Tuesday, November 24, 2015

Tax Policy and the Magic Investment Channel

OK, someone has to do it.  There was a dreadful column on tax policy in today’s New York Times, and none of the usual suspects (Dean, where are you?) has jumped on it yet, so I guess it’s up to me.

The column tells us that shifting from an income to a consumption tax is something that “many economists in both parties applaud”.  We learn that “Democratic economists, like their Republican counterparts, say taxing consumption encourages savings, investment and greater economic growth.”  The only trick is to avoid making a national sales tax too regressive, so we’ll have to work on that.

Now tell me: exactly how is a consumption tax supposed to increase investment?  Like, by what channel?  Is there a dearth of savings that prevents business from being able to finance new projects?  We have a savings glut.  Will a flood of savings lower interest rates?  Current rates on business borrowing are just about all risk premium at this point.  And what’s the evidence that savings rates are so responsive to taxes anyway?  Yes, I know that countries with VAT’s tend to save more, but there’s massive endogeneity there.  Look at it this way: I live in Washington State, which finances itself with an 8% sales tax, while our next door neighbor, Oregon, has an income tax.  Is there any evidence that savings are so much greater here than there?

So exactly what is the channel that’s supposed to lead from taxing consumption to greater business investment?

Incidentally, if you happen to be of a Keynesian persuasion, you believe savings are more a consequence of investment than a cause of it, and you would also expect that, at times of macroeconomic slack, consumption crowds in investment through rate of return effects.  Just saying.

Monday, November 23, 2015

Offing "The Agenda" Before the Agenda Offs Us

Dean Baker writes:
The time has long since passed when we should be arguing about whether global warming is happening or whether the consequences will be serious. The question is what we are prepared to do about it.
And the answer is… “set targets”?

As long as adopting shorter work weeks and years to achieve full employment is off the agenda, doing something meaningful about climate change is also off the agenda. Shorter hours is not a panacea for full employment or slowing man-made climate change. But excluding shorter hours from the policy mix is the opposite of a panacea — guaranteed toxic.

It is no mistake that shorter hours are off the agenda. It is not happenstance or serendipity. The best way to describe the thinking behind the exclusion is a kind of rentiers’ marxism-in-reverse. Marx’s model of capitalism predicts an “increasing organic composition” of capital. In the absence of capital devaluing crises, such an increase makes labor increasingly scarce relative to capital.

Shorter hours would make labor even scarcer relative to capital. Price of labor goes up, returns to capital go down. Can’t let that happen. This is America, where “free enterprise” rules and the rich buy the public policy regime — and whatever economic policy rationale justifies it — that suits them.

So achieving full employment and mitigating climate change are off the respectable economists’ agenda. The question is what are we prepared to do about that?

Off the Agenda? Off the Agenda!

Dean Baker:
"We could try to get to full employment with shorter work weeks and years, through measures such as work sharing, paid family leave, and paid vacations, but this route is also largely off the agenda."
 Off the agenda! (as in "off the pig!")

Sunday, November 22, 2015

Sandwichman's Lump-of-Labor Odyssey, Part II

Back in July, I posted Sandwichman's Lump-of-Labor Odyssey with the intention of posting a second installment. The next day, I left for a week in California and part two fell by the wayside. Larry Summers's recent comments on the so-called Luddite fallacy have caused me to resurrect my earlier plan.

This is not the first time Summers has sung this refrain. Back in February, he told the same story to a Brookings policy forum on "The Future of Work in the Machine Age." The earlier renunciation of the fallacy claim concluded with this prudent qualification:
And I would want to leave you with that concern as there whether you think it's due to technology or whether you think it's due to globalization, or whether you think it's due to the maldistribution of political power, something very serious is happening in our society.
That is to say, regardless of what caused it, the lower demand for workers is a reality that must be faced. In his post on Summers's latest recantation, Peterson Institute president Adam S. Posen observed that the implications are scary "[u]nless we can somehow transform that sustained lower demand for workers into the widespread leisure of the sort imagined by Keynes and some science fiction writers, with the income redistribution to support it,"

Ironically, it was precisely the obstinate hostility toward transforming lower demand for workers into leisure that propelled the bogus fallacy claim in the first place. Understanding this inversion of motive and rationale is crucial. It was not because they thought there would always be plenty of jobs to reabsorb displaced workers that employers' organizations and newspaper editorialists opposed shorter hours; it is because they opposed shorter hours that they insisted there would always be plenty of jobs.

In other words, macroeeconomic thinking is not, in the words of Action from West Side Story, "depraved on account I'm deprived." It has been deprived -- of the insight of its own theoretical tradition -- because it is depraved! 

Sneering at the so-called Luddite fallacy under the conviction that productivity would inevitably create more jobs than it destroyed used to be known as the "economic law" that "supply creates its own demand" -- a faith that was once said, by John Kenneth Galbraith, to have "sank without trace" in the wake of John Maynard Keynes's refutation of it.
Until Keynes, Say's Law had ruled in economics for more than a century. And the rule was no casual thing; to a remarkable degree acceptance of Say was the test by which reputable economists were distinguished from the crackpots. Until late in the '30s no candidate for a Ph.D. at a major American university who spoke seriously of a shortage of purchasing power as a cause of depression could be passed. He was a man who saw only the surface of things, was unworthy of the company of scholars. Say's Law stands as the most distinguished example of the stability of economic ideas, including when they are wrong. 
The old nostrum didn't "sink without trace" at all. It simply slipped into a disguise. In that disguise, it performed EXACTLY the same function as had previously been performed by the vulgar version of Say's Law -- separating the "crackpots" and "stupid people" who worried about technological unemployment from the "smart people" who duly memorized and recited the mantra,
"Well the technology will remove the jobs. If there’s more productivity than people are going to have more money and if people have more money, they’re going to spend it and then everybody’s going to be employed."
Was that even "macroeconomic thinking"? Of course not. It is precisely the same old, same old classical political economy orthodoxy in an even more archaic, anti-mercantilist bottle.

Although he generously credits the teachings of Bob Solow, Summers must know that it was his own Uncle Paul Samuelson, who promulgated the lump-of-labor fallacy ruse year after year in his universally prescribed introductory textbook. As I mentioned in part one of the Odyssey, when I wrote to Samuelson in the late 1990s, asking about the source of the fallacy claim his reply was gracious but uninformative. He informed me that the fallacy "was widespread during the Great Depression 1929-1935 and is still encountered in today's France."

"A standard move in the rhetoric of reaction"

My inquiry to Samuelson followed up a listserv discussion I had earlier in 1999 with Summers acolyte Brad DeLong, in which he referred to the wages-fund doctrine of classical political economy as "a standard move in the rhetoric of reaction." DeLong correctly associated the lump-of-labor fallacy with the wages-fund doctrine. What DeLong didn't grasp at the time was that fallacy claim reinstated the old doctrine by purporting to refute a mirror image of itself. Here is the transcript of that exchange, which I previously posted to EconoSpeak in August of 2014.

But, Brad, while we're asking for examples, can you give me an example of any economist who has challenged the sources of Samuelson and Nordhaus's perennial lump-of-labor fallacy? If anthropologists were as accommodating as economists, Piltdown man would still be in our evolutionary family tree.
Samuelson and Nordhaus's "lump of labor" fallacy is the Classical doctrine that fiscal and monetary policy cannot affect the total amount of employment--that the number of hours worked is fixed, unchangeable, unresponsive to government policies. And that the best we can do (when confronted with a situation like Europe's 10% unemployment today, or America's 25% unemployment in the Great Depression) is to spread the (limited) amount of work around fairly. 
But what Samuelson and Nordhaus want to argue--I think correctly--is that we know very well how to get to a better outcome in which unemployment is low not because a lot of us are working part-time (when we would rather be working full-time), but because demand for labor is high...
Ah, now we're getting somewhere. Wouldn't that Classical doctrine be what is known as the wages-fund doctrine, Brad?
DeLong (ellipsis in original):
Yep. But it remains alive, a standard move in the rhetoric of reaction to use against demands that the government do something to make the economy behave better... 
You bet the wages-fund doctrine remains alive as a standard move in the rhetoric of reaction. One need only peel back the textbook onion one layer from Samuelson and Nordhaus to the Raymond Bye and William Hewett textbooks of the previous generation (1930s, 1940s, 1950s). There you find the same hoary lump-of-labor fallacy forthrightly likened to the "general overprodution fallacy". Here is Bye's explanation of why the lump-of-labor fallacy is a fallacy:
"Every laborer creates a product which is offered in exchange for the products of other laborers. The demand for labor thereby grows as fast as its supply; the one cannot be greater or less than the other, for they are the same thing." 
According to this explanation, then, any monetary or fiscal action of the government for the purpose of "creating jobs" is futile because all it can do is divert the means for employing labour from its natural course (determined by the identity of supply and demand), "at the expense of the other laborers who would have been employed, and at the expense of society, which has less wealth than might have been." 
I have another question, Brad, at what point in the history of political economy did the workers, trade unions, and social democratic politicians suddenly and inexplicably embrace the reactionary doctrine of the wages-fund? I'm puzzled because all I can ever find is attribution of this theory of the lump of labor to the workers, trade unions etc. On the other hand, I can find quite a bit of repudiation and denunciation of the wages-fund doctrine from socialists, trade unionists etc. Not the least from a certain K. Marx. 
DeLong (ellipsis in original):
that I do not know. Let me hunt around and see if I can find anything... 
I'd be much obliged. 
A year and a half later (August 2000), though, the question of the lump of labor arose again in Brad's admiration of some passages in Paul Krugman's book The Accidental Theorist.

DeLong (bracketed interpolations in original):
But my most favorite pieces of the book of all are three passages that go to the heart of Krugman's commitments--both moral and intellectual. The first is a biting denunciation of William Greider for being an "accidental" theorist: someone who does not think issues through, but who just looks at surfaces without peering into depths or thinking coherently and whose thought is thus shaped by implicit, unexamined theories of which he is not conscious:
" ...reducing the number of workers it takes to make [manufactures] reduces the number of jobs in the [manufactures] sector but creates an equal number in the [services] sector, and vice versa. Of course, you would never learn that from talking to [manufacturing] producers, no matter how many countries you visit; you might not even learn it from talking to [services] manufacturers. It is an insight that you can gain only... by engaging in [economic] thought experiments."
Ironically (and ironic is too mild a term for it), the position from which Krugman criticizes Greider is itself based on an implicit, unexamined theory of which he is not conscious. That accidental theory holds that increasing the volume of trade is the only and certain way to expand employment (and, by implication, raise wages).  
BUT WAIT! Krugman's own "accidental theory" has a name. And I'm sure he's heard of it. I know Brad has. It is the wages-fund theory of classical political economy [correction 2014: I should have said "Say's Law, which depends on the wages-fund doctrine"] -- sometimes referred to as the discredited wages-fund doctrine. So Krugman beats Greider over the head with a defunct doctrine and Brad applauds. 
This indeed reminds one of Keynes. To be exact, it reminds one of Brad's "most favorite" Keynes quotes:
 "Practical men, who believe themselves to be quite exempt from any  intellectual influences, are usually the slaves of some defunct  economist. Madmen in authority, who hear voices in the air, are  distilling their frenzy from some academic scribbler of a few  years back..."
Brad and I had a brief exchange about the wages-fund theory a while back and I quote his characterization of it: "Yep. But it remains alive, a standard move in the rhetoric of reaction to use against demands that the government do something to make the economy behave better..." Putting two and two together, then, one of Brad's most favorite pieces of Krugman is when he employs a standard move in the rhetoric of reaction. Hmmmm.  
But just to carp on this theme a few moments longer, I shudder to mention that Krugman's allegation against Greider (and it is only an allegation -- a speculation really about how his thought has been "shaped") is that he, Greider, is making a static assumption, ultimately based on what was once called (Wilson, 1871), a "Unionist reading of the wages-fund theory."
I asked Brad some time ago just when it was that workers, trade unions and social democratic politicians (not to mention populist  muckrakers) enthusiastically but implicitly embraced the reactionary doctrine of the wages-fund theory. He replied: "that I do not know. Let me hunt around and see if I can find anything. . ."  
Brad didn't get back to me on that.

Please allow me to introduce myself

Hi folks. This blog has been bereft of representation from one crucial constituency, the UnDead. Of course, undead economists are discussed here all the time, but never has one posted. I've shambled in to remedy that situation. For depressing job-related reasons I'm reduced to publishing under a pseudonym, since otherwise the undead at my place of work would get to gurgling and growling. You could chop off one of their arms and they wouldn't give it a second thought. But publish in a way that might annoy somebody, anybody, living, dead, or undead, oh no! Do I sound bitter? That would be a mistake. I can't be bitter. I'm dead! (In comments, please avoid the subject of my identity, in jest or otherwise. Don't make me take a bite out of your shoulder.)

I've always considered this site the property of its contributors, so if any take umbrage at my arrival, I'll be happy to stagger out. No hard feelings, there can't be after all, because . . . see above.

As Barkley could tell you, while living I was a great economist. Alas, death has sapped my prodigious mathematical faculties. Sadly, eating brains doesn't help, though it does hit the spot. That stuff would be over your heads anyway. I'm mostly verbal now, in a post-mortem kind of way. (Not post-modern. That would be worse than dead.)

I expect to write more about politics, since economics is looking pretty dead these days too. Utility theory got killed by behavioral economics, or maybe Barkley's brainwaves monitors. Monetarism and real business cycles, long dead. New Keynesian macro, deeply infirm, its representative consumer aimlessly roaming the countryside, trying to optimize current and future consumption when he has no idea what the hell the future will bring. Lumps of labor being posited everywhere.

Ditto the current crop of presidential candidates, though I would make an exception for Bernie Sanders, who actually could pass for dead but is really the only live option among the contenders.

With that I will sign off, since we undead take some getting used to, and I'm getting hungry.

Saturday, November 21, 2015

"Some Big Changes in Macroeconomic Thinking from Lawrence Summers"

This post's title refers to Adam Posen's blog post about the keynote address by Larry Summers: "Is It (just) Hysteresis? Disentangling the Cyclical from the Structural," Conference: Making Sense of the Productivity Slowdown, Peterson Institute for International Economics, Washington, DC, November 16, 2015:
...basically what we were taught were that there were these smart people who were exemplified by Bob Solow and there were the stupid people who were exemplified by a bunch of sociologists. 
And the stupid people said that technology was going to remove the jobs and the smart people said, “Well the technology will remove the jobs. If there’s more productivity than people are going to have more money and if people have more money, they’re going to spend it and then everybody’s going to be employed. And so, it’s like the Luddite fallacy to think that technological progress reduces jobs and this is stupid. And that’s basically what I believed and you know, that’s basically what I went through life believing because that’s what I’ve been taught and it seemed to me to make sense. 
And then at some point, it sort of occurred to me that suppose the stupid people were right, what would it look like? Well what it would it look like would be there’ll be some large categories of labor who would see their relative wage go way down.
O.K. fine, but Sandwichman would just love it if Larry Summers would send a little credit his way for documenting FIFTEEN YEARS AGO the vacuity of the stupid people fallacy claim.

"The 'Lump-of-Labor' Case Against Work-Sharing: Populist Fallacy or Marginalist Throwback?" Tom Walker in "Working Time: International trends,'theory and policy perspectives, Lonnie Golden and Deborah Figart (eds), Routledge, 2000.

"Why economists dislike a lump of labor," Tom Walker, Review of Social Economy Volume 65, Issue 3, 2007, pp. 279-291.

What Has Not Been Said About The Late Herbert Scarf

Economic theorist Herbert Scarf recently died.  There have been a number of blog posts about him and his work.  A good one is by Tim Taylor here.  He notes innovative work Scarf did  on inventory theory and the theory of  indivisibilities.  Other commentators have pointed out his work on the relationship between general equilibrium and the core.  I have no  complaint with any of this, although many may not  know of it or care about it as it was some time ago and has largely gotten built into the grad theory textbooks, especially the stuff on GE and core.   All of this makes him look like a sort of minor panjandrum of very orthodox theory, orthodox now almost to the point of boring.  However, I personally think that he has been under-appreciated and under-recognized.

In this regard let me mention just two items.  One is his reasonably well known demonstration of how easy it is for a general equilibrium to be unstable.  That has gotten into a lot of the textbooks, but it seems to get overlooked a lot, even though we have seen some pretty dramatic examples of major instability in the real economy, most notably involving speculative bubbles and their crashes, with one of these bringing about a global economic crisis worse than anything since the Great Depression.  People like Kenneth Arrow and others definitely recognized the importance of Scarf's work, and indeed it is indeed in the textbooks that the conditions for stability of GEs are very strong and unlikely to be met, even as many macroeconomists blithely assume not only that GE holds, but that it is unique and stable, thinking that this somehow shows how rigorous and theoretically astute they are.  Herb Scarf knew better.

The other is much more obscure, and arguably less important.  It came out of his concern for  the issues surrounding actually calculating general equilbria, which many microeconomists do all the time with CGE models, whose usefulness I am not going to totally deny, although Scarf's  work raises warning flags.  In particular he was more than any of the other general equilibrium theorists aware of the deep mathematical issues involved in actually precisely computing equilibria, issues related to constructivist critiques of classical mathematics over such things as assuming the Axiom of Choice and the Law of the Excluded Middle, issues raised in recent years by K. Vela Vellupillai, although with most economists ignoring him.  Maybe they are right to do so, but I happen to know from talking with both of them at the same time a few years ago that Herb Scarf took these issues seriously, and Velupillai has credited him with being the only serious general equilibrium theorist to appear to be aware of them and to have discussed them, which he did  in his famous book on computing general equilibria.

Anyway, a sad loss of fine man and an under-appreciated brilliantly innovative scholar.

Barkley Rosser

Friday, November 20, 2015

Read Carefully Before Signing: The Eurozone Crisis Narrative

A group of economists is circulating a document called Rebooting the Eurozone: Step 1 – Agreeing a Crisis Narrative.  (Their on is off.)  It was written by a high profile team including such luminaries as Richard Baldwin, Olivier Blanchard, Paul de Grauwe and Daniel Gros and asks readers to send in their own endorsements if they are economists.  A bunch of heavy-hitters have their names appended at the bottom.

For the most part it is a reasonable account.  The two main factors they identify are the imbalances that accumulated within the EZ before 2008 and took the form of excessive private debt and the absence of institutional features that would otherwise permit adjustment within a currency zone.  (Fiscal federalism and flexibility are not on their list, probably to obtain consensus across a political spectrum from center-right to center-left.)  They call attention to the partitioning of banking along national lines, which fed the “doom loop” of bailouts, macro deterioration, nonperforming loans, deterioration of sovereign debt in bank portfolios and greater vulnerability of the financial system to runs, leading to further bailouts etc.

I thought about signing on.  Then I stopped, reread the letter and saw a bullet point smuggled in at the end of their list of crisis-inducing features:

Interesting....  All the other bullet points have short explanations to convince the reader that the observation is correct and important, but not this one.  Perhaps the authors thought that a reference to the evils of “rigid factor and product markets” would be uncontroversial and obvious.  Or perhaps they can’t actually supply a justification based on agreed-upon research.  Or both.

There are two reasons why this little sentence bears attention.  The first is that it is probably wrong.  There has been a large volume of research on the relationship between price (especially wage) flexibility and macroeconomic performance, and the best you can say is that it is inconclusive.  In Europe at least, countries with the most “managed” labor and product markets tend to outperform the paragons of liberalism.  Of course, it depends on the time period.  During the 90s, when it was struggling to absorb the former GDR, Germany looked like a macroeconomic weakling, and economists were quick to jump on it for its elaborate “Rhineland Model” of worker participation, industry associations and public banks.  Now Germany is on top, and economists—well, they will talk about almost anything but the effects of the social market model.  Now it’s southern Europe that has sclerotic regulation that prevents it from being competitive.

But the second reason gets to heart of what’s wrong with this letter: it misses not only a key piece of the economics, but just about all of the politics.  It seems to assume that the reason the political elite of the eurozone imposed self-defeating austerity and failed to take low-cost, utterly feasible actions to defuse the crisis, like quickly extending lender of last resort protection to governments and their financial systems, was lack of economic information or understanding.  A great cloud of confusion has supposedly settled on the European capitals, and it is up to the good people of the Consensus Narrative to let the sun shine in.

I’d argue, however, that EZ policy has been consistent and even rational, if you adopt a different view of what the policy actually is.  Suppose the overriding goal of the elites is to use the leverage of Europe, and especially its common currency, to undo the post-WWII social compromises that are unbudgeable at the country level.  Reduce union power, cut back the welfare state, privatize public enterprises, get rid of the levers that permit public intervention in how companies are managed and run.  In that case, it would be dereliction of duty to permit countries to escape crisis without taking these desired measures, now packaged as “reforms”.  The “rigidity” bullet point summarizes this perspective, vitiating the whole point of the exercise.  The response to the narrative will be something like, “Yes, you have reasonable arguments, but as you acknowledge yourself, failure to reform is at the heart of the problem.  This is why we can’t simply support uncompetitive countries  without insisting on a corresponding package of reforms.”

No, I don’t think I’ll sign.

Wednesday, November 18, 2015

The Appropriate Term Is "Violent Jihadists"

Since the last Democratic presidential candidates' debate last on Saturday, I have been thinking about what is the proper term for those who carried out the attack in Paris.  Of course there is the specific group with which they are affiliated, which is best labeled "Da'esh," which is the Arabic name for them (from an acronym).  "Islamic State" and its relatives "ISIS" and "ISIL," which are competing acronyms granting them this "statehood," that they do not deserve are inappropriate.

But the more difficult question is the one that was posed at the beginning of the debate to the candidates: do you join the Republicans in calling the broader movement "radical Islam"?  While they sort of muddled things by saying that one should not "oppose all Muslims," that is not of course what the term "radical Islam" means, although it is not unreasonable to see that many completely peaceful Muslims might be offended by its use.  More precisely, however, the issue is violence.  So, there may well be Muslims who follow "radical" interpretations of Islam.  But such interpretations do not necessarily mean that these people support violently attacking innocent people as the those killing people in Paris were doing (as well as those killing people in Beirut a few days earlier).  While there may be some "radical economists" who support violent actions, most do not.  The word "radical" does not necessarily imply violence, even when attached to the word "Islam."

So what about "jihadi," the term used by Hillary Clinton in responding to the question?  Well, the problem here is that there is more than one meaning to the word "jihad" as it is used in the Qur'an. So, yes, those engaging in war for Islam get this label, but the more frequent use of the term has been to mean an internal spiritual struggle, a struggle that has nothing whatsoever to do with violence.  So, using the term "jihadi" also has problems. 

This extends arguably also to the slightly better term that Martin O'Malley used, "radical jihadi," which suffers from both of the problems noted above.  Neither term unequivocally implies the aggressive violence directed at innocent persons that is what is the real problem here.  Again, a radical jihadi could be someone who is engaged in an internal spiritual struggle, but one that is very profound and wrenching, a radical struggle that goes to their roots, but one that involves no violence.

So, I propose that the proper term is "violent jihadi."  This implies someone who is engaging in violent action for the purpose of religious war who also happens to be Muslim.  I  doubt these politicians will  pick up on this, but this term is accurate and I would also hope inoffensive.

Barkley Rosser

Friday, November 13, 2015

Cruz Mugs Trump, Hugs Lump

According to the Wall Street Urinal:
Immigration was also a flashpoint, with Ted Cruz slip-streaming Mr. Trump as an ardent restrictionist. He even embraced the lump of labor fallacy that the supply of jobs is so fixed that immigrants “drive down the wages for millions of hardworking men and women.” 
Not so. In a 2013 analysis, the Congressional Budget Office estimated that the bill that passed the Senate that year would have raised average wages by 0.5% by 2033. CBO also found that among the poorest workers, new immigrants tend to lower the wages of other immigrants, not native-born workers. That’s because they work in industries like hospitality and agriculture that are dominated by newcomers. Mr. Cruz is positioning himself to pick up nativist voters who now support Mr. Trump if the businessman fades.
Translation: immigrants working in hospitality and agriculture are not hardworking men and women. Gee, that's news to me. Is that why they call the WSJ a "news"paper?

Wednesday, November 11, 2015

The Strange Cult of Henry George

Having devoted EconoSpeak space to an argument by Thomas Shearman, a follower of Henry George, it is only fair and balanced to present the contrary view. I stumbled across the following comment on a libertarian(?) website. The possibility occurred to me that it may be satire (see paragraph 3):
We definitely need to strengthen our platform. It needs to be much more hard hitting and radical. 
This is especially true with regard to property rights. We must demand an end to all taxes on property. These are the worst of all taxes. They hurt the economy, causing increased: homelessness, pollution, poverty, resource misallocation, and misdirected infrastructure development. 
There is no such thing as “monopoly rents” or any of the other fascist socialist nonsense from the wacko marxists of the Henry George cult. 
The Libertarian Platform must call for the complete protection of Private Property rights: 
The Libertarian Party calls for the repeal all taxes on property by all levels of government. The property tax is the worst of all taxes. Free people who own their own land, farms, businesse property, apartments, condominiums, houses, homes or any other property must be left free by government to exercise sole dominion over their property. They must be allowed to live tax free and to use their property as they see fit. 
Property taxes deny individuals the right to become free, independent and self sufficient. Without property taxes, millions of Americans would be able to live without any income or participation in the cash economy. They are forced by the property tax to have an income and are forced into the hands of the government. 
The property tax consititues a "taking" of a portion of a person's property each year, without compensation. It should therefore be declared unconstitutional under the Constitution’s "takings clause" that requires compensation for the taking of property by the government. 
The Property Tax is absolutely the most evil of all taxes. It causes the greatest harm to the rights of the individual. It is the essential first component in the government’s tyrrany [sic] of taxation. 
No person can every [sic] be free so long as property taxes are allowed to exist.

Monday, November 9, 2015

Evil Effect of Robot, Rent and Taxation

Again with the damned robots. When it comes to robots, etymology matters. Czech playwright Karel Čapek's brother suggested the name to him, based on a word for forced labour. For example:
The system of rent by robot or forced labour -- that is, so many days' labour without any specification of the quantity of work to be performed -- is a direct premium on idleness. A landlord wishes a field of corn to be cut; his steward sends out, by means of his Haiduks, information to the peasants to meet at such a field at such an hour with their sickles.
Note that this robot in question isn't just any old forced labor but a payment of rent by obligatory labor. It is the price the peasants must pay for access to the parcel of land from which they get their subsistence.

The question of "robot" is thus inseparable from the question of rent. In the case of the electro-mechanical devices that have nowadays acquired the name, robot, the rents in question are the royalties due on the patents -- the intellectual property -- embodied by the machine.

What is rent? An anarchist pamphlet from 1892 stated, boldly, "Rent is taxation; taxation, rent..." A Georgist book from a few years later by Thomas Shearman, Natural Taxation: An Inquiry Into the Practicability, Justice and Effects of a Scientific and Natural Method of Taxation, elaborated on that seemingly circular definition:
To state the case is to demonstrate the justice of the tax. For what is here proposed is simply this: To tax the proceeds of taxation, and nothing else. 
For ground rent is taxation, and nothing else. The power to collect ground rent is a delegated power of taxation. 
Can anything be more just than for the State to draw its revenue from the proceeds of such taxation and from nothing else? Privilege of collection implies duty of payment. The duty of providing for the whole support of government is indissolubly attached to the right of collecting ground rent. The landlord, as the only natural tax-gatherer, is also the only natural revenue-provider. Every man who buys the privilege of taxation assumes, by the very act, a proportionate share of the burden of government expenses. No lapse of time, no misconception of the situation, no unwise or excessive payment for the privilege can ever relieve him from this inherent obligation.
Curiously. though, those who have benefited most from the powers of taxation granted to them by government are most vociferous in their objection to their "private property" being taxed, as Shearman observes, a few pages later:
It will be said, of course, that this method of taxation is mere "confiscation"; and, to the minds of many, this will be a conclusive objection. It is to be regretted that the brilliant author of Progress and Poverty should have even once used this word; thus seeming to identify the cause of equal taxation with apparent robbery and to confound justice with injustice. Although such may not have been its original meaning, yet by long usage "confiscation" is understood to mean a punishment for crime or moral incapacity. We are not at liberty to confiscate, in this sense, either land or its rent.  
But no question of confiscation arises in the case. If all the land belongs to all the people, if past generations had no power to alienate it from the control of the present, if its rent is now wrongfully withheld from the people, their taking the whole of it would be merely a just resumption of their own, not confiscation. And this is all which Henry George ever meant; as page after page of his book clearly shows. It is not necessary, however, to discuss that question here. We are not inquiring into the wrongs of the past or even into the general rights of the people in the present. We are considering only the proper method of raising necessary revenue.  
Class legislation 
The only pretence for charging that this method is a measure of confiscation is founded upon the allegation that it is unjust to put the whole burden of taxation upon a single class. In the light of past history, during which the owners of land have used all their powers, with immense success, to get rid of all taxes upon themselves and to cast the whole burden upon the landless poor, their present remonstrances, sometimes pathetic, sometimes ferocious, against a reversal of their methods, are highly entertaining. Every tariff duty, every excise tax, every indirect tax bears witness to the persistent ingenuity with which the collectors of rent, the natural tax, have shifted the burdens of public taxation upon other shoulders. Not one dollar of our vast federal revenue is collected from rent. Nine tenths of it is collected from the comparatively poor. Great Britain has been hitherto governed by large landlords: America by small ones. Both alike have evaded the taxation of rent as much as possible. Both alike have never hesitated to ruin vast numbers of their fellow citizens, by sudden, arbitrary and disastrous changes in methods of taxation. Both alike have never dreamed of allowing the smallest compensation to the victims of their caprice. But, as only great landlords can make a profit out of such methods, British landlords have made themselves wealthy in this way; while the mass of American land-owners have plundered themselves for the benefit of a few.  
There is no precedent for the doctrine that taxation must be spread over the whole community, and still less for the novel claim that the State is bound to compensate taxpayers for the payment of taxes. When will any congress compensate Americans whose property was destroyed by changes in the tariff?  
Originally, all land was granted by the State upon the express or clearly implied condition that the grantee should provide for all the expenses of government. The land-owners gradually shifted the burden off their own shoulders, by new taxes on the non-voting population. But even they had not the audacity to make a perpetual covenant between themselves and the government which they controlled, for exemption from taxation. The plea of their successors is that, by long failure on the part of the people to demand their rights and the performance of the conditions upon which the land was granted, landlords have been led to believe that such a demand would never be made; that many of them have paid large prices for the privilege of charging rent, in the belief that rent would never be taxed; and that it is unjust for the State to change its policy in this respect, without giving to them as much with one hand as it takes from them with the other.  
The argument is just as valid in favor of kings and nobles; and it has been urged upon their behalf with equal sincerity. Down to 1788 French nobles were exempt from most taxes. Many men (like Beaumarchais) bought a title, partly for the sake of this exemption. The French Revolution swept away all these privileges, without a shred of compensation; and all the world now says that this was perfectly right. But to an army of tax-eaters in those days it seemed monstrously wrong. The parallel is complete.  
Compensation for vested rights
The concentration of all taxes upon ground rents, if enacted at the foundation of a state, would obviously be simple justice. Why is it not equally just at any later period? "Because," it is said, "there have been many changes of ownership: vested rights have sprung up: new men have bought the land from the original owners, paying a much larger price than they would have paid if it had been understood that rent would be taxed. Heavy taxation will destroy the market value of the land; and this would be robbery under the forms of law."  
What is this land value, which is so sacred that it must not be heavily taxed? Nothing in the world except the value of a power, conferred upon individuals, to tax other individuals for the privilege of standing upon the earth. It is the only kind of property which cost the original owner nothing, in either wealth or labor. Every other form of property was called into being by honest human skill and labor, and was therefore fully paid for. Property in ground rents was, in every instance, originally acquired either by undertaking to bear the cost of government, as in feudal times, or by gift or theft, just as we have seen it acquired in Oklahoma. No doubt, thousands sacrificed much, in the pursuit of Oklahoma land, by hanging on the borders of the territory for weeks, waiting for the day upon which the gift was to be made. But by doing so they no more gave value for the land, than beggars give value for what they get, by standing hat in hand all day long.  
It is true that this power to levy taxes upon other men has been sold, over and over again, at increasing prices, and is now generally held by men who paid something of value for it. But what of that? The State never pledged itself to exempt this privilege from taxation, or to limit the amount to which it will be taken for public purposes; and no legislature has any moral right to do so. The present owners of the taxing power have bought upon a speculation, and must take all the chances of speculation. Among those chances is the possibility that the State may call for no part of the tax collected under the name of rent, and, on the other hand, the possibility that it may call for nearly the whole of it. All other forms of property are bought on a similar speculation.  
Iron, steel, glass, crockery, tin plates, buttons, laces, whisky, apples, eggs, horses, cattle, mortgage bonds, bank stocks, railway shares, and hundreds of other things are bought and sold, with full knowledge that there may be sudden and vast changes in the rates of taxation upon them, made without notice, without the slightest scruple, and without even a thought of compensation to the many who suffer thereby. The tax on whisky was suddenly raised to 50 cents, then to $1, then to $2, then reduced to 50 cents, then raised again to 90, and all without the slightest compensation to anybody. The tariff taxes were suddenly increased 50 per cent, all around, in 1864, in one night, without notice and without a dream of compensation.  
Why, then, this amazing and unexampled tenderness for speculators in the privilege of taxing their fellow men? The answer is easy. Most of the losses arising from increase in other forms of taxation fall upon the masses of comparatively poor, because the burden of such taxes is shifted upon them. None of the loss arising from an increase of taxation upon ground rents would fall upon the poor; because that burden cannot be shifted upon anybody. It is the old, old story. The right of the rich to plunder the poor is a vested right, sacred, even in the eyes of the poor themselves, through long training in abject servility.

Sunday, November 8, 2015

Ben Carson and "The Secret Life of Walter Mitty"

An excerpt from The New Yorker:
A huge, complicated machine, connected to the operating table, with many tubes and wires, began at this moment to go pocketa-pocketa-pocketa. “The new anesthetizer is giving away!”shouted an interne. “There is no one in the East who knows how to fix it!” “Quiet, man!” said Mitty, in a low, cool voice. He sprang to the machine, which was now going pocketa-pocketa-queep-pocketa-queep. He began fingering delicately a row of glistening dials: “Give me a fountain pen!” he snapped. Someone handed him a fountain pen. He pulled a faulty piston out of the machine and inserted the pen in its place. “That will hold for ten minutes,” he said. “Get on with the operation.”

What Makes Ben Lie?

What kind of "civil dialogue" is making up a nasty thing that somebody never said and attributing it to them? What kind of pathological liar feels compelled -- and authorized -- to make up things that can be easily refuted with a text search?
Never has Saul Alinsky said in any book -- or other publication -- "Never have a conversation with your adversary, because that humanizes them and your job is to demonize them." A total fabrication.

"Gas All Boomers" Or At Least Tax And Cut Their Benefits More Says WaPo

No, nobody in today's Washington Post Outlook section devoted to the boomers said that first line, although it has become a commonplace on such sites as Economics Job Market Rumors where anonymous and frustrated millennials very frequently and fervently spout that opening line to the point that it lost whatever ironic humor it had some time ago.  But then irony is a Gen-X thing, not a millennial or boomer thing.

However, taxing them more and cutting their benefits is certainly called for by new economics reporter (and Gen Xer) James Tankersley, in an astoundingly bad article full of so much nonsense one does not know where to start.  He claims that because of their huge numbers, none of this will happen, even though the latest budget deal has in fact cut benefits for them (really for everybody not already receiving them, but with front end boomers the most likely to have been counting on those now cut benefits in the near term, see my post on this here).

While I shall deal with Tankersley's numerous misrepresentations, let me note more of the anti-boomer venom filling this special issue (Is this WaPo trying to market to millennials?).  So, Heather Havrilesky has the following:

"For the remainder of the decade, we can expect a brand-new wave of melodramatic retrospectives, each designed to remind us of a magical time when boomer heads were packed full of  idealistic notions and covered in lustrous free-flowing hair.  But just as what goes up must come down, what frolics in the mud of Woodstock must eventually sulk in the flourescent chill of the cardiology office. Somehow as boomers age, their commitment to dragging that dusty 60s archival reel out of the basement yet again seems to grow exponentially"

[I shall accept that some of this complaining is not without merit.  Her eventual take is that people now should take things as seriously now without looking back to the 60s either for inspiration or comparison, especially invidious comparison, and that starting in the 70s and on the more conservative majority of the boomers took over the show.  But mostly she is whining and snarking.]

Not quite as hostile is the much older Landon Y. Jones, one of the early coiners of the term "baby boomers." who declares:

"The designation has to do with coming of age at the right time. They enjoyed sex, drugs, and rock-and-roll, took all the good jobs and are now retiring and becoming a burden on society," which is the gist of Tankersley's whine, although Jones is mostly interested in the origin of the term and how it has been used indifferent countries rather than blasting on and on in this vein, which is in fact him reporting on the views of the late Dutch critic of the boomers, Pim Fortuyn.

Before going to Tankersley, I will note one other writer a bit more sympathetic to the boomers, Shirley Abrahms, who dispels five myths about them.  Supposedly, in spite of Tankersley et al, they are not as wealthy as widely thought (although some are), they are not clearly much healthier than their parents (and the recent Case-Deaton report on middle aged white males dying sooner since 2000 fits in with this, although she did not mention that), that boomers are reasonably charitable rather than just being "selfish," that they are not as technologically incompetent as many think, although certainly Xers and millennials are more  competent than they are (not to mention the rising post-millennials now beginning to make their first appearances), and finally that their sex lives are not total disasters, although aside from all the viagra and cialis ads, I was under the impression that they were mostly being criticized for having been too much into sex, etc., although perhaps that wicked past had supposedly led to a pathetic present.  For all her wisdom, Abrahms undercuts her own credibility by somehow thinking that 18 year olds were voting for LBJ in 1964, which was most definitely not the case (why is it that WaPo has gotten so bad that even its supposed fact checkers goof up?).

So, on to Tankersley, regarding whom I really wonder if either he or his anti-entitlement bosses are aware just how totally off this debut article is.  I am not going to quote and will not answer everything, but will try to focus on some of the biggest bloopers.  I shall also note that near the end of his article that a lot of the problems he identifies are really a matter of the large numbers of boomers and not any clearly intentional actions.  But this does not absolve them from deserving to "pay more" somehow for all the damage they have supposedly caused.  A main thrust of my response will be, if indeed they were causing all these problems, were not the earlier Silents and Greatest at least as guilty, if not in some cases worse?

OK, I shall quote one paragraph, which summarizes most of his complaints:

"Boomers soaked up a lot of economic opportunities without bothering to preserve much for the generations to come.  They burned a lot of cheap fossil fuels, filled the atmosphere with beat-trapping gases and will probably never pay the costs of averting catastrophic climate change or helping their grandchildren adapt to a warmer world.  The took control of Washington at the turn of the millennium, and they used it to rack up a lot of federal debt, even before the Great Recession hit."


For starters let us note that the stagnation of real wages began in the 1970s, about the time when most boomers entered the labor market.  So both the Greatests and the Silents did much better than the boomers on that one, with the period of rapidly rising real wages being 1945-73.  Yes, the early Greatests suffered in the Great Depression and fighting in WW II, but those amazingly quiet Silents really raked it in.  Look at somebody born in 1930.  only barely experiencing the GD as a child and not having to fight in WW II, if experiencing the privations of rationing, again as a young person, but then entering the job market in the late 40s and having the full experience of that postwar boom, well into middle age when the wage growth slowed, and in their 50s when fica taxes rose sharply as part of the Greenspan Commission's 1983 deal designed to "make sure the baby boomers pay for  their own retirement," which mostly they have despite the misrepresentations of Tankersley.  There were no payments for  COLA recipients prior to 1971, but any Greatest or Silent retiring not too long after it was put in then paid zippo into Social Security but got many times what they paid in benefits, far more than the boomers will get (who so far have not whined about this latest benefit cut, which Tankersley ignores, needless to say).

Tankersley's spin is that even though wages have not risen, a point he ignores, boomers got promoted to higher salaries as they aged.  While indeed growth has reverted to its 1975-95 average, there is no reason that Xers and millennials will not be able to have such promotions either. After all, the boomers are now indeed beginning to retire in serious numbers, opening up all those upper tier jobs for their juniors to earn more.  The idea that SS and Medicare will not be there is of course the biggest phone screed that WaPo hands out, when in fact the projections have the millennials receiving more in benefits than current recipients, even if the system "goes bankrupt," not that Tankersley is anywhere near even being conscious of this I think.  And, of course most of those projected increases in costs are tied to medical care cost increases, which hopefully will be kept more in line in the future.

Then we have all this stuff about burning fossil fuels and ruining the environment.  Last time I checked, the golden era of gas hog polluting cars was the 50s and 60s, with environmental laws arriving in the early 70s and with higher oil prices leading to much greater gas efficiency of cars. This backslid in the later 80s and 90s when oil prices fell and we got the SUV boom.  But offhand the Greatest and the Silents look at least as guilty, and frankly more so, on this matter of polluting the atmosphere than do the boomers, whose main sin would indeed to be their large numbers, not their excessively polluting ways compared to other generations.

Then we get this weird claim that the millennials "took control of Washington at the turn of the millennium," thus making "the boomers" responsible somehow for the clearly irresponsible policies of George W. Bush, even though he lost the popular vote in 2000.  But Bill Clinton is a boomer, and he was in charge in the 90s, when the national debt actually fell. Do not the boomers get some credit for him?  Or do we only get the blame for his sexual improprieties?  The more striking increase in non-war debt came with Reagan, he of the Greatest Generation, with some of the boomers not even old enough to vote when he came in.  Surely he was more a creature of the Greatests and the Silents, with their failure to obey rational expectations and Ricardian Equivalence by lowering their savings rates when they got his tax cuts (with income tax cuts indeed offsetting those fica increases aimed at the boomers).  

He goes on and on about a lot more, but I think I am going to stop here other than to note that he opens by complaining about people talking about raising the retirement age for future retirees not somehow noting that indeed the 1983 agreement put in place such increases for the boomers, increases which are already happening and will continue to do so. Really, this article is a disgrace.

Barkley Rosser

Added on 11/17/15:  It is not men but women among poor whites for whom their death rates are rising among 45-54 year olds.  Also, I apologize to anybody offended by my failure to capitalize the names of patented medicines for overcoming edf, not to mention fica.