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The Circle Bastiat

Comparing the privatized House barbershop to the government operated Senate barbershop sheds some light on the future success of health care reform, French argues. (Rebecca Craig/AP/The Daily Times )

Will health care reform be successful? Capital Hill barbershops show no

By Douglas FrenchGuest blogger / 03.21.12

The Supreme Court is going to consider the constitutionality of ObamaCare in the coming weeks, but the government takeover of healthcare didn’t start with the current president, but with Harry Truman decades ago.

We’re told the nation’s health care needs fixed: That the free market isn’t providing for this vital service adequately.  However, America’s healthcare hasn’t been left to the free market since World War II.   The president has promised that more government will make healthcare cheaper and more available.

A comparison of two capitol hill barber shops will shed some light on whether the president has it right.  The Senate and the House of Representatives each have a barbershop for member use.  In 1994, the House barbershop was privatized by Republicans who had taken over control of the House that year for the first time in decades.  The Senate shop has remained a government operation.

Before it was turned into a private enterprise, the House shop employed 16 barbers, each of whom received federal pensions and benefits. Now the shop has three employees, one of which is part-time.

“We’ve gone through a lot of changes, with members going back to their districts on the weekends and fewer customers because of the extra security that the House has put up after 9/11, but we’re all self-employed,” long-time House barber Joe Quattrone says. “Money’s not everything. I love coming to work every day. Would you rather go to a job you hated for $50,000 or one you liked for $40,000?”

The House shop actually turned a profit last year, despite occupying an inferior location in the Rayburn House Office Building, farther from the two adjoining House buildings than is the Senate’s barbershop.

Meanwhile, the Senate Hair Care Services, the formal name for the Senate barbershop, with its 11 employees, required a $300,000 taxpayer bailout to keep its barber pole lighted, despite not having to pay the government a dime in rent.

Having the advantage of government subsidy, one might assume senators pay less for their haircuts and shaves than House members.  Not hardly.  While the Senate barbershop charges $23 for a trim with water but no shampoo and $20 for a shave, the House barbershop charges $17 and $10.

So while many lawmakers are all for having the government take over healthcare and other things that private enterprise can provide better and cheaper, the inefficiency of the Senate barbershop has at least one big government cheerleader wondering.

Rep. John Conyers, D-Mich., is no fan of free markets, but says “I would like to know why the Senate barbershop is running its business into the red.”

U.S. President Barack Obama looks on during a meeting with Ireland's Prime Minister Enda Kenny in the Oval Office of the White House in Washington, March 20, 2012. Brandly argues that Obama's aggressive stance against China's trade practices could lead to real conflict. (Jason Reed/Reuters/File)

Obama's misguided views on fair trade

By Mark BrandlyGuest blogger / 03.20.12

Barack Obama’s recent statement on fair trade, a statement applauded by some leading Republicans, contains some easily recognizable errors in international trade theory. The central problem with his remarks is seen in his following position:

Now, one of the things that I talked about during the State of the Union address was making America more competitive in the global economy. The good news is that we have the best workers and the best businesses in the world. They turn out the best products. And when the playing field is level, they’ll always be able to compete and succeed against every other country on Earth.

But the key is to make sure that the playing field is level. And frankly, sometimes it’s not.

Here we see the view, commonly held by the media and non-economists in our universities, that international trade is a competition, analogous to sports or military competition (sometimes, “trade competition” is compared to the Cold War). If the playing field is not level, then the trade is not fair. Economists, and this view is not limited to Austrians, understand that international trade is the fruit of cooperation, not competition. America and China are not trade competitors. Paul Krugman thoroughly demolishes this fallacy in “The Illusion of Conflict in International Trade” (reprinted in Krugman’s Pop Internationalism). Krugman explains that in international trade “it is the illusion of economic conflict, which bears virtually no resemblance to the reality, that poses the real threat.”

The danger in Obama’s position is that he pledges to do something about China’s trade practices:

Since I took office, we’ve brought trade cases against China at nearly twice the rate as the last administration, and these actions are making a difference. For example, we halted an unfair surge in Chinese tires, which has helped put over 1,000 American workers back on the job. But we haven’t stopped there.

Two weeks ago, I created a Trade Enforcement Unit to aggressively investigate any unfair trade practices taking place anywhere in the world. And as they ramp up their efforts, our competitors should be on notice: You will not get away with skirting the rules. When we can, we will rally support from our allies. And when it makes sense to act on our own, we will.

Obama is threatening China. Our government will “aggressively investigate,” other government’s actions, other countries “should be put on notice,” governments that obey Obama’s decrees are our “allies,” and he’s willing to take actions against those that refuse to bow down to the U.S. state. Fortunately, Obama does say that “we prefer dialogue” to more aggressive actions, but he doesn’t limit his actions to negotiations. Government managed trade in the name of fair trade reduces our gains from trade, but the danger in Obama’s position is that it could lead to real conflict with China that goes beyond the illusion of conflict seen by our political leaders.

For some sound reasoning on this issue, see Krugman’s Pop Internationalism. In addition to the paper mentioned above, I recommend “Competitiveness: A Dangerous Obsession” and my favorite chapter “What Do Undergrads Need to Know About Trade?”

Gasoline drips from a nozzle at gas station in Lake Oswego, Ore. McMaken argues that for all of the government's posturing about responsibility, the Pentagon uses an incredible amount of fuel. (Rick Bowmer/AP)

The Pentagon is a gas guzzler

By Ryan McMakenGuest blogger / 03.12.12

Late last month, Bloomberg reported that British Petroleum continues to experience substantial growth in the amount of money it receives from the Pentagon for its oil services. From 2010 to 2011, Pentagon contracts with BP increased by one-third from about 1 billion to 1.35 billion.

This was presented by some in the media as a scandal, since presumably, BP should be punished by the Pentagon for it’s massive 2010 oil spill in the Gulf of Mexico. The larger story, however, should be about just how much the Pentagon spends on oil every year.

The BP contracts are just one small portion of total Pentagon spending on oil, and as Bloomberg reported earlier in February, Pentagon spending on oil surged 26 percent from 2010 to 2011, rising from $13.7 billion to $17.3 billion during that period. That’s about 117 million barrels of oil.

Indeed, the U.S. Department of Defense is the largest purchaser of oil on earth, and reportedly consumes more than any other governmental department or body worldwide. Obviously, the effect of such a huge driver of global demand on the global oil price certainly isn’t zero.

There have been talks in Washington of cutting the military’s budget by about 500 billion over the next ten years. In spite of the fact that this amount is laughably small, the military is claiming that the global oil price, which the military itself is pushing up, will make even a tiny reduction difficult.

We can consider this along side the much ballyhooed effort by the Pentagon to “go green” and slash its use of fossil fuels. It also promises to cut greenhouse gas emissions by ten percent. This cut, however,

exempts the military’s bases in Iraq and Afghanistan, as well as the jets, ships, and ground vehicles that swallow up 75 percent of the military’s fuel supply.

So, the Pentagon will be cutting emissions except when it’s not. And by cutting its reliance on fossil fuels, it can presumably get to work driving up the price of non-fossil fuels. Whether or not the reduction of fossil fuel use and greenhouse gas emissions should be a goal of public policy is debatable, but in typical fashion, the reality of the effort to “go green” hardly matches the PR.

The idea of the Pentagon becoming environmentally conscious is itself somewhat ridiculous. Governments worldwide have committed some of the worst environmental disasters in history, and government militaries tend to be among the worst perpetrators. Civilian functions of government can be environmentally disastrous, as in the case of the Soviets and the Aral Sea, but governmental war efforts seem to produce the lion’s share of the damage done. Even leaving aside all the fire bombing and the nuclear bombs and the depleted uranium bombs still being used by the Pentagon, we’re left with nuclear test sites, the myriad of polluted weapons production sites, such as Rocky Flats and the non-stop use of oil that is necessary to move around machines of war day in and day out across the globe. The U.S., for example, has essentially been at war nonstop since 1990. That sort of thing gets expensive in both budgetary outlays and in environmental impact.

American taxpayers aren’t just paying once for the Pentagon’s spending spree on oil. They’re also paying through higher prices at the pump. Worldwide, private citizens continue to pay for government militaries through lost limbs thanks to leftover land mines, or polluted soil and groundwater due to depleted uranium, through unexploded munitions, or through just old-fashioned air pollution.

Yet governments continue to lecture private citizens for the crime of driving an automobile to the grocery store or failing to recycle a few aluminum cans.

In this file photo, a worker counts U.S. dollar bills at a money changer in Manila. The number of billionaires worldwide has skyrocketed in the past decade. Meanwhile, being a millionaire isn't nearly the sign of wealth it used to be. (Romeo Ranoco/Reuters/File)

Billionaire is the new millionaire

By Douglas FrenchGuest blogger / 03.09.12

Being a billionaire isn’t such an exclusive group anymore. Back in 1998, there were reportedly 230 billionaires worldwide. Now, according to Forbes magazine, the number has grown to 1,226. The United States still has the most with 425, but now 58 countries have billionaires. Russia and China have nearly 100 each.

Nobody seems too excited about billionaires, likely because a billion is an unimaginable number—a thousand million. There was once a time when being a millionaire meant real wealth, but no more. Most financial planners will say that the average person needs to retire with more than a million dollars socked away to live comfortably in retirement.

The word millionaire was coined in 1720 during John Law’s ‘Mississippi Bubble” to describe those making vast fortunes in Law’s Mississippi Company stock that rose from 150 livres to 10,000 in the matter of months. But just as quickly, the stock and the currency wildly inflated by Law’s Banque Royale, crashed and Law was forced into exile.

Like Ben Bernanke, Law believed France’s economic problems as being one of not enough money. He started small with his privately owned Banque Générale, within a year all royal revenues were to be paid in the Banque’s notes and these notes were to be cashed on sight at government offices, making these offices essentially branches of Law’s bank.

Two years into Law’s system, the livre was devalued again, by 40 percent. Despite the devaluations, Law’s reputation continued to rise and by the end of 1718, the state took over Law’s bank, which became the Banque Royale. A nomadic gambler just three years before, Law suddenly had immense power, controlling the monopoly on coining money, the collection of tax revenues, as well as tobacco and salt revenues. His Mississippi Company (Compagnie du Mississippi) would buy up the debt of the French government, a proposal John T. Flynn compares to Roosevelt’s plan to extinguish America’s debt by having the Social Security Board purchase it.

Law inflated the money supply through the Banque Royale, he created jobs through public-works projects; he attempted to release the hoarded savings back into business with the promotion of Mississippi Company shares; he exploited France’s colonial empire, relieved the debt-ridden government of its debts, and was making money for himself and his patrons.

Law’s system unraveled a mere four years after it began. People fled Law’s paper for the safety of gold and silver, despite Law’s attempts to demonetize and confiscate specie. Ultimately, Law’s system would only serve to forestall France’s bankruptcy, not solve it. Law himself would die near poverty a decade later.

What were once Law’s millionaires are now Bernanke’s billionaires. “Law is the precursor of the inflationist redeemers,” Flynn explained. “Like all the inflationist salvations, his career was short.”

Bernanke has been on the job for six years, and the Gates, Buffetts, and Slims of the world are reaping the benefit. But for how long?

In this file photo, a supporter waves a South African flag as he blows a vuvuzela, prior to a World Cup match. South Africa is looking to nationalize its platinum mines, a move that French argues would be devastating for the region's already impoverished economy. (Eugene Hoshiko/AP/File)

Will nationalizing mines make South African poverty worse?

By Douglas FrenchGuest blogger / 03.05.12

Here in South Africa there is plenty of talk of nationalizing the nation’s mines, especially the country’s platinum mines. After all, SA is no longer the world leader in gold production, while the country still produces 80% of the world’s platinum. In fact platinum group metals (PGM) account for the bulk of SA’s mineral value.

However, as Nazmeera Moola points out in her “economic viewpoint” column in the February 24th Financial Mail, PGM production has been falling since 2007 at the same time profit margins fell, despite elevated prices. Ms. Moola writes that margins dropped 5-10 percent last year from the previous year, with rising wage and electricity costs to blame.

For the first time in years, the platinum price is lagging the gold price, despite the fall in production. And production will likely be further challenged going forward. Strike violence has not only led to 59 hospitalizations but three deaths, with the latest being a contract worker who was beaten to death. The body was found in Freedom Park near Impala Platinum’s Rustenburg mine.

Impala dismissed 17,000 workers over the labor unrest and 3,000 oz. of production is being lost each day. Through February 14th 60,000 oz. had been lost and the company announced that it would fall 40 percent short of fulfilling its contracted deliveries for April.

After six weeks, about half the the dismissed workers had been replaced, but workers are being prevented from entering the mine by striking workers. Some two dozen workers not wanting to take part in the illegal strike remain in the hospital after being assaulted by strikers.

Platinum mining is dangerous business and the South African government’s Department of Mineral Resources, while aiming for zero mining fatalities on the job, have stepped up the number of safety, or Section 54, stoppages. These DMR stoppages can lead to complete mine shutdowns.

According Ms. Moola, Section 54 stoppages accounted for half the 14% year-over-year drop in production at Aquarius Platinum, while causing Anglo Platinum to lose 101,000 ozs. of production in 2011. Impala’s production at Rustenburg was down in 12% in 2011 due to Section 54 stoppages.

“The combination of deeper mines and the increased focus on safety means mining techniques will need to adjust,” writes Moola. “This means less ore will be extracted and costs will rise.”

Platinum expert Steve Forrest makes the point that in addition to rising safety standards, there has been a lack of capital investment in platinum mining, and he believes PGM production peaked in 2008.

Impala has announced that once the strike is settled at Rustenburg, it will reassess the viability of each mine shaft at the project. At the same time Anglo American CEO Cynthia Carroll is considering either curtailing production at Anglo Platinum or getting rid of the company entirely.

South African’s ANC considers platinum a “sovereign resource.” So talk of nationalization could easily turn into heavy-handed government action. In neighboring Zimbabwe, the ham-handedness has already begun.

Just a week ago Implat’s David Brown received a demand letter from Robert Mugabe’s Zimbabwe government giving him two weeks to hand over the ownership of 29.5 percent of his company’s Zimplats operation to the state-run empowerment fund, threatening unspecified sanctions if it did not comply.

Perhaps Brown knew this was coming, as he had tendered his resignation weeks earlier, effective June 30th, with no replacement named. Brown was hoping to meet with government, attempting to negotiate a smaller taking, pointing out that handing over nearly a third (and eventually 51 percent) of the Zimbabwe operation will stop the company’s growth prospects.

Zimbabwe’s Empowerment Minister Saviour Kasukuwere says he is “sick and tired” of Brown’s delaying tactics regarding the ceding of shares under Zimbabwe’s controversial indigenisation legislation.

“We can only engage him if he comes here to implement the law,” Kasukuwere told Reuters, after stating that: “The problem with Brown is that he talks too much. We are sick and tired of his delaying tactics.”

Kasukuwere was quoted by Associated Press as saying that a proposed visit by Brown would not change the government’s decision. He also said he has no plans to meet Brown.

“I don’t need to meet them over anything. Why are they coming to see me? I’m not a zoo,” Kasukuwere told The AP. “I have nothing to discuss. They must respect the laws of this country.”

Just a day after the Empowerment Minister’s threatening comments, Zimbabwe Prime Minister Morgan Tsvangirai spoke to a trade and investment conference crowd in Johannesburg trying to drum up investment in his country. Using his best salesman spin, Tsvangirai called the indigenisation policy “rhetoric rather than reality.”

Business leaders in South Africa are talking about the opportunity for a “platinum valley,” emulating America’s Silicon Valley.

“Both big business and government are singing from the same hymn sheet of diversifying potential demand for platinum within the huge global energy arena,” writes Martin Creamer for Mining Weekly. “Platinum, clean energy and jobs can go hand in hand with the development of hydrogen fuel cells – zero-emission devices that are able to shrink the world’s carbon footprint.”

All this feel-good, job creating, clean energy rhetoric sounds great for spurring platinum demand and putting people to work. However, the government’s thievery (or threats to) of platinum assets only serve to stifle capital investment, leading to continued lower mine output.

Sadly, in a region with unemployment well over 20 percent and rampant poverty, the abundant precious minerals will stay in the ground, while millions living above ground starve.

Crowds wait in line, near South Africa's national flag, to catch a glimpse of the FIFA World Cup Trophy in Khayelitsha township near Cape Town in this file photo. (Mike Hutchings/Reuters/File)

A democracy funded by the few (it's not the US)

By Douglas FrenchGuest blogger / 02.29.12

In America the population is collectively on edge at tax time because 140 million people file tax returns out of a total population of 310 million. Of course not everyone who files, pays taxes, but at least all these folks share in the annoyance at filling out (or paying someone else to) the ever-changing, mind-bogglingly complex, 1040 form.

Here in South Africa, I learn that the South African Revenue Service just announced that there has been a 13.8 percent increase in the number of tax returns filed. A record of just over four million tax returns were filed, up considerably from just over 3.5 million in 2010.

South Africa’s total population is well over 50 million. So less than 10 percent of SA’s population is paying for the other 90 percent. But of course, individual taxpayers only cover 35 percent of the government’s budget, while 45 percent comes from the VAT (value added tax) and corporate taxes.

On the other hand, the five million taxpayers likely pay most of the VAT and as Business Times columnist Stephen Mulholland points out, “the more prosperous among the five million also relieve the state of the burden of health costs, education for their children and, in many cases security in their homes.”

The last place you want to go for health care is a government hospital, I’m told, and the walls around the home where I’m staying in Johannesburg are a good 10 feet high, with electric wire at the top. The neighbors have a generator anticipating the frequent power outages.

Roughly one million people work for the South African government, so after those people are netted out, it is really four million people paying for a South African government that spends 50 percent of its budget paying its one million workers. And, while public workers have enjoyed wage increases, SA’s infrastructure crumbles, as little is budgeted for providing the services government insists on providing.

Living in South Africa means learning to live with sporadic brown outs, despite rate hikes of 25 percent each of the last three years. In every city we have visited, the power has gone off for extended periods of time, making it especially uncomfortable, for instance, in sweltering Durban.

But while our hostess is extremely annoyed at her government’s ineptness at keeping the lights on, there just aren’t enough taxpayers like her in this democracy to carry any weight.

In this file photo, Chrysler 200 vehicles are seen on the assembly line at the Sterling Heights Assembly Plant in Sterling Heights, Mich. (Carlos Osorio/AP/File)

Trade creates wealth. Regulation destroys it.

By Art CardenGuest blogger / 02.28.12

We’re wrapping up our discussion of international trade in Econ 100 today with an analysis of tariffs and import restrictions. The defense of protectionism is a classic example of the Broken Window Fallacy in action.

Suppose the government decides to impose restrictions of some kind on automobiles produced in Japan. To the untrained eye, this looks like a great idea. More Americans are employed making cars, and they earn higher incomes. Detroit booms. It’s easy to see autoworkers’ nice cars and nice houses and conclude that protectionism is a great idea.

But there’s more to this than meets the eye. What we don’t see are the hidden costs of protectionism. The first is the waste from using costly production methods. Protectionism changes manufacturers’ incentives, and they use capital and labor that could have been better-used elsewhere to produce (say) cars. The economic imagination is useful here. If people weren’t making cars, they could be making medical devices. Or tacos. Or automotive repair services (it stands to reason that if you can build cars, you can probably also fix them). Or any of a number of other things. As Russell Roberts points out in The Choice, there might be some short-run costs for workers who have trouble retooling; however, free trade leads to new opportunities for the next generation.

The second cost comes from the fact that tariffs increase the price of cars. When prices rise, people demand less of something. Consumers are worse off because they have fewer cars, and the cars they are no longer buying are cars that would cost less than consumers are willing to pay in the absence of tariffs. Interventions like tariffs raise the incomes of some workers by impoverishing others.

The third cost comes from the change in incentives when it is discovered that people can raise their incomes by getting favors from the government. At best, favors from the government are a zero-sum transfer from one group of people to another. In reality, however, people use scarce resources to effect these transfers. Consider just one cost: the cost of flying to and from Washington, DC. The plane that is flying auto executives and union representatives from Detroit to DC could be used for something else, like flying people from Detroit to New York for business or from Detroit to Los Angeles for a vacation. The prospect of subsidies, tariffs, and other benefits from the government means that people will take valuable resources that could have been used to create wealth (planes, the time and energy of flight attendants and pilots, bags of roasted peanuts) and instead use them to transfer wealth. On net, we’re all worse off.

*Interested readers might be wish to read The Choice by Russell Roberts. In it, a television manufacturer is visited by the ghost of David Ricardo. Hilarity ensues, and the case for free trade is explained beautifully. The link is to my Amazon Associates Account; any revenue I get from Amazon Associates sales will go to the Fellowship MemphisEngage Memphis” fund.

A view of a multi-million dollar home in foreclosure on Rexford Drive in Beverly Hills, California. Some 180 houses in the 90210 zip code have been foreclosed on by lenders, scheduled for auction, or have been served with a default notice, the highest level since the 2008 financial crash. (Jonathan Alcorn/Reuters/File)

Beverly Hills goes vacant

By Douglas FrenchGuest blogger / 02.26.12

Reuters reports that more of the Beverly Hills crowd are walking away from their underwater mansions.

Despite most of the mortgages in this tony zip code exceeding $1 million, buyers are walking, not because they have to, but because it makes financial sense.

“It’s a business decision, not an emotional one which it is for normal people,” said Deborah Bremner, owner of the Bremner Group at Coldwell Banker, which specializes in high-end properties in the Los Angeles area. “I go to cocktail parties and all people are talking about is whether it is time to walk away, although they will never be quoted in the real world.”

California is a non-recourse state. So, handing the keys to the lender means “Tha-Tha-Tha-That’s All Folks” as lenders cannot pursue borrowers for deficiencies (the shortfall between what is owed and what the house brings at the foreclosure auction).

Those with jumbo loans are more likely to strategically default. ”Now that these homeowners with jumbo loans are finding out you can do this, more and more are doing strategic foreclosures,“ says Jon Maddux the CEO of YouWalkAway.com. Foreclosures on jumbo loans have increased 579% since 2008, greater than any other form of loan, according to a report by Lender Processing Services, Inc.

Tim Reid writes that a “huge ‘shadow inventory’ is building of elite homes that are in default but have not been put on the market,” as lenders have only put 12 homes up for sale of the 180 total distressed properties in Beverly Hills.

As the saying goes, “So goes California, so goes the nation.”

U.S. Republican presidential candidate U.S. Rep. Ron Paul (R-TX) writes in his notes during a break in the Republican presidential candidates debate in Mesa, Arizona, February 22, 2012. Paul advocates a uniform, low tax rate for all Americans, with the goal of eventually bringing taxes to zero. (Joshua Lott/Reuters/File)

Half of Americans don't pay income tax. So what.

By Ryan McMakenGuest blogger / 02.25.12

Last week, the Heritage Foundation published commentary on the number of Americans who pay income tax, and decried the fact that 49.5 percent of Americans are “not represented on a taxable return.” The Daily Mail then picked up the statistics and announced that “HALF of Americans don’t pay income tax despite crippling government debt.”

To its credit, the body of the Heritage post began with a reference to the “the sharp increase of Americans who rely on the federal government for housing, food, income, student aid or other assistance.” The emphasis of the piece, however, and thus, the emphasis of the other news outlets and pundits who have picked up on the statistic, is that too few people pay taxes.

The increase in reliance on government assistance is the problem here, not a lack of people who pay income tax.

Yet, it has become something of a right-wing talking point to claim that a declining number of taxpayers among some income groups is a nefarious development in American history.

The emphasis on the lack of taxpayers is getting the whole issue backward. The problem is the increase of income from government transfer payments. There is nothing bad whatsoever about fewer people paying income taxes.

The Conservative obsession with getting people to pay more in taxes comes from a preoccupation with class warfare in which it is assumed that if middle-class and wealthy people are paying too much in taxes (which they are), then the solution is to punish low-income people by making them pay more in taxes. It’s allegedly not “fair” if everyone is not being extorted by the state in a similar fashion.

The just solution, however, is to greatly decrease the tax burden of those paying taxes now. In a recent NPR interview, Ron Paul nicely summed up what is actually “fair”:

MR. SIEGEL: This week’s release of Mitt Romney’s taxes and President Obama’s advocacy of a millionaire’s tax raise questions about fairness in funding the government. The first question: Do you believe that income derived from dividends interest or capital gains should be taxed at a lower rate than income earned from a salary or commissions?

REP. PAUL: Well, I’d like to have everybody taxed at the same rate, and of course, my goal is to get as close to zero as possible, because there was a time in our history when we didn’t have income taxes. But when government takes it upon themselves to do so much, you have to have a tax code. But if you’re going to be the policemen of the world and run all these wars, you have to have a tax code. But as far as what the rates should be, I think it should be as low as possible for – for everybody.

It’s a safe bet that Siegel’s underlying assumption behind the question is that in order to make taxes fair, then anyone who is paying a tax bill that is too “low” should therefore have his taxes raised.

The opposite is true, as noted by Paul.

So, when Conservatives get bent out of shape about some people not paying tax, the response should be to demand lower taxes for everyone, not to complain that people aren’t paying their “fair share,” which seems to be the Conservative sentiment.

We might also note that this statistic apparently only applies to income taxes. It says nothing about payroll taxes, which for many middle-class people is by far the largest part of one’s monthly tax bill. Any teenager with his first job notices just how much those payroll taxes take out of one’s paycheck. So, to claim that people aren’t paying taxes simply because they’re not paying income tax is rather disingenuous. Since there’s no such thing as a Social Security or Medicare trust fund, payroll taxes are really just income taxes under another name.

Also, any demand for more taxation is really just a demand for increased government revenue. It’s a call for more money so government can bomb more people, bail out more banks and spread around more largesse to politically well-connected friends.

So, the focus on whether or not “enough” people are paying taxes completely misses the point. The larger point is that far too many Americans receive government benefits. Indeed, recent increases in income as measured by the BLS, reflect increases in government transfer payments, as I’ve shown here.

Ludwig von Mises wrote in Bureaucracy that a system in which a majority of the population is dependent on the government dole leads to an unstable political and economic situation, since a majority of the population then has a vested interest in increasing the power of government to redistribute wealth. While the Heritage article makes some comments in this vein, it nevertheless makes the claim that “The rapid growth of Americans who don’t pay income taxes is particularly alarming for the fate of the American form of government.” Really? By that logic, “the American form of government” would be in danger if the income tax were abolished. Oh, how did America ever survive prior to the 16th Amendment?

There is no doubt that the growth in dependency on government largesse is a serious problem, but that doesn’t mean that any American pays too little in taxes. It simply means that the government spends too much money.

The Conservative reaction to this statistic, however, seem to be: “Hey, those guys aren’t being taxed! Tax them!” This is hardly a phrase that should be uttered by anyone who claims to be for limited government.

In a field near Coy, Ark., an ear of corn is partially exposed on the stalk before harvest in this file photo. According to McMaken, the rising price of land in the corn belt will work its way to consumers, due in part to the way that the government subsidizes corn. (Danny Johnston/AP/File)

Why we're paying more for corn

By Ryan McMakenGuest blogger / 02.24.12

Prices are increasing for land in the corn belt:

Land values are uniformly rising throughout the Corn Belt and the Great Plains, thanks to farmers being the primary buyers and to the value of commodities. Higher prices for grain have spurred the most significant demand for land since the 1970’s.

These price increases will work their way into the cost of food for consumers, and let’s not forget that corn (among other crops grown in the corn belt) is a subsidized crop, so taxpayers get to pay for the corn twice.

As mentioned by one farmer in the film King Corn, “I don’t know a single farm out here that isn’t in a government program.”

The profitability of farm land may also be linked to the proliferation of genetically-modified crops in recent years. In addition to corn, the linked article also notes that much of the land may be used for soybeans. There is nothing free-market about soybeans either since soybeans are another case of a type of government subsidy being used to enhance private profits (soybeans are also directly subsidized). In this case, the subsidy takes the form of a government-granted monopoly known as a patent. This patent is on the soybean genes themselves, since these genes are from herbicide-resistant soybeans. (Most corn/maize also is also genetically-modified (GM) and patented.)

The patenting of crops in turn leads to less innovation in crop varieties and in consumer choice since the owners of genes can prosecute any farmer who plants varieties of non-GM crops that may have been unintentionally crossed with GM crops via wind. Farmers who have the bad luck of owning farms downwind are then likely to be sued by the the owners of the patents should the downwind farmer attempt to harvest seeds from his own crops.

This use of monopoly power to crush the planters of other varieties of corn and soybeans constitutes a third way that government intervention leads to consumers paying extra for food. This time, the extra payment is in the form of fewer choices in food.

This isn’t an attack on GM food, mind you, which may have many benefits. However, the growth of government monopoly power over all varieties of GM crops and over crops that even happen to be planted near GM crops (which is most crops) has led to a severe retardation in innovation and the use and development of other varieties of these crops everywhere.

In the developing world, however, Reuters reports that GM crops are booming, and it is hard to begrudge the residents of poorer countries their desire to grow food that is less likely to spoil or fall victim to disease. On the other hand, one cannot know the long term effects of government monopoly on the future of innovation in agriculture in the absence of a free market in planting and development of new crops.

On the other end of the spectrum is Europe, where most GM crops are simply banned. This is just another type of tax on consumers, although Europe is notorious for meddling in even the tiniest aspects of agriculture, so who can be the least bit surprised?

A recent Reuters story notes that the bans on GM crops will likely continue well into the future, although they have approved one variety of maize controlled by Monsanto via its monopoly on the patented gene. But otherwise, any consumer who actually wants these goods is simply out of luck.

So, while farmland is now profitable, the taxpayer and consumer is certainly paying his fair share. He pays in his tax dollars, and he pays for the government monopolies (known as patents) which in turn diminish his choices of crops via government intervention. And, he pays more for food through price inflation. The feds point to the CPI and claim that prices increases are mild, but even the CPI shows food price increases at 3.5 percent to 4 percent over the past year, and this is well above income growth for the same period. If food prices are growing faster than income, that’s not the kind of “stability” that leads to wealth creation. Of course, As the New York Fed has informed us: Who needs food when you can just buy an iPad?

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