April 15 is nearly upon us. Those who pay taxes might consider the low quality of government services and the high amount of federal tax that they pay. On balance, the income tax destroys savings and personal independence, while the uses to which Congress has put the money are of scant value. The income tax should be repealed. I have written the follwing letter to my Congressman, Maurice Hinchey:
April 14, 2008
Dear Congressman Hinchey:
I urge Congress to repeal the federal income tax. Congress has not proven itself intellectually or morally fit to take possession of so large a share of the American purse. I urge you to return the money to the American people, except for a small amount that Congress might devote to its own education by taking basic economics and ethics courses.
Sincerely,
Mitchell Langbert, Ph.D.
Monday, April 14, 2008
Saturday, April 12, 2008
Progressivism and Fear Revisited
The dominant mood of the past century's Progressive era has been fear. The movement that was founded on the claim that self-expression is of paramount importance; that democracy is sacred; and that institutions can be re-shaped to suit public ends has generated neither human fulfillment nor democracy. It has generated fear. It has done so by re-directing economic resources and potential growth toward large, established firms; regulating the economy and so foreclosing entrepreneurship; creating inflation and the income tax and so foreclosing independent wealth and saving. It restricts employment by favoring large firms over small by redirecting capital to the large firms through the governmentally-supported banking system. The re-direction of capital from personal savings into large corporations' treasuries resulted in the reduction in the number of jobs but also changed the character of jobs from those that reflect entrepreneurial initiative and creativity, hence human fuilfillment, to those that depend on conformity to a boss; teamwork; and fear of being fired. The dominant mood of the Progressives was teamwork and group behavior, the sacrifice of the individual to the group. This was paradoxically done in the name of encouraging self-fulfillment and self-expression. But the chief mood has been a century of fear. The Progressives created the Great Depression by first creating the Fed under Woodrow Wilson, with the Fed then mismanaging the money supply. This created a generation whose chief fear was unemployment and lack of "social security". The Roosevelt administration, following through with the Progressive program, intensified the Fed's power by abolishing the gold standard. The result has been mismanagement of the nation's credit supply; inflation; a reduction in the number of good (non-corporate) jobs; and fear. Fear of not conforming to the boss's whims. Fear of not being politically correct; fear of not following the Progressive elite's fashion of the moment; fear of unemployment because of non-conformity to the corporate and state's whimsical definitions of compatibility and interpersonal skills; fear of not laughing at Bill Maher's stale jokes; and fear of not getting a job at all.
Fear is not far removed from hate. Progressivism is not far removed from totalitarian rule and economic decline.
Fear is not far removed from hate. Progressivism is not far removed from totalitarian rule and economic decline.
Thursday, April 10, 2008
An Appeal to Heaven
In HBO's John Adams television series there are a number of interesting flags. One is "An Appeal to Heaven" or "Liberty Tree". According to flagline.com , which sells a replica, it was Washington's naval flag. The John Adams series shows people in Boston walking around with the flag in Boston. I'm not sure whether that is accurate or not.
The phrase "an appeal to heaven" is taken from John Locke's Second Treatise on Government. In chapter 3, section 20 Locke writes:
"for wherever violence is used, and injury done, though by hands appointed to administer justice, it is still violence and injury, however coloured with the name, pretences, or forms of law...war is made upon the sufferers, who having no appeal on earth to right them, they are left to the only remedy in such cases, an appeal to heaven."
I wonder if we need to think about re-reading Locke and reviving this flag.
Thursday, April 3, 2008
The Economic Contours of a Buffett-Obama Administration
The Economic Contours of a Buffett-Obama Administration
Much has been made about Barack Obama's association with Pastor Jeremiah Wright, who represents the identity politics fringe of the Democratic Party. Mainstream Americans ought to be concerned because the Democrats have introduced leftists into staff positions in state legislatures and Congress and funded them in universities. For example, Eliot Spitzer's suggestion of granting drivers' licenses to illegal aliens likely did not spring from the mouth of his latest romantic partner, but rather from staffers whom he introduced into Albany. With associations of the Pastor Wright sort, Mr. Obama seems likely to aim to employ staffers with fringe views. If you liked the idea of granting drivers' licenses to aliens, it is certain that you will love an Obama administration.
An even more important question than identity politics, though, is what a President Obama would do to the economy. Thus, a more important association than Obama-Wright is Obama-Buffett. What clues might this relationship offer about the economic direction that an Obama administration would take? One clue is Mr. Obama's recent recommendation, quoting the authority of Mr. Buffett, to increase the capital gains tax. Mr. Buffett's investment philosophy famously involves buying and holding for the long term, and so would not be hurt and would possibly be helped by higher capital gains taxes. In contrast, traders whose investment approach involves more frequent buying and selling would be hurt. Long term holders infrequently pay capital gains taxes, while frequent traders may pay taxes more frequently. Thus, capital gains taxes would hurt Mr. Buffett's competition more than they would hurt him. That which hurts his competition would likely help him.
An increased capital gains tax would provide an incentive for investors to favor investment in Berkshire Hathaway over buying and selling commodities and stocks. The Federal Reserve Bank has increasingly become involved in timing and influencing the financial markets, increasing the returns to short term traders who respond to Fed moves but potentially harming long term holders because of market unpredictability. Mr. Buffett's Berkshire stock has nevertheless performed modestly, but only modestly, well. An increase in the capital gains tax would likely increase the value of Berkshire Hathaway stock because it would provide incentives for long term holding. Hence, Mr. Obama has already been advocating policies that would prove economically beneficial to Berkshire Hathaway, and quoting Mr. Buffett in doing so.
Mr. Buffett's investments span a wide swath of businesses. He favors domestic businesses over foreign ones. Many of the businesses and stocks that Mr. Buffett's Berkshire Hathaway owns are consumer products, media, financial, insurance, food and retail businesses (Coca Cola, See's Candies, Capital Cities ABC, GEICO, Dairy Queen, reinsurance and small retail). Thus, policies that a Buffett-Obama administration would likely favor would involve support to a broad swath of domestic consumer, financial and real estate-related businesses.
A weak dollar/high inflation policy executed in the name of full employment with increased taxes to Mr. Buffett's competitors and protectionism are the most likely outcomes of a Buffett-backed Obama presidency. High inflation serves Berkshire Hathaway's interests for several reasons. First, inflation reduces real wages and so real labor costs for Berkshire's retail and construction businesses. Second, inflation reduces real debt, and the diverse businesses that Mr. Buffett owns, from house construction to consumer products, carry debt and so benefit from inflation. Third, inflation weakens the dollar. Since Mr. Buffett's businesses tend to be domestic, a weak dollar will help Berkshire because it will make American-made goods relatively cheap. Of course, this will occur in tandem with the average American's becoming poorer due to the same inflation, so while it will help Berkshire Hathaway it will harm American workers. Thus, one can expect that an Obama presidency will harm American workers in the name of helping them.
Since Mr. Buffett's businesses are primarily domestic, protectionism would prove beneficial to them as well. We can expect protectionism from an Obama presidency. This too would harm American workers by making goods more expensive but would prove helpful to Berkshire Hathaway.
One of the fundamental principles of progressive-liberalism is that it emphasizes that low wages are conducive to full employment while it de-emphasizes the benefit that low wages, low interest rates and high inflation provide to owners. Mr. Buffett is a student of John Maynard Keynes, and we can expect the Keynesian inflationary policy to be a pillar of an Obama presidency. The Keynsian argument is that increasing the money supply reduces interest rates and real wages. This stimulates employment, but it also makes workers, savers and pension holders poorer while it improves the position of owners, like Mr. Buffett.
At the margin, the stimulative effect of the Fed's printing money will include the creation of low-wage retail jobs, and this will benefit Berkshire Hathaway, which owns retail businesses. As well, Berkshire Hathaway benefits because low interest rates boost the value of its stock price. Low interest rates cause investors to value future earnings at a higher value. If an investor knows that he is going to receive a dollar in a year, if interest rates are reduced from 10% to 1%, the value of that future dollar is considerably raised in the present. Since the stock market is a mechanism to value future earnings, increasing the supply of money (that is, reducing interest rates) boosts stock market values. Since Berkshire Hathaway emphasizes long term holdings, its value will be especially enhanced. Thus, an Obama Presidency will likely prove to be inflationary through encouraging the Federal Reserve Bank to print money.
An Obama presidency will emphasize taxes that harm small investors and traders who compete with Mr. Buffett. These would include inheritance, capital gains and income taxes. It will reduce interest rates which raise the value of Berkshire Hathaway's holdings and subsidize long term holders. It will reduce the value of the dollar, which will stimulate demand for Berkshire Hathaway's domestic businesses. It will increase protectionism and raise tariffs, especially those which reduce competition to Mr. Buffett's businesses. Mr. Obama will reduce real wages, enhance income inequality and all the while will tell Americans how much he is helping them because he has created a few low-wage jobs for employees of Berkshire Hathaway.
Much has been made about Barack Obama's association with Pastor Jeremiah Wright, who represents the identity politics fringe of the Democratic Party. Mainstream Americans ought to be concerned because the Democrats have introduced leftists into staff positions in state legislatures and Congress and funded them in universities. For example, Eliot Spitzer's suggestion of granting drivers' licenses to illegal aliens likely did not spring from the mouth of his latest romantic partner, but rather from staffers whom he introduced into Albany. With associations of the Pastor Wright sort, Mr. Obama seems likely to aim to employ staffers with fringe views. If you liked the idea of granting drivers' licenses to aliens, it is certain that you will love an Obama administration.
An even more important question than identity politics, though, is what a President Obama would do to the economy. Thus, a more important association than Obama-Wright is Obama-Buffett. What clues might this relationship offer about the economic direction that an Obama administration would take? One clue is Mr. Obama's recent recommendation, quoting the authority of Mr. Buffett, to increase the capital gains tax. Mr. Buffett's investment philosophy famously involves buying and holding for the long term, and so would not be hurt and would possibly be helped by higher capital gains taxes. In contrast, traders whose investment approach involves more frequent buying and selling would be hurt. Long term holders infrequently pay capital gains taxes, while frequent traders may pay taxes more frequently. Thus, capital gains taxes would hurt Mr. Buffett's competition more than they would hurt him. That which hurts his competition would likely help him.
An increased capital gains tax would provide an incentive for investors to favor investment in Berkshire Hathaway over buying and selling commodities and stocks. The Federal Reserve Bank has increasingly become involved in timing and influencing the financial markets, increasing the returns to short term traders who respond to Fed moves but potentially harming long term holders because of market unpredictability. Mr. Buffett's Berkshire stock has nevertheless performed modestly, but only modestly, well. An increase in the capital gains tax would likely increase the value of Berkshire Hathaway stock because it would provide incentives for long term holding. Hence, Mr. Obama has already been advocating policies that would prove economically beneficial to Berkshire Hathaway, and quoting Mr. Buffett in doing so.
Mr. Buffett's investments span a wide swath of businesses. He favors domestic businesses over foreign ones. Many of the businesses and stocks that Mr. Buffett's Berkshire Hathaway owns are consumer products, media, financial, insurance, food and retail businesses (Coca Cola, See's Candies, Capital Cities ABC, GEICO, Dairy Queen, reinsurance and small retail). Thus, policies that a Buffett-Obama administration would likely favor would involve support to a broad swath of domestic consumer, financial and real estate-related businesses.
A weak dollar/high inflation policy executed in the name of full employment with increased taxes to Mr. Buffett's competitors and protectionism are the most likely outcomes of a Buffett-backed Obama presidency. High inflation serves Berkshire Hathaway's interests for several reasons. First, inflation reduces real wages and so real labor costs for Berkshire's retail and construction businesses. Second, inflation reduces real debt, and the diverse businesses that Mr. Buffett owns, from house construction to consumer products, carry debt and so benefit from inflation. Third, inflation weakens the dollar. Since Mr. Buffett's businesses tend to be domestic, a weak dollar will help Berkshire because it will make American-made goods relatively cheap. Of course, this will occur in tandem with the average American's becoming poorer due to the same inflation, so while it will help Berkshire Hathaway it will harm American workers. Thus, one can expect that an Obama presidency will harm American workers in the name of helping them.
Since Mr. Buffett's businesses are primarily domestic, protectionism would prove beneficial to them as well. We can expect protectionism from an Obama presidency. This too would harm American workers by making goods more expensive but would prove helpful to Berkshire Hathaway.
One of the fundamental principles of progressive-liberalism is that it emphasizes that low wages are conducive to full employment while it de-emphasizes the benefit that low wages, low interest rates and high inflation provide to owners. Mr. Buffett is a student of John Maynard Keynes, and we can expect the Keynesian inflationary policy to be a pillar of an Obama presidency. The Keynsian argument is that increasing the money supply reduces interest rates and real wages. This stimulates employment, but it also makes workers, savers and pension holders poorer while it improves the position of owners, like Mr. Buffett.
At the margin, the stimulative effect of the Fed's printing money will include the creation of low-wage retail jobs, and this will benefit Berkshire Hathaway, which owns retail businesses. As well, Berkshire Hathaway benefits because low interest rates boost the value of its stock price. Low interest rates cause investors to value future earnings at a higher value. If an investor knows that he is going to receive a dollar in a year, if interest rates are reduced from 10% to 1%, the value of that future dollar is considerably raised in the present. Since the stock market is a mechanism to value future earnings, increasing the supply of money (that is, reducing interest rates) boosts stock market values. Since Berkshire Hathaway emphasizes long term holdings, its value will be especially enhanced. Thus, an Obama Presidency will likely prove to be inflationary through encouraging the Federal Reserve Bank to print money.
An Obama presidency will emphasize taxes that harm small investors and traders who compete with Mr. Buffett. These would include inheritance, capital gains and income taxes. It will reduce interest rates which raise the value of Berkshire Hathaway's holdings and subsidize long term holders. It will reduce the value of the dollar, which will stimulate demand for Berkshire Hathaway's domestic businesses. It will increase protectionism and raise tariffs, especially those which reduce competition to Mr. Buffett's businesses. Mr. Obama will reduce real wages, enhance income inequality and all the while will tell Americans how much he is helping them because he has created a few low-wage jobs for employees of Berkshire Hathaway.
Subscribe to:
Comments (Atom)
