There are several ways that Washington taxes and expropriates the majority of your earnings. Before 1970 the real hourly wage increased by approximately 2% per year. Some years it increased more and others less, but between 1800 and 1970 there were roughly 2% annual increases. The reasons for these increases were productivity growth and monetary stability. In turn, productivity growth depends on innovation while monetary stability depends on a stable money supply over the long term (in the 19th century there were fluctuations in prices due to fractional reserve banking among state banks, but in the long run prices were stable). Entrepreneurs will be loath to take risks if there is monetary instability that threatens potential returns.
There are additional sources of innovation, and government has assaulted all of them. For example, education in the sciences and technology might contribute to innovation. But the education system in the United States is poor and does not produce graduates who on the whole are capable of learning science and math. Moreover, education creates an entitlement mentality that deters risk taking and entrepreneurship.
Innovation depends on capital formation. But the income tax inhibits saving. This is reinforced by other forms of taxation such as Social Security, gasoline tax, sales tax, property tax and inheritance tax. Each of these taxes subtracts from income and therefore reduces the capacity of entrepreneurs to save. Banks are unlikely to lend to entrepreneurs who invent radically new technology. Private investors or "angels" may, but the solicitation of investment angels is difficult and not every inventor will be talented at doing so. Moreover, there has been a bias among private capital investors for computer and other electronic technology, and while there has been innovation in that very limited arena, there are wide areas in manufacturing, services and products outside of the "high tech" space where there has been an innovation drought. In these fields existing firms have been able to obtain financing to facilitate overseas plant investment to procure lower wage foreign labor but not radically new ideas. Pharmaceuticals seemed to have reached a dead end even before the health care act, and in the health care act the Democrats have taken a sledge hammer to pharmaceutical companies and to the economy at large, ensuring ever worsening stagnation in real hourly wage growth.
Most importantly, the freeing of the Federal Reserve Bank from constraints on monetary expansion and its freedom to subsidize Wall Street firms, real estate developers, hedge funds and commercial banks, has accelerated the transfer of wealth from wage earners to stock and other asset investors. The freeing occurred in 1971.
As a result of these government policies, the real hourly wage stopped increasing around 1971 and since then has not increased. The difference between the future value of one dollar that does not increase and the future value of one dollar that increases by 2% over 40 years is 220%. That means that without the Fed and without the dislocation to innovation and productivity increases due to it and to tax policies, your income would be approximately 220% higher than it currently is. For example, if you are earning $40,000 per year now, without the US government tax and Federal Reserve Bank system you would be earning $88,000. In other words, your income is 45% of what it would be without the Federal Reserve Bank.
That is on a before tax basis. If you pay 10% of your total income in federal income tax, 4% in state income tax, 5% in property tax, 7.65% in Medicare and Social Security tax (I'll exclude the 7.65% that the employer pays for you and then deducts from your wages) and say 2% in other taxes such as sales tax, premium tax, gasoline tax, inheritance tax and the like then the total is 23.65%. For many people that is an understatement. Rounding down to 23% gives you a reduction to your measly $40,000 of $9,200. Therefore, you aren't even earning what you would have earned in 1970, when taxes were lower. Instead of $40,000 you earn $30,800. Compared to what you would be earning in a free America where you might pay in state and federal tax what you would have paid in 1950, 15%, you are earning $30,800 / (.85 x $88,000) = 41.2%.
Aren't you grateful about all the government "services" that you receive, in exchange for which you pay 58.8% of your livelihood?
*United Socialist States of America
Showing posts with label taxes. Show all posts
Showing posts with label taxes. Show all posts
Monday, March 22, 2010
Friday, December 18, 2009
Profit Margin on Slaves versus New York Tax Payers' Burden
I am not expert on economic history but I have a niggling feeling. The net profit margin on American slaves after deductions for their amortized cost and maintenance costs (food, rent, etc.) may have been less than New Yorkers' tax burden. The government gets a bigger percentage of your income than slave holders got as return from their investments in slaves. In New York, to be free from imprisonment and other forms of government violence you must ante up about half and for many more than half of your income in taxes to "the man." These include a large property tax burden that all homeowners regardless of income must pay and so falls hard on retirees; sales tax of about 8-9%; state income tax; city income tax if you live in Big Apple; and of course federal income tax. Did I leave out inflation, which is a wealth transfer device, premium taxes, capital gains taxes and death taxes? Of course, the New York Times owners, the Ochs Sulzbergers, have managed to dodge the last for five generations while advocating them for the middle class. And alas, dear reader, you can probably think of some additional ones, such as gasoline taxes.
Slavery existed from pre-historic times and many historians speculate that it was an economic and incidentally moral improvement over the earlier method of handling conquered tribes, namely, massacring them. Slavery is a horrific institution well beyond economic considerations. Nevertheless, it might be interesting to know whether federal, state and local government exploits its citizens economically to the same degree that slaves were exploited. Naturally, there are some government services that benefit citizens, such as defense, social security, roads and police. But a large share of government budgets is pure waste, pandering to special interests, support of inefficient and failed programs, make work jobs for powerful unions like the Service Employees International Union and pure corruption.
In conclusion, let us recall this 1966 Beatles' song from their Revolver album:
>Let me tell you how it will be;
There's one for you, nineteen for me.
'Cause I'm the taxman,
Yeah, I'm the taxman.
Should five per cent appear too small,
Be thankful I don't take it all.
'Cause I'm the taxman,
Yeah, I'm the taxman.
if you drive a car - I'll tax the street;
if you try to sit - I'll tax your seat;
if you get too cold - I'll tax the heat;
if you take a walk - I'll tax your feet.
Taxman
'Cause I'm the taxman,
Yeah, I'm the taxman.
Slavery existed from pre-historic times and many historians speculate that it was an economic and incidentally moral improvement over the earlier method of handling conquered tribes, namely, massacring them. Slavery is a horrific institution well beyond economic considerations. Nevertheless, it might be interesting to know whether federal, state and local government exploits its citizens economically to the same degree that slaves were exploited. Naturally, there are some government services that benefit citizens, such as defense, social security, roads and police. But a large share of government budgets is pure waste, pandering to special interests, support of inefficient and failed programs, make work jobs for powerful unions like the Service Employees International Union and pure corruption.
In conclusion, let us recall this 1966 Beatles' song from their Revolver album:
>Let me tell you how it will be;
There's one for you, nineteen for me.
'Cause I'm the taxman,
Yeah, I'm the taxman.
Should five per cent appear too small,
Be thankful I don't take it all.
'Cause I'm the taxman,
Yeah, I'm the taxman.
if you drive a car - I'll tax the street;
if you try to sit - I'll tax your seat;
if you get too cold - I'll tax the heat;
if you take a walk - I'll tax your feet.
Taxman
'Cause I'm the taxman,
Yeah, I'm the taxman.
Friday, June 5, 2009
Bertrand de Jouvenal on the Bush-Obama Bailouts
De Juvenal takes a quote from Rostovtzev's "Social and Economic History of the Roman Empire" (quoted on p. 190 of "On Power"). He may as well be talking about the bailouts, Wall Street and America's special interest economy, courtesy of Democrats and Republicans:
"The reforms of Diocletian and Constantine, by implementing a policy of systematic spoliation to the profit of the State, made all productive activity impossible. The reason is, not that there were no more large fortunes: on the countrary, their build-up was made easier. But the foundation of their build-up was now no longer creative energy, or the discovery and bringing into use new sources of wealth, or the improvement and development of husbandry, industry and commerce. It was, on the contrary, the cunning exploitation of a privileged position in the State, used to despoil peole and State alike. The officials, great and small, got rich by way of fraud and corruption."
De Juvenal remarks:
"All that can be said is that contemporaries get the feeling of progress right through the period in which the state is building up, a feeling comparable to the sense of well-being, which in an economic cycle accompanies the period of high prices. When the process nears its apogee, the more sensitive spirits are assailed by feelings of doubt and dizziness...
"Then the question is heard again whether the egalitarian society, which is the handiwork of the despotic state, is more or less advantageous to the mass of workers than a society of independent authorities..."
The irony about the United States is that in the 1880s and 1890s, before the establishment of the "Progressive" state, immigrants were flocking here at a rate of between 100,000 and over 500,000 per year, real wages were rising at more than 2% per year, and living standards of the common man had doubled in 40 years, between 1849 and 1889. More liberty was enjoyed than anywhere else in history and the savings rate of the average person was increasing rapidly.
In its place, led by the "Progressives" Theodore and Franklin Roosevelt and Woodrow Wilson and the establishment of the Federal Reserve Bank, Americans established a system whereby, since 1970, real wages have declined. In the past 10 years the number of years that the average person has needed to work to pay for a house with 100% of his untaxed wages has doubled from 3.6 years to 7.2 years. America went from a federal income tax of 10% in 1950 to a situation now where tax rates are so punitive that saving is all but impossible, where massive amounts of money are transferred to wealthy clients of the Democrats and Republicans via the Federal Reserve Bank's inflation (which subsidizes the stock and real estate markets at the expense of real wages), and the New York Times tells us that the only problem facing America is that taxes aren't high enough.
"The reforms of Diocletian and Constantine, by implementing a policy of systematic spoliation to the profit of the State, made all productive activity impossible. The reason is, not that there were no more large fortunes: on the countrary, their build-up was made easier. But the foundation of their build-up was now no longer creative energy, or the discovery and bringing into use new sources of wealth, or the improvement and development of husbandry, industry and commerce. It was, on the contrary, the cunning exploitation of a privileged position in the State, used to despoil peole and State alike. The officials, great and small, got rich by way of fraud and corruption."
De Juvenal remarks:
"All that can be said is that contemporaries get the feeling of progress right through the period in which the state is building up, a feeling comparable to the sense of well-being, which in an economic cycle accompanies the period of high prices. When the process nears its apogee, the more sensitive spirits are assailed by feelings of doubt and dizziness...
"Then the question is heard again whether the egalitarian society, which is the handiwork of the despotic state, is more or less advantageous to the mass of workers than a society of independent authorities..."
The irony about the United States is that in the 1880s and 1890s, before the establishment of the "Progressive" state, immigrants were flocking here at a rate of between 100,000 and over 500,000 per year, real wages were rising at more than 2% per year, and living standards of the common man had doubled in 40 years, between 1849 and 1889. More liberty was enjoyed than anywhere else in history and the savings rate of the average person was increasing rapidly.
In its place, led by the "Progressives" Theodore and Franklin Roosevelt and Woodrow Wilson and the establishment of the Federal Reserve Bank, Americans established a system whereby, since 1970, real wages have declined. In the past 10 years the number of years that the average person has needed to work to pay for a house with 100% of his untaxed wages has doubled from 3.6 years to 7.2 years. America went from a federal income tax of 10% in 1950 to a situation now where tax rates are so punitive that saving is all but impossible, where massive amounts of money are transferred to wealthy clients of the Democrats and Republicans via the Federal Reserve Bank's inflation (which subsidizes the stock and real estate markets at the expense of real wages), and the New York Times tells us that the only problem facing America is that taxes aren't high enough.
Friday, April 10, 2009
Government: The Oldest Confidence Scheme
For a number of years I worked at starting a business and investing in real estate. One of the chief challenges with which business men have to deal is the deception and manipulation of confidence men and women. Elderly people fall prey to confidence men who offer prizes for cash and Internet sweepstakes, but seasoned, high level executives fall for them as well. The Madoff scandal is but the most glaring of history's confidence schemes. In 2001, Sam Waksal convinced Peter Dolan, then recently appointed CEO of Bristol Myers Squibb and Waksal's friend (as was the also ill-fated Martha Stewart) to invest $2 billion in Imclone. According to the Wharton School of Business:
"But in December, the Food and Drug Administration rejected ImClone's application for Erbitux's market approval. ImClone's stock is now trading under $10 a share and its former chief executive, Samuel Waksal, was arrested in June on charges of conspiracy, perjury and insider trading. Authorities are investigating whether Waksal tipped off his friend, Martha Stewart, also an investor in the company, to sell shares just prior to the FDA's December ruling."
The annals of business are replete with stories of confidence schemes.
But government offers confidence schemes that are even bigger and of more malicious scope than does business. For example:
-Chinese, Soviet and Cuban governments came to power on the promise that communism would make their comrades' lives better. After decades, tens of millions of victims murdered by these governments, and one mismanaged enterprise after the other, the comrades were as poor as ever. The communist countries could not develop.
-In America, the Great Society programs of Lyndon B. Johnson claimed to be an important tool to help the poor and minorities. Today, 21% of inner city black teenagers are unemployed. Poverty has not been eradicated, rather income inequality has grown.
-Social security claimed to help the economic security of the elderly. Yet today, the economic value of social security contributions is far lower than the economic value that taxpayers contribute. Politicians transferred benefits to politically vocal constituencies in the 1970s and earlier. The result is that today's taxpayers pay for the retirement of previous generations, while seeing their own recede into the ever more distant horizon.
-Military strategy. Government claims expertise with respect to military strategy. Defense is the one area where no one denies that government ought to play a role, although the left believes it should be a smaller role than the right. But in Vietnam and Iraq, the military refused to heed the advice of William S. Lind and Thomas X. Hammes as to the importance of Fourth Generation Warfare. The result was botched strategy, thousands of Americans killed unnecessarily and at least hundreds of thousands of Vietnamese and Iraqis killed unnecessarily.
-Central banking. The biggest scam. I have blogged about this elsewhere. The idea that economists are better equipped to judge how much money the crooks at the Federal Reserve Bank ought to print is a funny idea. Add to it the laughable claim that the money ought to be given to bankers, and the bankers ought to have the power to expand the counterfeit money five fold in order to "help the poor" is unquestionably the biggest financial scam in the history of mankind.
-Government operations. In the 1970s I had the privilege to work as an office temp in New York City's Department of Social Services. I was still in college. My job was to type forms for medicaid claims. The office as a large, 20,000 square foot room with at least 100 employees, maybe more. I was typing the forms, but when I looked up, not a single other person was working. Everyone else in the office was standing around talking. Not a single employee at a typewriter. Then, a group of them came to my desk and stood around me. One started saying that it was ungodly to work because Jesus said to give unto God what is God's and Ceasar what is Ceasar's.
This occurred just before the mayoralty of Edward I. Koch, the Democrat who advocates lots of additional government programs. The DSS continued unaffected during Koch's 12-year mayoralty.
It is difficult to get to the bottom of all the thieving, stupidity and incompetence in government operations. One example was FEMA's handling of the New Orleans Hurricane Katrina a few years back. The Democrats, with their usual incompetent finger pointing and refusal to look for real causes, blamed the hurricane on Bush. But there is hardly a competently run agency in state and federal government. They are all mismanaged scams.
But, of course, the confidence men cum politicians do not discuss the mismanagement, waste, misallocation of resources and failed regulation. They do not tell you that they are helping the rich through their regulatory and monetary scams.
Rather, they tell the American people that they are helping the poor and the general population.
The American people are suckers. They are suckers to allow 50% of their income to go to federal and state taxes to be squandered on the garbage that politicians oversee.
"But in December, the Food and Drug Administration rejected ImClone's application for Erbitux's market approval. ImClone's stock is now trading under $10 a share and its former chief executive, Samuel Waksal, was arrested in June on charges of conspiracy, perjury and insider trading. Authorities are investigating whether Waksal tipped off his friend, Martha Stewart, also an investor in the company, to sell shares just prior to the FDA's December ruling."
The annals of business are replete with stories of confidence schemes.
But government offers confidence schemes that are even bigger and of more malicious scope than does business. For example:
-Chinese, Soviet and Cuban governments came to power on the promise that communism would make their comrades' lives better. After decades, tens of millions of victims murdered by these governments, and one mismanaged enterprise after the other, the comrades were as poor as ever. The communist countries could not develop.
-In America, the Great Society programs of Lyndon B. Johnson claimed to be an important tool to help the poor and minorities. Today, 21% of inner city black teenagers are unemployed. Poverty has not been eradicated, rather income inequality has grown.
-Social security claimed to help the economic security of the elderly. Yet today, the economic value of social security contributions is far lower than the economic value that taxpayers contribute. Politicians transferred benefits to politically vocal constituencies in the 1970s and earlier. The result is that today's taxpayers pay for the retirement of previous generations, while seeing their own recede into the ever more distant horizon.
-Military strategy. Government claims expertise with respect to military strategy. Defense is the one area where no one denies that government ought to play a role, although the left believes it should be a smaller role than the right. But in Vietnam and Iraq, the military refused to heed the advice of William S. Lind and Thomas X. Hammes as to the importance of Fourth Generation Warfare. The result was botched strategy, thousands of Americans killed unnecessarily and at least hundreds of thousands of Vietnamese and Iraqis killed unnecessarily.
-Central banking. The biggest scam. I have blogged about this elsewhere. The idea that economists are better equipped to judge how much money the crooks at the Federal Reserve Bank ought to print is a funny idea. Add to it the laughable claim that the money ought to be given to bankers, and the bankers ought to have the power to expand the counterfeit money five fold in order to "help the poor" is unquestionably the biggest financial scam in the history of mankind.
-Government operations. In the 1970s I had the privilege to work as an office temp in New York City's Department of Social Services. I was still in college. My job was to type forms for medicaid claims. The office as a large, 20,000 square foot room with at least 100 employees, maybe more. I was typing the forms, but when I looked up, not a single other person was working. Everyone else in the office was standing around talking. Not a single employee at a typewriter. Then, a group of them came to my desk and stood around me. One started saying that it was ungodly to work because Jesus said to give unto God what is God's and Ceasar what is Ceasar's.
This occurred just before the mayoralty of Edward I. Koch, the Democrat who advocates lots of additional government programs. The DSS continued unaffected during Koch's 12-year mayoralty.
It is difficult to get to the bottom of all the thieving, stupidity and incompetence in government operations. One example was FEMA's handling of the New Orleans Hurricane Katrina a few years back. The Democrats, with their usual incompetent finger pointing and refusal to look for real causes, blamed the hurricane on Bush. But there is hardly a competently run agency in state and federal government. They are all mismanaged scams.
But, of course, the confidence men cum politicians do not discuss the mismanagement, waste, misallocation of resources and failed regulation. They do not tell you that they are helping the rich through their regulatory and monetary scams.
Rather, they tell the American people that they are helping the poor and the general population.
The American people are suckers. They are suckers to allow 50% of their income to go to federal and state taxes to be squandered on the garbage that politicians oversee.
Monday, November 3, 2008
Read My Lips: Obama Aims to Tax Middle Class
The specter of inflation coupled with Senator Barack Obama's intent to tax all who earn over $125,000 (which has been reduced recently from $250,000) is ultimately an open intent to tax the middle class. Within a decade the equivalent of a $50,000 or $60,000 income will be in excess of $125,000. The rhythm of the recent pissant media blitz becomes clearer.
To fund massive bailouts of Wall Street, higher taxes will be necessary to pay interest on the loans. The Federal Reserve Bank has monetized the bailout, doubling the size of the its bank credits within a month, an unheard of monetary expansion. This will be inflationary. Barack Obama's support comes from the media and from Wall Street, which also supported George W. Bush. Bush causes the inflation, Obama raises the taxes to cover the loans. The tempo is obvious. The media did not attack Bush in '04 the way it is attacking Palin in '08. There were nowhere near the stakes at play in '04. Bush was Wall Street's guy in '04. Obama is their guy in '08. Obama raises taxes on the middle class to subsidize Wall Street. Bush provides the subsidies and creates the inflation to prepare the way.
What is ironic in this is how the naive left believes the pissant media hype--"change", etc. This is the change Obama is talking about: bigger distributions to Wall Street; crippling inflation; and higher taxes on the Middle Class to pay for it. He will throw a few dollars to the poor, and enrage conservatives, satisfying the left that he is a man of the people.
As PT Barnum put it, a sucker is born every minute. In this election, there are about 100 million suckers.
To fund massive bailouts of Wall Street, higher taxes will be necessary to pay interest on the loans. The Federal Reserve Bank has monetized the bailout, doubling the size of the its bank credits within a month, an unheard of monetary expansion. This will be inflationary. Barack Obama's support comes from the media and from Wall Street, which also supported George W. Bush. Bush causes the inflation, Obama raises the taxes to cover the loans. The tempo is obvious. The media did not attack Bush in '04 the way it is attacking Palin in '08. There were nowhere near the stakes at play in '04. Bush was Wall Street's guy in '04. Obama is their guy in '08. Obama raises taxes on the middle class to subsidize Wall Street. Bush provides the subsidies and creates the inflation to prepare the way.
What is ironic in this is how the naive left believes the pissant media hype--"change", etc. This is the change Obama is talking about: bigger distributions to Wall Street; crippling inflation; and higher taxes on the Middle Class to pay for it. He will throw a few dollars to the poor, and enrage conservatives, satisfying the left that he is a man of the people.
As PT Barnum put it, a sucker is born every minute. In this election, there are about 100 million suckers.
Sunday, September 21, 2008
Right Change on Senator Obama's Tax Proposals
Bob Robbins just forwarded a link to Right Change's article about Senator Barack Obama's tax plan. According to Right Change, after Barack Obama's tax plan, the change in your pocket will be all that you have. Apparently that's what Senator Obama meant by "change"! Here is Right Change's list:
1. Small main street businesses would be forced to pay tax rates as high as 62.3% under Senator Obama’s tax proposals.1
2. Senator Obama’s tax plan would tax small businesses at a higher rate than Wal-Mart!
3. Taxes on retirement income and savings could increase by at least 33%, hitting millions of seniors when they need these resources the most.
4. 4 million workers over the age of 50 – those eagerly looking forward to retirement –would be hit with increased tax bills.
5. Millions of Americans would only keep 38 cents of every dollar that they earn.5
6. Senator Obama’s tax plan would reduce the after tax wages of millions of workers by 17.7%.
7. It will take 227 days per year, nearly 8 months, just to pay your tax bill!7
8. 97,065 carpenters, 110,908 police officers, 254,992 nurses, 208,562 postsecondary teachers and 237,000 dentists would see tax increases, if the earnings cap was successfully eliminated.8
9. 10.3 million workers would see an average of $5,650 taken from their paycheck and given to government programs.
10. Even YOU might be considered “Rich.”
1. Small main street businesses would be forced to pay tax rates as high as 62.3% under Senator Obama’s tax proposals.1
2. Senator Obama’s tax plan would tax small businesses at a higher rate than Wal-Mart!
3. Taxes on retirement income and savings could increase by at least 33%, hitting millions of seniors when they need these resources the most.
4. 4 million workers over the age of 50 – those eagerly looking forward to retirement –would be hit with increased tax bills.
5. Millions of Americans would only keep 38 cents of every dollar that they earn.5
6. Senator Obama’s tax plan would reduce the after tax wages of millions of workers by 17.7%.
7. It will take 227 days per year, nearly 8 months, just to pay your tax bill!7
8. 97,065 carpenters, 110,908 police officers, 254,992 nurses, 208,562 postsecondary teachers and 237,000 dentists would see tax increases, if the earnings cap was successfully eliminated.8
9. 10.3 million workers would see an average of $5,650 taken from their paycheck and given to government programs.
10. Even YOU might be considered “Rich.”
Saturday, July 19, 2008
How Many Zeroes in a Billion?
Clayton Mackey, my next door neighbor and Republican activist of West Shokan, New York, has forwarded the following to me.*
How many zeros in a billion?
The next time you hear a politician use the word 'billion' in a casual manner, think about whether you want the 'politicians' spending YOUR tax money.
A billion is a difficult number to comprehend, but one advertising agency did a good job of putting that figure into some perspective in one of it's releases.
A. A billion seconds ago it was 1959.
B. A billion minutes ago Jesus was alive.
C. A billion hours ago our ancestors were living in the Stone Age.
D. A billion days ago no-one walked on the earth on two feet.
E. A billion dollars ago was only 8 hours and 20 minutes, at the rate our government is spending it.
While this thought is still fresh in our brain...let's take a look at New Orleans... it's amazing what you can learn with some simple division.
Louisiana Senator, Mary Landrieu (D) is presently asking Congress for 250 BILLION DOLLARS to rebuild New Orleans . Interesting number...what does it mean?
A. Well... if you are one of the 484,674 residents of New Orleans (every man, woman, and child) you each get $516,528.
B. Or... if you have one of the 188,251 homes in New Orleans , your home gets $1,329,787.
C. Or... if you are a family of four...your family gets $2,066,012.
Washington, D. C < HELLO! > Are all your calculators broken??
Accounts Receivable Tax
Building Permit Tax
CDL License Tax
Cigarette Tax
Corporate Income Tax
Dog License Tax
Federal Income Tax Federal Unemployment Tax (FUTA) Fishing License Tax
Food License Tax
Fuel Permit Tax
Gasoline Tax
Hunting License Tax
Inheritance Tax
Inventory Tax
IRS Interest Charges (tax on top of tax)
IRS Penalties (tax on top of tax)
Liquor Tax
Luxury Tax
Marriage License Tax
Medicare Tax
Property Tax
Real Estate Tax
Service charge taxes
Social Security Tax
Road Usage Tax (Truckers)
Sales Taxes
Recreational Vehicle Tax
School Tax
State Income Tax
State Unemployment Tax (SUTA)
Telephone Federal Excise Tax
Telephone Federal Universal Service Fee Tax
Telephone Federal, State and Local Surcharge Tax
Telephone M inimum Usage Surcharge Tax
Telephone Recurring and Non-recurring Charges Tax
Telephone State and Local Tax
Telephone Usage Charge Tax
Utility Tax
Vehicle License Registration Tax
Vehicle Sales Tax
Watercraft Registration Tax
Well Permit Tax
Workers Compensation Tax
STILL THINK THIS IS FUNNY?
Not one of these taxes existed 100 years ago...and our nation was the most prosperous in the world. We had absolutely no national debt...
We had the largest middle class in the world... and Mom stayed home to raise the kids. What happened? Can you spell "P-O-L-I-T-I-C-I-A-N-S"?
And I still have to press '1' for English.
I hope this goes around the USA at least 100 times.
What the heck happened?????
*The e-mail was without attribution. If the author objects to my posting it, please inform me and I will remove it.
How many zeros in a billion?
The next time you hear a politician use the word 'billion' in a casual manner, think about whether you want the 'politicians' spending YOUR tax money.
A billion is a difficult number to comprehend, but one advertising agency did a good job of putting that figure into some perspective in one of it's releases.
A. A billion seconds ago it was 1959.
B. A billion minutes ago Jesus was alive.
C. A billion hours ago our ancestors were living in the Stone Age.
D. A billion days ago no-one walked on the earth on two feet.
E. A billion dollars ago was only 8 hours and 20 minutes, at the rate our government is spending it.
While this thought is still fresh in our brain...let's take a look at New Orleans... it's amazing what you can learn with some simple division.
Louisiana Senator, Mary Landrieu (D) is presently asking Congress for 250 BILLION DOLLARS to rebuild New Orleans . Interesting number...what does it mean?
A. Well... if you are one of the 484,674 residents of New Orleans (every man, woman, and child) you each get $516,528.
B. Or... if you have one of the 188,251 homes in New Orleans , your home gets $1,329,787.
C. Or... if you are a family of four...your family gets $2,066,012.
Washington, D. C < HELLO! > Are all your calculators broken??
Accounts Receivable Tax
Building Permit Tax
CDL License Tax
Cigarette Tax
Corporate Income Tax
Dog License Tax
Federal Income Tax Federal Unemployment Tax (FUTA) Fishing License Tax
Food License Tax
Fuel Permit Tax
Gasoline Tax
Hunting License Tax
Inheritance Tax
Inventory Tax
IRS Interest Charges (tax on top of tax)
IRS Penalties (tax on top of tax)
Liquor Tax
Luxury Tax
Marriage License Tax
Medicare Tax
Property Tax
Real Estate Tax
Service charge taxes
Social Security Tax
Road Usage Tax (Truckers)
Sales Taxes
Recreational Vehicle Tax
School Tax
State Income Tax
State Unemployment Tax (SUTA)
Telephone Federal Excise Tax
Telephone Federal Universal Service Fee Tax
Telephone Federal, State and Local Surcharge Tax
Telephone M inimum Usage Surcharge Tax
Telephone Recurring and Non-recurring Charges Tax
Telephone State and Local Tax
Telephone Usage Charge Tax
Utility Tax
Vehicle License Registration Tax
Vehicle Sales Tax
Watercraft Registration Tax
Well Permit Tax
Workers Compensation Tax
STILL THINK THIS IS FUNNY?
Not one of these taxes existed 100 years ago...and our nation was the most prosperous in the world. We had absolutely no national debt...
We had the largest middle class in the world... and Mom stayed home to raise the kids. What happened? Can you spell "P-O-L-I-T-I-C-I-A-N-S"?
And I still have to press '1' for English.
I hope this goes around the USA at least 100 times.
What the heck happened?????
*The e-mail was without attribution. If the author objects to my posting it, please inform me and I will remove it.
Wednesday, May 23, 2007
Supply Factors and Stagnant Wages
Blue collar workers' real wages have stagnated because of labor supply factors. These include:
-The baby boom
-Immigration
-Diversity
They have also stagnated because of:
-Health insurance costs and
-Costs of bureaucracy due to workplace regulation.
Social stratification has increased because of:
-Urban renewal and disruption of blue collar social networks and
-Unnecessary college degree requirements.
In other words, supply factors and government intervention have caused the stagnation of blue collar real wages that the US has suffered in the past 30 years.
In recent years, a coalition of the new left and old right has found common ground in attacking freedom of exchange. Their "pro-Corn Law" argument is that trade results in poverty. But they forget about the massive starvation during the Irish potato famine that the "anti-globalization" Corn Laws caused. The argument is based on a post hoc ergo propter hoc fallacy, that because stagnant wages have followed post-war globalization, post-war globalization caused the stagnant wages. The General Agreement on Tariffs and Trade began liberalizing trade immediately after the World War II, but wages did not begin stagnating until the early 1970s when the Baby Boomers entered the workforce and immigration had begun to increase due to the the 1965 immigration law . Amazingly, liberal economists ignore these factors when discussing stagnant wages.
Post hoc ergo propter hoc is a common fallacy in social science because it is difficult or impossible to control for the effects of all variables. Hence, the validity of social science findings must always be regarded with deep suspicion. Yet, despite the lack of evidence of a causal relationship between lower wages and globalization, the mass media has given considerable air time to demagogues like Lou Dobbs, who claim that globalization causes poverty. A bit of common sense suggests that this is improbable, because although employees who lose their jobs sustain losses due to relocation of industry, millions of others pay lower prices because of the same relocation. In turn, with extra cash, consumers either save or consume, which results in renewed demand for labor.
The "golden age" of wages for which Michael Moore, Pat Buchanan and Lou Dobbs yearn was characterized by restrictions on entry of labor supply that artificially propped up wages: the low birth rate of the 1930s Great Depression; the exclusion of Blacks from the best and unionized jobs; the absence of women; and race-based limitations on immigration.
During this "golden age", the federal and state governments further created the conditions for wage stagnation with a search and destroy mission against social networks in blue collar and poor communities that had in the past propped up blue collar entrepreneurship. At the same time, tax exemptions for third party health insurance, Medicaid and Medicare boosted demand for health insurance, indirectly raising labor costs through higher premiums. The costs of these programs include a considerable premium for fraud and bureaucracy. The New York Times recently found that New Yorkers pay one billion dollars for Medicaid fraud, which is likely the tip of the iceberg. Health plans are penalized because unnecessary care and the costs of bureaucracy to control it raise health care costs dramatically. The higher medical costs reduce labor demand.
Paul Krugman, a liberal academic, does not argue that globalization causes lower wages. In an article in Rolling Stone he states the statistical facts that:
"(W)ages have failed to keep up with rising prices...The number of Americans in poverty has risen even in the face of an official economic recovery, as has the number of Americans without health insurance. Most Americans are little, if any, better off than they were last year and definitely worse off than they were in 2000."
Krugman argues that inequality is because of the reduction in the power of unions, greed of corporate executives, and declining real value of the minimum wage. He also argues that American society has become more stratified than European society and he fears stagnation similar to Latin America's. However, Krugman ignores the absence of stable legal systems, the rule of law, individualism and laissez faire in Latin America. As well, he does not mention the key factor to which I allude above: the demographics of the Baby Boom, which dramatically increased the supply of labor. The Baby Boom generation was also the first to see a marked increase in the percentage of college graduation. As well, immigration increased in the late 1960s, just prior to the flattening of real wages (see George Borjas on immigration). Increased labor force participation of Blacks, Hispanics, women and other minority groups beginning in the late 1960s increased further the supply of labor around the time that wages began to flatten. Likewise, hostile state and federal regulation increased labor costs by imposing regulation, bureaucracy and paperwork in a myriad of health and human resource-related areas (OSHA, ERISA) in the early 1970s, likely without increasing workers' standard of living much (see Kip Viscusi on OSHA).
The effects of urban planning in cities like New York that destroyed functioning, racially integrated neighborhoods and replaced them with segregated neighborhoods separated by class and race lines in the early 1960s likely contributed to social stratification; this was exacerbated by the creation of a welfare-dependency culture. The urban renewal and welfare policies of the 1950s and 1960s destroyed entrepreneurial initiative and self-esteem of inhabitants, and created a psychology of welfare-dependency.
All of these factors combined, namely, governmental assaults on low-wage entrepreneurs through urban renewal, regulation and paperwork in the 1960s and 1970s, unpreventable demographic shifts (e.g., entrance of the Baby Boomers into the workforce beginning in 1969), and immigration contributed to stagnant real wages and stratification. Government added to the mess by raising social security benefits in the early 1970s; the raise in contributions further increased labor costs.
Krugman's argument about corporate greed involves the post hoc ergo propter hoc fallacy. While I agree that top executive pay increases have been excessive and too often have failed to reflect stock market-adjusted firm performance, there is no connection between the raises the top managers get and blue collar workers' stagnant wages. Most workers do not work for the large corporations that Krugman is criticizing, where top executives earn in the millions. First, according to the Bureau of Labor Statistics the median worker works in a firm with slightly above 250 employees. These are not the firms with multi-million dollar executive compensation packages. If large firms are inefficiently run, such smaller firms may benefit because the larger firms are less competitive. Large firms' poor governance may increase wages of lower-wage employees of smaller firms, i.e., the median.
Second, the wages of workers in large firms, where there are high executive salaries, are higher than the wages of workers in median firms.
Third, there is no reason to believe that the wages of executives in the large firms influence the wages of the workers in the same firms. Wages are determined by supply and demand and productivity. Firms continue to hire workers until the wage, as determined by supply and demand, equals the marginal revenue product. If the supply increases, there is downward pressure on wages, and the additional workers hired will be less productive and wages will decline. This will in turn increase profit. However, the reverse will occur should the Baby Boomers retire and immigration be curtailed.
As far as stratification, I have just finished reading David Farber's excellent Sloan Rules: Alfred P. Sloan and the Triumph of General Motors (University of Chicago Press, 2002) and could not help but notice the large percentage of automobile executives in the 1910's, through 1940's who did not have college degrees (although Alfred P. Sloan himself was an MIT graduate) but who, because of ability, worked their ways up to the pinnacle of business success. Three examples were William S. Knudsen, Henry Ford, and Walter Chrysler. Today, most inner-city youngsters with engineering talent would not be able to pursue a career in most industries if they, like Knudsen, Chrysler and Ford, failed to get a degree. An exception was the well-connected Bill Gates, whose privileged exposure to computers at an elite high school and family connections contributed to his success (along with his off-the-charts ability).
Brad DeLong of Berkeley argues that imports are not the cause of stagnant blue collar wages, essentially agreeing with Krugman:
"The U.S. is not facing increasing competition from low-wage countries. Imports are not the principal cause of falling blue-collar wages, or falling demand for blue-collar workers. The most rapid growth in the relative share of imports occurs in the 1970s, during which blue-collar wages keep pace with productivity and with the wages of white-collar workers...
"The decrease in blue-collar job demand because we do not produce what we import is roughly offset by the increase in blue-collar job demand by export-producing firms...Blue-collar job demand in construction, machine tools, and other investment-goods industries rises because foreign capital finances more investment in America than would take place otherwise...In 1962 36% of the workforce were blue-collar 'production workers'; in 1992 26% of the labor force falls into the blue-collar category. If today we had the same occupational distribution of employment that we had in 1962, there would be 12,000,000 more blue-collar jobs. Thus 'Globalization' --trading our services for their goods--is responsible for only five percent of the relative decline in the share of blue-collar jobs in our economy over the past three decades."
What is amazing to me is that there has been so much criticism of globalization based on the claim that there is a relationship between globalization and wages, but the obvious supply factors: labor market participation, supply, demographic effects, government regulation, mandated social security and Medicare benefits, health care cost inflation and factors affecting stratification (unnecessary job requirements based on education) are not mentioned.
Does the media analyze or does it propagandize?
-The baby boom
-Immigration
-Diversity
They have also stagnated because of:
-Health insurance costs and
-Costs of bureaucracy due to workplace regulation.
Social stratification has increased because of:
-Urban renewal and disruption of blue collar social networks and
-Unnecessary college degree requirements.
In other words, supply factors and government intervention have caused the stagnation of blue collar real wages that the US has suffered in the past 30 years.
In recent years, a coalition of the new left and old right has found common ground in attacking freedom of exchange. Their "pro-Corn Law" argument is that trade results in poverty. But they forget about the massive starvation during the Irish potato famine that the "anti-globalization" Corn Laws caused. The argument is based on a post hoc ergo propter hoc fallacy, that because stagnant wages have followed post-war globalization, post-war globalization caused the stagnant wages. The General Agreement on Tariffs and Trade began liberalizing trade immediately after the World War II, but wages did not begin stagnating until the early 1970s when the Baby Boomers entered the workforce and immigration had begun to increase due to the the 1965 immigration law . Amazingly, liberal economists ignore these factors when discussing stagnant wages.
Post hoc ergo propter hoc is a common fallacy in social science because it is difficult or impossible to control for the effects of all variables. Hence, the validity of social science findings must always be regarded with deep suspicion. Yet, despite the lack of evidence of a causal relationship between lower wages and globalization, the mass media has given considerable air time to demagogues like Lou Dobbs, who claim that globalization causes poverty. A bit of common sense suggests that this is improbable, because although employees who lose their jobs sustain losses due to relocation of industry, millions of others pay lower prices because of the same relocation. In turn, with extra cash, consumers either save or consume, which results in renewed demand for labor.
The "golden age" of wages for which Michael Moore, Pat Buchanan and Lou Dobbs yearn was characterized by restrictions on entry of labor supply that artificially propped up wages: the low birth rate of the 1930s Great Depression; the exclusion of Blacks from the best and unionized jobs; the absence of women; and race-based limitations on immigration.
During this "golden age", the federal and state governments further created the conditions for wage stagnation with a search and destroy mission against social networks in blue collar and poor communities that had in the past propped up blue collar entrepreneurship. At the same time, tax exemptions for third party health insurance, Medicaid and Medicare boosted demand for health insurance, indirectly raising labor costs through higher premiums. The costs of these programs include a considerable premium for fraud and bureaucracy. The New York Times recently found that New Yorkers pay one billion dollars for Medicaid fraud, which is likely the tip of the iceberg. Health plans are penalized because unnecessary care and the costs of bureaucracy to control it raise health care costs dramatically. The higher medical costs reduce labor demand.
Paul Krugman, a liberal academic, does not argue that globalization causes lower wages. In an article in Rolling Stone he states the statistical facts that:
"(W)ages have failed to keep up with rising prices...The number of Americans in poverty has risen even in the face of an official economic recovery, as has the number of Americans without health insurance. Most Americans are little, if any, better off than they were last year and definitely worse off than they were in 2000."
Krugman argues that inequality is because of the reduction in the power of unions, greed of corporate executives, and declining real value of the minimum wage. He also argues that American society has become more stratified than European society and he fears stagnation similar to Latin America's. However, Krugman ignores the absence of stable legal systems, the rule of law, individualism and laissez faire in Latin America. As well, he does not mention the key factor to which I allude above: the demographics of the Baby Boom, which dramatically increased the supply of labor. The Baby Boom generation was also the first to see a marked increase in the percentage of college graduation. As well, immigration increased in the late 1960s, just prior to the flattening of real wages (see George Borjas on immigration). Increased labor force participation of Blacks, Hispanics, women and other minority groups beginning in the late 1960s increased further the supply of labor around the time that wages began to flatten. Likewise, hostile state and federal regulation increased labor costs by imposing regulation, bureaucracy and paperwork in a myriad of health and human resource-related areas (OSHA, ERISA) in the early 1970s, likely without increasing workers' standard of living much (see Kip Viscusi on OSHA).
The effects of urban planning in cities like New York that destroyed functioning, racially integrated neighborhoods and replaced them with segregated neighborhoods separated by class and race lines in the early 1960s likely contributed to social stratification; this was exacerbated by the creation of a welfare-dependency culture. The urban renewal and welfare policies of the 1950s and 1960s destroyed entrepreneurial initiative and self-esteem of inhabitants, and created a psychology of welfare-dependency.
All of these factors combined, namely, governmental assaults on low-wage entrepreneurs through urban renewal, regulation and paperwork in the 1960s and 1970s, unpreventable demographic shifts (e.g., entrance of the Baby Boomers into the workforce beginning in 1969), and immigration contributed to stagnant real wages and stratification. Government added to the mess by raising social security benefits in the early 1970s; the raise in contributions further increased labor costs.
Krugman's argument about corporate greed involves the post hoc ergo propter hoc fallacy. While I agree that top executive pay increases have been excessive and too often have failed to reflect stock market-adjusted firm performance, there is no connection between the raises the top managers get and blue collar workers' stagnant wages. Most workers do not work for the large corporations that Krugman is criticizing, where top executives earn in the millions. First, according to the Bureau of Labor Statistics the median worker works in a firm with slightly above 250 employees. These are not the firms with multi-million dollar executive compensation packages. If large firms are inefficiently run, such smaller firms may benefit because the larger firms are less competitive. Large firms' poor governance may increase wages of lower-wage employees of smaller firms, i.e., the median.
Second, the wages of workers in large firms, where there are high executive salaries, are higher than the wages of workers in median firms.
Third, there is no reason to believe that the wages of executives in the large firms influence the wages of the workers in the same firms. Wages are determined by supply and demand and productivity. Firms continue to hire workers until the wage, as determined by supply and demand, equals the marginal revenue product. If the supply increases, there is downward pressure on wages, and the additional workers hired will be less productive and wages will decline. This will in turn increase profit. However, the reverse will occur should the Baby Boomers retire and immigration be curtailed.
As far as stratification, I have just finished reading David Farber's excellent Sloan Rules: Alfred P. Sloan and the Triumph of General Motors (University of Chicago Press, 2002) and could not help but notice the large percentage of automobile executives in the 1910's, through 1940's who did not have college degrees (although Alfred P. Sloan himself was an MIT graduate) but who, because of ability, worked their ways up to the pinnacle of business success. Three examples were William S. Knudsen, Henry Ford, and Walter Chrysler. Today, most inner-city youngsters with engineering talent would not be able to pursue a career in most industries if they, like Knudsen, Chrysler and Ford, failed to get a degree. An exception was the well-connected Bill Gates, whose privileged exposure to computers at an elite high school and family connections contributed to his success (along with his off-the-charts ability).
Brad DeLong of Berkeley argues that imports are not the cause of stagnant blue collar wages, essentially agreeing with Krugman:
"The U.S. is not facing increasing competition from low-wage countries. Imports are not the principal cause of falling blue-collar wages, or falling demand for blue-collar workers. The most rapid growth in the relative share of imports occurs in the 1970s, during which blue-collar wages keep pace with productivity and with the wages of white-collar workers...
"The decrease in blue-collar job demand because we do not produce what we import is roughly offset by the increase in blue-collar job demand by export-producing firms...Blue-collar job demand in construction, machine tools, and other investment-goods industries rises because foreign capital finances more investment in America than would take place otherwise...In 1962 36% of the workforce were blue-collar 'production workers'; in 1992 26% of the labor force falls into the blue-collar category. If today we had the same occupational distribution of employment that we had in 1962, there would be 12,000,000 more blue-collar jobs. Thus 'Globalization' --trading our services for their goods--is responsible for only five percent of the relative decline in the share of blue-collar jobs in our economy over the past three decades."
What is amazing to me is that there has been so much criticism of globalization based on the claim that there is a relationship between globalization and wages, but the obvious supply factors: labor market participation, supply, demographic effects, government regulation, mandated social security and Medicare benefits, health care cost inflation and factors affecting stratification (unnecessary job requirements based on education) are not mentioned.
Does the media analyze or does it propagandize?
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