Statist Policy and the Great Depression

September 18, 2014

Phineas Fahrquar:

A useful corrective to the liberal myth-making that surrounds the Great Depression

Originally posted on International Liberty:

It’s difficult to promote good economic policy when some policy makers have a deeply flawed grasp of history.

This is why I’ve tried to educate people, for instance, that government intervention bears the blame for the 2008 financial crisis, not capitalism or deregulation.

Going back in time, I’ve also explained the truth about “sweatshops” and “robber barons.”

But one of the biggest challenges is correcting the mythology that capitalism caused the Great Depression and that government pulled the economy out of its tailspin.

To help correct the record, I’ve shared a superb video from the Center for Freedom and Prosperity that discusses the failed statist policies of both Hoover and Roosevelt.

Now, to augment that analysis, we have a video from Learn Liberty. Narrated by Professor Stephen Davies, it punctures several of the myths about government policy in the 1930s.

Professors Davies is right on the…

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More Los Angeles restaurants add #Obamacare surcharge

September 4, 2014
"Obamacare has arrived"

“Obamacare has arrived”

First it was Republique, announcing they were charging customers an additional 3% to cover the added costs imposed by Obamacare and being ripped for it by outraged liberals. Now the owners of Lucques and other trendy restaurants have decided to add a healthcare surcharge, too.

Economics — it’s the law:

The cost of offering these benefits is significant and the reality is that restaurants, particularly smaller restaurants like the ones many of us own, have a very high ratio of staff members to revenue and run on very slim profit margins. Successfully run restaurants generally make between 5-10% net profits so a health care benefit which eats away 3% of gross sales will take away anywhere from 30% to 50% of annual profits for a restaurant. We’ve discussed simply raising menu prices, but ultimately food prices are tied in many ways to the ingredients we purchase. Those ingredient costs have increased astronomically recently so we’re already struggling with working creatively to keep menu prices down and don’t feel it’s right to try to factor health care costs into menu prices as well. We’d rather keep our menu costs as an accurate refection of our ingredient prices so that customers know that if we have to raise them it’s because we can’t avoid passing on our increased costs.

Like I’ve said before, labor is a cost. If you increase the cost of labor –in this case, by commanding employers to provide  expensive health insurance coverage– something has to give. Either the restaurant takes a huge hit in their profit margin, calling into question the reason for being in business in the first place, or they cut hours and jobs, or they raise prices. There is no way to avoid that choice. These restaurant owners have chosen the third option: raise prices, and they have chosen to be bluntly honest with their customers about it.

Good for them, and I hope all businesses follow the trend. Why shouldn’t customers know why their meal or other commodity or service has become more expensive? Isn’t transparency good? Or is it gauche to remind the largely progressive clientele of places like Melisse that their legislated largesse to the proletariat actually has a cost?

The ACA is an anti-constitutional monstrosity of a law. It needs to be repealed; it’s inflationary effect is just one reason why.

More under Elections have consequences.

via Truth Revolt


The Punitive Economic Cost of Class-Warfare Taxation

September 1, 2014

Phineas Fahrquar:

More evidence (from Europe!) that high tax rates harm economic growth and general prosperity. Barack Obama, take note.

Originally posted on International Liberty:

I’ve already shared a bunch of data and evidence on the importance of low tax rates.

A review of the academic evidence by the Tax Foundation found overwhelming support for the notion that lower tax rates are good for growth.

An economist from Cornell found lower tax rates boost GDP.

Other economists found lower tax rates boost job creation, savings, and output.

Even economists at the Paris-based OECD have determined that high tax rates undermine economic performance.

And it’s become apparent, with even the New York Times taking notice, that high tax rates drive away high-achieving people.

We’re going to augment this list with some additional evidence.

In a study published by a German think tank, three economists from the University of Copenhagen in Denmark look at the impact of high marginal tax rates on Danish economic performance.

Here’s what they…

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Social Security’s Looming Fiscal Nightmare

August 10, 2014

Phineas Fahrquar:

Just a reminder of another fiscal bomb set to go off.

Originally posted on International Liberty:

With all the controversy over the failed and costly Obamacare program, it’s understandable that other entitlements aren’t getting much attention.

But that doesn’t mean there aren’t serious problems with Medicaid, Medicare, and Social Security.

Indeed, the annual Social Security Trustees Report was released a few days ago and the updated numbers for the government-run retirement program are rather sobering.

Thanks in part to sloppy journalism, many people only vaguely realize that Social Security is actuarially unsound.

In reality, the level of projected red ink is shocking. If you look at the report’s annual projections and then adjust them for inflation (so we get an idea of the size of the problem based on the value of today’s dollars), we can put together a very depressing chart.

How depressing is this chart? Well, cumulative deficits over the next 75 years will total an astounding $40 trillion. And keep…

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New Diaper Subsidy is A Raise For Welfare Recipients

August 8, 2014

Phineas Fahrquar:

Proposals like this, when the state suffers from pathetic infrastructure and its finances are a wreck, makes me wonder if some sort of “political dementia” hasn’t taken hold in Sacramento. Regardless, Grimes is right: a subsidy will only hide the trues cost of the product and encourage manufacturers to raise prices, because now it’s a “right.”

Originally posted on KATY GRIMES:

Diapers, diapers, diapers for everyone!

If ever there was evidence of the need for a part time Legislature in California, it is now: California Democrats are pushing a diaper subsidy program for welfare parents.

The rationale for this idea is right out of the welfare-state handbook: low-income parents cannot take advantage of free or subsidized child care if they cannot afford to leave disposable diapers with their child at care facilities.

This is nothing more than a boost to welfare payments, without actually identifying it as an increase. California taxpayers would be livid if the Legislature was honest about increasing welfare payments.

AB 1516 by Assemblywoman Lorena Gonzalez, D-San Diego, would create a new taxpayer-subsidized program to provide eligible families already participating in CalWORKS, with $80 a month to buy diapers for children under the age of two.

“Assemblyman Mark Stone, D-Scotts Valley, said the true cost of the bill…

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Thanks to progressivism, we’ve lost the “War on Poverty”

August 1, 2014
"Defeat"

“Defeat”

The War on Poverty was launched in 1964 under Lyndon Johnson with the best of intentions: through massive spending and extensive welfare programs, the government would eradicate poverty in America and make people self-sufficient. Like I said, a worthy goal.

It has also been an utter failure. In 1964 we declared war on poverty, and poverty won.

As the chart above shows, poverty was in deep, rapid decline in America after World War II without any government help, just the natural processes of a growing, prosperous economy. It looked well on its way to elimination, perhaps. Then, in the mid to late-60s, it leveled off and, save for an occasional bump up, has stayed right around fifteen percent.What happened?

In 1964, with the start of the War on Poverty, progressives and other economically illiterate do-gooders wound up trapping people in poverty, rather than helping them out of it. As Robert Rector at The Signal writes:

Johnson did not intend to put more Americans on the dole (1). Instead, he explicitly sought to reduce the future need for welfare by making lower-income Americans productive and self-sufficient.

By this standard, the War on Poverty has been a catastrophic failure. After spending more than $20 trillion on Johnson’s war, many Americans are less capable of self-support than when the war began. This lack of progress is, in a major part, due to the welfare system itself. Welfare breaks down the habits and norms that lead to self-reliance, especially those of marriage and work. It thereby generates a pattern of increasing inter-generational dependence. The welfare state is self-perpetuating: By undermining productive social norms, welfare creates a need for even greater assistance in the future. Reforms should focus on these programs’ incentive structure to point the way toward self-sufficiency. One step is communicating that the poverty rate is better understood as self-sufficiency rate—that is, we should measure how many Americans can take care of themselves and their families.

Emphasis added.

What was it Ronald Reagan said?

“The nine most terrifying words in the English language are ‘I’m from the government and I’m here to help.'”

One would think that, faced with all the mounds of evidence that government programs don’t lift people out of poverty, Progressives, who claim to be devoted to “progress,” would see the war on poverty has been a failure and that the programs should be reformed or discontinued and something else tried, something like less government intervention.

But, no. Few ever will be that honest, because to say government failed to reorder society as desired would be to admit that the central tenet of progressivism, a faith in the power of technocrats to manage a vastly complex society, was wrong.

Meanwhile, that core 15% remains trapped in poverty, addicted to government “crack” and walking a road paved with good intentions.

PS: Note the sharp climb back up to 15% at the end of that chart. It starts soon after the Democrats take over Congress in 2006 and undo the 1990s Clinton-Gingrich welfare reform, then accelerates under Obama. Coincidence? I think not.

RELATED: Cato economist Dan Mitchell has often written on the same topic. Here’s a post he wrote on the failures of the War on Poverty and another on the “redistribution trap.” That latter is must-reading.

Footnote:
(1) Many criticize that assertion, with some justification. See for example Kevin Williamson’s “The Dependency Agenda.”

(Crossposted at Sister Toldjah)


Obamacare is Bad News for Your Wallet Today and Worse News for Your Wallet Tomorrow

July 9, 2014

Phineas Fahrquar:

The Democrats and their enablers, including the big insurance companies and groups like AARP, have much to answer for.

Originally posted on International Liberty:

I wrote a few weeks ago about the hidden economic damage of Obamacare, particularly the harm to the job market.

Today, let’s get further depressed by looking at the ever-worsening fiscal damage of the law.

Here’s some of what Chuck Blahous of Mercatus wrote about this costly new entitlement.

The ACA was enacted in 2010 with the promise of reducing the federal budget deficit while expanding health insurance coverage. Nearly lost amid the recent press cheerleading over ACA enrollment figures is that this promise has disintegrated, and now no one…can say how much fiscal damage the ACA will ultimately cause. …CBO currently estimates that the ACA’s coverage provisions will cost the federal government $92 billion a year by FY2015. This is roughly 0.5 percent of projected U.S. economic output for 2015, well exceeding the relative costs of Social Security and Medicaid at similar points in their histories. (The amount falls…

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