before Mises’ contributions, the primary debate had been over the “J.S. Mill question”: are people “good enough” for socialism? Since citizens will need to be motivated by serving the public good rather than pursuing their individual self-interest, “we” will need to create a “new man” to people this brave new world. But Mises redirected the debate in a more technical direction: Is it possible for a non-market system to perform all the necessary “calculations” to be able to achieve results as good as those provided by a market system that generates prices as measures of opportunity costs?
It turns out that the way Mises was translated was, and is, unfortunate. The original title of his 1920 article was “Die Wirtschaftsrechnung im sozialistischen Gemeinwesen.” The word “Wirtschaftsrechnung” can be translated literally as “the economic arithmetic,” so “calculation” is not unfair. But even a cursory reading of Mises, and later expositors such as F.A. Hayek, reveal that the problem is not “calculating” the solution to set of equations where the data are given; the whole point of market processes is that exchange in a system of enforceable property rights generates the data that the system can then use to coordinate the conflicting plans and purposes of millions of people, in widely geographically separated locations.
This apparently minor word choice—I wish Mises had used a form of “Generieren,” or “to generate,” instead—has created grave difficulties ever since. After all, if the data are given, but dispersed, what is necessary is computing power. And, unsurprisingly, that is exactly how Mises’ opponents interpreted his argument.
…..
This mistaken interpretation of the Misesian “calculation” problem persists to today, and it’s getting worse. MIT economist Daron Acemoglu recently tweeted the question that is on many minds about knowledge and computational power.
What Acemoglu calls “Hayek’s argument” is actually Mises’ argument, reinterpreted through the Hayekian explanation of the role of prices conveying information about relative scarcity. Note: If the problem is “calculation,” then Acemoglu’s question is perfectly fair. Socialism is not impossible, it is just limited by the ability of society to replicate the function of the price system, gathering dispersed data and performing and updating calculations very rapidly. But that means that the function of markets is essentially mechanical, and there is nothing in principle that would prevent economic experts from solving this problem, with sufficient computing power.
But…wait, stop, don’t! The problem is not calculation of given data, but the generation of the data that would be required, but does not yet exist. An example will make it clear why this is true.
Jacob Sullum is correct: “Ron DeSantis dangerously blurs the line between state and private action.” A slice:
DeSantis’ insistence on overriding those private decisions belies his description of Florida as “an oasis of freedom” with a “business-friendly environment.” When it comes to vaccination and masks, he recently told John Stossel, Florida has “consistently sided with the individual,” which is accurate only if you ignore individuals whose business policies DeSantis does not like.
The same is true of the Individual Freedom Act, the Orwellian name of a Florida law also known as the Stop WOKE Act. Among other things, it purported to dictate private employers’ training practices, a provision that a federal judge blocked last year because it violated freedom of speech.
The Goldwater Institute’s John Thorpe calls for the Davis-Bacon Act to be ditched.
“Maritime protectionism continues to plague offshore wind development,” so reports Colin Grabow.
Vinay Prasad tweets: (HT Jay Bhattacharya)
The data linking gas stoves to asthma is weak science. The links in article are trash science.
… is from page 91 of Ronald Bailey’s insightful 2015 book, The End of Doom:
The modern combination of liberal trial-and-error institutions – limited democracy, free markets, and liberal science – emerged in Western Europe and North America and have been spreading around the globe. Wherever the institutions of liberalism have been embraced, prosperity has followed in their wake.
DBx: Indeed.
Yet the same human imagination that is indispensable to modern prosperity – the imagination that innovates – has (as most things do) a downside. This imagination allows individuals to conjure in their heads beautiful worlds that are far superior to any reality, actual or possible. Unsatisfied with reality even when and where it is off-the-charts superior to any other reality ever experienced by humans, individuals obsessed with their imagined utopias insist that reality is hell that can be transformed into heaven if only enough coercion is used to bring the imagined heaven into earthly existence.
Social engineers – whether they be leftist progressives, rightist “national conservatives,” or something else altogether – are, at the end of the day, mystics. Most of these mystics today speak the language of science; many even use mathematics to describe their utopias; and nearly all are sincere. They are true believers in their mysticisms. But they are all detached from reality. They know too little history. Their thinking is illogical. They believe in miracles. They are mystics peddling the equivalent of poisonous snake oil.
…..
Pictured above is Free Trade Hall in Manchester, England. This building – which is now a Radisson hotel – is a monument to what Bailey calls “liberal trial-and-error institutions.”
… is from page 117 of the 1993 Third Edition of the late Carlo Cipolla’s 1976 book, Before the Industrial Revolution: European Society and Economy, 1000-1700:
It was a poor and primitive Europe, a Europe made up of countless rural microcosms – the largely self-sufficient manors, whose autarchy was part cause and part consequence of the decline in trade. Society was dominated by a spirit of resignation, suspicion, and fear of the outside world. People withdrew into the economic isolation of the manors just as they sought spiritual isolation in the monasteries.
DBx: While today’s world isn’t likely to resort to the extreme localism and isolation that marked Europe in the latter half of the first millennium A.D., there is nevertheless a lesson for us in the calamitous actions of our ancestors from that era. Suspicion and fear of the outside world – in our case, suspicion and fear of citizens of foreign countries – that prompts us to retreat from the outside world and to arrest economic and social change will make us poorer materially, intellectually, and spiritually.
David Harsanyi describes as “intolerably dishonest” the media’s coverage of the debt-limit battle. Two slices:
President Joe Biden, writes Politico’s White House Bureau Chief Jonathan Lemire, “has prioritized deal-making throughout the debt ceiling talks. But with GOP obstinate, Biden is changing tactics.”
What in the hell is he talking about, you may wonder. Only last month, Lemire’s publication reported that Biden was “happy to meet” with House Speaker Kevin McCarthy, R-Calif., but “not on whether or not the debt limit gets extended. That’s not negotiable.” (Italics mine.) That doesn’t sound like someone who’s “prioritized deal-making” on the debt ceiling.
Back in January, press secretary Karine Jean-Pierre was unequivocal in saying that “we will not be doing any negotiation over the debt ceiling.” On April 27, The Washington Post reported, “White House reiterates refusal to negotiate on debt limit as pressure mounts.”
…..
No one, of course, expects Democrats to unilaterally surrender. But media always covers negotiations over spending as if the organic center, the endpoint, the only reasonable place to be, stands not between the desires of two competing political parties or two competing branches of government but rather wherever Democrats happen to reside. One side is trying to save the nation from default and economic ruin; the other is a reckless “hostage taker” intent on rolling back progress.
David Henderson’s optimism is admirable and instructive.
Lockdowns are focused protection of the laptop class:
March 22, 2020: Toronto imposes a harsh lockdown of the city to flatten covid. Over the next two months, covid spreads in the poorest neighborhoods, while the richest ones stay home and stay safe.
On March 15, 2020, two days after then-President Donald Trump declared a national COVID-19 emergency, Cornell law professor Michael Dorf urged Congress to impose a nationwide lockdown and suspend the writ of habeas corpus.
Congress never took either of those constitutionally dubious steps, which Dorf said were necessary to “save the nation.”
Instead, as Supreme Court Justice Neil Gorsuch noted this month, “executive officials across the country issued emergency decrees on a breathtaking scale,” amounting to one of “the greatest intrusions on civil liberties” in US history.
That experience made it clear that legislators need to reconsider the definition of emergencies and impose limits on the powers they confer.
…..
Meanwhile, however, local and state officials had ordered sweeping, long-lasting restrictions on social and economic activity, impeded only occasionally by judicial intervention.
Those orders often involved scientifically senseless rules and arbitrary distinctions between “essential” and “nonessential” businesses.
They impinged on fundamental rights, including freedom of movement, freedom of association, the free exercise of religion and the right to armed self-defense.
Worse, all these restrictions had the force of law, sometimes backed by criminal as well as civil penalties, even though the elected representatives charged with lawmaking did not participate in formulating or approving them.
The orders were based on statutes that granted governors vast powers during emergencies that they themselves declared and extended.
… is from page 52 of University of Connecticut economist Richard Langlois’s monumental forthcoming (2023) study, The Corporation and the Twentieth Century (emphasis original; footnote deleted):
In addition to limits on immigration, the Progressives thus supported a variety of nonmarket controls, notably minimum-wage laws and hour restrictions, not because they believed these would help the poorest members of society, but precisely because believed, as laissez-faire economists taught, that such policies would exclude the least productive from the labor market. They also believed (correctly) that these restrictions would exclude women as well, encouraging them back into their proper role in society.
DBx: Langlois here writes of the Progressives of early 20th-century America, but Progressives of early 21st-century America support many of the same policies that were supported by these earlier Progressives. The chief difference between Progressives of a century ago and Progressives of today is that Progressives of a century ago, while their values were vile, had a better understanding of economics than do Progressives of today. Progressives today, for example, actually believe that forcing employers to pay more for low-skilled labor will result in employers paying more for low-skilled labor without any negative impacts on this labor. Progressives of a century ago were not as prone to swallow such flat-earth-like nonsense.
Also worthy of note is that one of the goals of Progressives of a century ago was to keep women out of the workforce and at home. This skepticism of women working outside of the home is now found increasingly today among America’s “national conservatives” (who, intoxicated by nostalgia, mistakenly believe that the American economy of the mid-20th century was superior to the American economy of today).
…..
Pictured here is the American Progressive Edward Alsworth Ross, a man whose ethical values – certainly by the standards of today, and even by the standards of his own day – were vile. But, hey, when you believe yourself to be working to improve humanity with Science, ethical values must not obstruct your Scientific tinkering with society. After all, it’s Science!
… is from page 334 of the “Random Thoughts” section of Thomas Sowell’s 2010 book, Dismantling America:
One of the scariest aspects of our times is how easy it is for glib loudmouths to turn us against each other, weakening the whole framework of society, on which we all depend.
Industrial-policy plans often run into unexpected political and legal problems regarding their design and implementation. Even before the VinFast project stalled, North Carolina’s giveaway to a foreign company raised eyebrows. At the time of the award, VinFast had never sold a car in the U.S. Given the state’s long and unsuccessful quest to land an automobile manufacturer, the plan reeked of political desperation, not sound economics. Now it smells worse.
The government’s expedited seizure of local property for manifestly commercial purposes—promised roads and related infrastructure to support only VinFast’s factory—is also a classic case of eminent-domain abuse. While the U.S. Supreme Court ruled in Kelo v. City of New London (2005) that government may take private property for commercial purposes, many states have since outlawed the practice. North Carolina hasn’t.
Many on the left undoubtedly see these and related problems as mere speed bumps on the road to national progress, whether on climate change or any government priority. But some on the right embrace industrial policy too, with little acknowledgment that it often requires the expansion and exercise of state power in ways that undermine the economy and achieve the left’s priorities. State planning tends to trample on the principles, communities and people that national conservatives supposedly hold dear.
The corporate facility at issue in Kelo was never built, but the “little pink house” was bulldozed anyway. Maybe if the Merry Oaks Baptist Church suffers the same fate, “conservatives” who embrace industrial policy will reconsider their approach.
Antitrust cases cost a great deal of time and money, and yet Lina Khan asserts that FTC will be looking more closely at M&As both past and present — and this assertion should be of concern to any entrepreneur and any corporate investor.
Essentially, the FTC is placing itself as the primary arbiter when it comes to business transactions, and it is conveying that it can predict what the future holds for innovations and acquisitions. This creates an environment of not only great uncertainty for business, especially now that previous transactions may be revisited and reconsidered, but also great risk for the competitiveness of US firms.
The FTC has not only a skewed view of the government’s role for business, but also a limited one in its assessment of the US market. Currently, the Chinese corporation Shein is proving to be one of the fastest growing online apparel retailers with sales surpassing H&M and Zara. The trend for promoting a #SheinHaul is also disrupting sales for Amazon, given the cost-savings consumers can find when buying directly from fast-fashion suppliers, rather than via Amazon’s e-commerce system. So while the FTC calls into question Amazon’s dominant status once again with another antitrust lawsuit, international competition from China may handle Khan’s concerns and quash the American-owned giant in the end. And with Temu hot on the heels of Shein, we may find American firms floundering to keep up at all, thanks to being sidelined by FTC filings.
Noah Rothman decries government’s “war on things that work.” Three slices:
Armed with unchecked self-confidence and possessed of an abiding faith in the idea that you must be coerced into altruism, the activists seem to be coming for almost everything you own. In the process, they are waging a crusade against convenience, an assault on comparative advantage, and a war on things that work.
Securing the fossil-fuel-free future that President Joe Biden imagines for us sometime in the 2030s will not be a pain-free proposition — at least that appears to be the conceit of the more radical wing of the environmentalist Left. The scale of the challenge, as they see it, demands sacrifice from us all. One of their most controversial moves is to give up natural-gas-powered appliances, your gas kitchen range foremost among them.
The relentless lobbying of local governments to forbid natural-gas hookups in new buildings had already succeeded in a number of municipalities when the U.S. Consumer Product Safety Commission (CPSC) sought public comment earlier this year on a proposal to impose a ban nationwide. By then, California had announced its own ban, to begin in the next decade, on the sale of new natural-gas-powered appliances, and New York State was set to follow suit.
…..
Or what if you value, you know, value? In most American states, natural-gas appliances cost between 10 and 30 percent less to operate on a regular basis than electric alternatives. What if you can’t afford to switch to the induction ranges — which can cost 60 percent more than gas stovetops — proposed by many anti-gas activists?
…..
The irrepressible self-righteousness of America’s technocratic social engineers may know no limits, but politicians who are responsible to voters just might learn from some of the green movement’s failed experiments. Take the State of New Jersey’s woeful example. In 2022, the Garden State implemented a policy so profoundly foolish that most residents probably doubted it would ever go into effect: an outright ban on single-use packaging — including food containers, plastic shopping bags, and even paper bags — in big-box and grocery stores.
Advocates of this policy routinely present circular logic by insisting that the success of their proscription can be measured in the number of people who comply with it. Yes, banning bags is an effective way to ban bags. But by any other measure, the switch makes little sense.
The alleged environmental benefits are indefinable. Scuttling plastic bags forces consumers to purchase and tote around reusable shopping bags, which require more energy and resources to produce (one European estimate found that reusable bags must be reused 7,100 times before they compete with plastic bags’ carbon footprint) and are less sanitary (as some might recall from the pandemic). The practical impact of the ban was so pronounced for disabled and low-income residents and the charities that serve them that the state baked into the law loopholes that temporarily allowed certain institutions to avoid complying with it.
George Will counsels Ron DeSantis to take a lesson from New Coke. A slice:
DeSantis has been marketing himself as Trump with the jagged edges filed off. But Trumpkins love their hero because of his jaggedness. And people repelled by Trump are uninterested in a smoother version of him. Besides, DeSantis is sometimes only slightly smoother.
In the end, the Great Barrington Declaration was validated as probably a better approach than those promoted and/or mandated by our own public-health establishment. (The GBD recommendations were very similar to the approach taken by Sweden, which reaped a lower Covid death rate than most other countries.)
Now, Bhattacharya and colleagues are back with a new Covid-related campaign that they hope will help ensure that the catastrophic failings and consequential loss of trust in our public-health institutions are not repeated.
Known as the Norfolk Group, Bhattacharya and his coauthors hope to create a national commission to explore the official responses to Covid — itemize what went right and wrong — toward the end of planning a better public-health response if/when another pandemic threatens. From the Executive Summary:
In this document we list specific questions on specific topics related to COVID-19 pandemic responses in the United States. We believe these questions are vital for the nation to ask the White House, the CDC, the FDA, and other government officials, as well as state health departments, scientists, and the media. The public deserves answers to these questions so we can learn from our mistakes. Key issues include:
What could have been done to better protect older high-risk Americans, so that fewer of them died or were hospitalized due to COVID-19?
Why was there widespread questioning of infection-acquired immunity by government officials and some prominent scientists? How did this hinder our fight against the virus?
Why were schools and universities closed despite early evidence about the enormous age-gradient in COVID-19 mortality, early data showing that schools were not major sources of spread, and early evidence that school closures would cause enormous collateral damage to the education and mental health of children and young adults?
Why was there an almost exclusive focus on COVID-19 to the detriment of recognizing and mitigating collateral damage on other aspects of public health, including but not limited to, cancer screening and treatment, diabetes, cardio-vascular diseases, childhood vaccinations, and mental health?
Why did the CDC fail to collect timely data to properly monitor and understand the pandemic? Why did we have to rely on studies from private initiatives and from other countries to understand the behavior of the virus and the effects of therapeutics, including vaccines?
Why was there so much emphasis and trust in complex epidemiological models, which are by nature unreliable during the middle of an epidemic, with unknown input parameters and questionable assumptions?
Could therapeutic trials have been run in a more timely manner? How was information on drug effectiveness and safety disseminated to doctors and clinicians? Were effective therapeutics easily accessible across the population? How did certain drugs become heavily politicized?
Why did vaccine randomized trials not evaluate mortality, hospitalization, and transmission as primary endpoints? Why were they terminated early? Why were there so few studies from the highest-quality CDC and FDA vaccine safety systems?
Why was the USA slow to approve and roll out critical COVID-19 testing capacity? Why was there more emphasis on testing young asymptomatic individuals than on testing to better protect older high-risk Americans? Why was so much effort spent on contact-tracing efforts?
Why was there an emphasis on community masking and mask mandates, which had weak or no data to support them, at the expense of efficient and critical COVID-19 mitigation efforts? Why did the CDC or NIH not fund large randomized trials to evaluate the efficacy and potential harms of mask wearing? Why didn’t policy recommendations change after the publication of randomized trial data from Denmark and Bangladesh which showed no or minimal efficacy of mask wearing by the public?
