Free Markets, Free People

Daily Archives: July 19, 2011


The Gang of Six is back

Gangs of anything are rarely good things.  And when it comes to the Senate’s Gang of Six, that caution is doubly true.  Today the Gang proposed a bipartisan deficit plan to which the president–eager to kick the deficit can down the road past the 2012 election–gave his qualified approval.  There is only this summary (PDF) available at the moment, and there is much to digest.

The good news is that there is at least some sanity in it.

  • Personal and corporate income taxes would be reduced to a top rate of 29%.
  • The Alternative Minimum Tax–which has turned into a horrific taxation burden–will be eliminated.
  • The CLASS Act provision of Obamacare would be repealed.

The bad news–and there’s always bad news with these guys–is that the budget reduction portion of it is notional.  As usual in Washington, it calls “cuts” what the rest of us would call “reductions in the rate of spending increases”.  In other words, spending isn’t actually reduced at any point, they just promise not to spend as much as they previously said they would. The main problem points include:

  • None of the plan’s “spending caps” apply to entitlement programs, only discretionary spending. So the 800-pound gorilla of the budget remains untouched.
  • Reform tax expenditures for health, charitable giving, homeownership, and retirement. These aren’t expenditures! They are allowing you to keep your money for IRAs, 401(k)s, Mortgage interest, etc.  So, that sounds…ominous. Especially since the plan assumes that these, and similar reforms will net an additional $1 trillion in revenue.
  • No reform at all of Medicare of Medicaid.
  • A politically-imposed requirement to use the Chained-CPI as an inflation measure, presumably to cut down on cost-of-living increases, as the Chained-CPI understates inflation even more than the current CPI does.
  • Requires the tax code to become more “progressive”, so you can expect serious increases in Capital Gains taxes.
  • No Social Security reform at all, unless there’s 60 votes for it in the Senate, i.e., sponsors for such reform prior to its submittal to the Senate for consideration. So, essentially, never.

There’s no information at all on how big or expensive government will be, say 10 years down the road. No information on how strict the spending caps will be, making me expect another Gramm-Rudmann deal: Good on paper, ineffective in practice.

Basically, this plan, so far as I can tell, contains some eye-candy on income taxes to draw in the supply-siders, with the actual deficit reduction portion sounding…sketchy. Or in the case of entitlements, by far the source of most federal spending, non-existent.

~

Dale
Twitter: @DaleFranks


Misunderstanding Capitalism

Deepak Chopra has, for some reason, come to be viewed as an intellectual by many.  For the most part I don’t get it.  

I’m reminded why when I read this Chopra statement on “The Mellow Jihadi” (disclaimer: The Mellow Jihadi does not agree with Chopra’s statement below):

Capitalism prevails as a system that once vied, supposedly, with Communism for world dominance, yet its deep flaws remain. Three come to mind. Capitalism discourages equal access to wealth, leading to enormous gaps between rich and poor. The free market lacks a conscience, giving rise to inequalities of education, health care, and job opportunities. Finally, capitalism if unchecked promotes corruption, both economic and political.

Capitalism is really given a bad rap here.   And it is mostly in word usage.  For instance “Capitalism discourages equal access to wealth”?

No.  It doesn’t.  What it requires is you earn your wealth, not have it handed to you.  I.e. it pretty much encourages hard work, sacrifice and innovation and rewards it with wealth if all goes well and people like what you do and want to buy it.   But the “deep flaw” here is you – the individual – actually have to initiate the action, do what is necessary to properly prepare yourself, work your butt off and hope you have done sufficient research and work to make all that pay off.  But it certainly doesn’t “discourage” anyone from earning wealth, it just makes no guarantee that all will share equally in wealth.  I see that as a feature, not a bug.  The enormous gaps between rich and poor can usually be traced back to enormous gaps in preparation, work ethic, and ability.  Btw, Mr. Chopra, in case you haven’t noticed, nature isn’t very good about “equality” either – when it comes to intelligence and ability.  Is that a “flaw” or reality?

Chopra goes on to say that “the free market lacks a conscience”.   Well that’s a straw man if ever I’ve seen one.  It’s a bit like saying a rock has no feelings.  A market operates without feelings, to include a conscience.  But that doesn’t mean that the society or culture in which it operates can’t do what it feels is necessary to ameliorate certain “inequalities” if it so desires.  That has zip to do with the market(s) other than they’re probably the fastest and best means to earn the wealth necessary to apply to the desired solutions.  It simply doesn’t follow logically that the functioning of markets somehow inherently means inequality of education, health care and job opportunities.  In fact history points to precisely the opposite being true.

Finally, Chopra, like many opponents of Capitalism, confuses the crony capitalism of today with actual Capitalism in its pure form.  Crony capitalism does indeed “promote corruption, both economic and political”, and we’re living through that today.  But Capitalism as a economic system doesn’t encourage either and, in fact, does its best to work around it via the market mechanisms that send the signals that encourage consumers to seek substitutes and/or alternatives when something doesn’t smell right.   But when government interferes, sets artificial bars to entry, writes legislation that favors large businesses that support powerful politicians, that’s not Capitalism.

The Mellow Jihadi quotes Winston Churchill with one of the better rebuttals:

The inherent vice of capitalism is the unequal sharing of blessings; the inherent virtue of socialism is the equal sharing of miseries.

Enough said.

~McQ

Twitter: @McQandO


Heat wave in Midwest is a result of what?

Yeah, you know where this is headed.  Story:

Forecasters call the heat wave gripping the central U.S. "unrelenting," and say residents should not expect any relief soon.

Heat advisories and warnings are in place in 17 states, from Texas to Michigan, as temperatures and humidity combine to make being outside uncomfortable for millions.

Across the country, this month’s summer’s searing heat has tied or broken high temperature records nearly 900 times, reports CBS News correspondent Cynthia Bowers.

Reaction:

What I want to know is when are the meteorologists going to stop calling all the extreme weather we’ve experienced over the past decade "unusual?" To me, this is starting to look like the new normal. Droughts, heat waves, wildfires, 500 year floods every five years or so — what we used to call unusual is what I now expect. But then I’m one of those heretical, devil worshiping believers in climate change.

Not mentioned?

Where the Midwest gets a lot of its rain during summers is from tropical storms and hurricanes in the Gulf.   And of course “climate change”, aka global warming, tells us that the increased heat caused by increased CO2 will cause increased and more violent hurricanes.

Yet, here we are, well into hurricane season and still looking for our “A” hurricane.

Yup, it really doesn’t matter what happens where, someone, somehow is going to try to make it into a “climate change” event.   But, as Stephen D at Booman Tribune notes, he’s a “believer” so connected dots isn’t particularly important when that’s the case.

~McQ

Twitter: @McQandO

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