Here is an interesting WSJ article on the economy and how it just MIGHT not be the end of the world…unless of course we make it that way with flawed policies. Read the whole article, but this is my favorite part:

The irony is almost too much to take. Yesterday everyone was worried about excessive consumer spending, a lack of saving, exploding debt levels, and federal budget deficits. Today, our government is doing just about everything in its power to help consumers borrow more at low rates, while it is running up the budget deficit to get people to spend more. This is the tyranny of the urgent in an election year and it’s the development that investors should really worry about. It reads just like the 1970s.

The ’70s. Now that’s WAY scarier than the housing market.

A wonderful article on why raising taxes on the “Rich” and lowering it for everyone else NEVER works.  While lowering taxes on the rich ALWAYS works.  The long and short of the article is that the EFFECTIVE tax rate on the top 1% has barely even budged since 1981 when the max rate was 70% to 2005 when it was 35%.  Meanwhile the total share of the tax burden as a percentage of GDP actually doubled.  It even points out how the peak of the 1% burden occurred directly after Clinton’s cut of the Capital Gains Tax rate in 1997 (from 28% to 20%), which directly resulted in a surplus.

The net net (a little phrase I’ve heard a lot lately) is that every time the Federal Government has lowered taxes on the top 1% (in the 1920s, Kennedy in the 60s, Reagan in the 80s) tax receipts go up.  Is there really any reason to believe that for some reason NOW would be any different than all of these previous times?

If you want to read an article that shows the disconnect between rhetoric and reality and completely misses the point on “Income Gap” by literally pretending things are true that aren’t true…read this.

Here are a couple of highlights:

One intuitive measure of inequality is to compare “high-income” and “low-income” families. Suppose we define a high income level as income at the 90th percentile: that is, the income level higher than that of 90 percent of all families but lower than that of the top 10 percent. Similarly, we can define a low income level as the income at the 10th percentile.

A sign of no economic foundation is words like “intuitive”, “suppose”, “can”. This method of defining inequality is not only arbitrary, but also useless.

This part is the part I agree with:

Why has inequality increased?

It is always tempting to look for a single cause that can explain a major social or economic event, but in all likelihood the growing gap between rich and poor has many causes. A list of the “usual suspects” is easy to compile; evaluating their relative importance is far more difficult.

Much evidence points toward declining demand for low-skilled workers as a crucial factor. In the view of many economists, the principal source of this shift has been technological change that has allowed firms to economize on low-skilled labor while increasing the demand for highly educated workers. Ironically, these changes are broadly a consequence of the growing importance of computers and automation in the economy, the very technological advances that have helped drive the current economic boom.

Globalization of the economy may also have played a role. In the past 25 years, low-skilled American workers have experienced increasing competition from both low-paid immigrants and low-paid workers living in other parts of the world who produce goods that compete with American products. Although the effects of globalization are not negligible, most economists think they are less significant than the effects of technological change on wage inequality.

Finally, institutional changes in the labor market have had an impact. These include the declining membership in labor unions in the private sector and the declining real value of the legal minimum wage, which until recently had been severely eroded by inflation.

International comparisons support this analysis. The pressures on low-skilled wages from technological change and globalization have affected all developed economies, but the growth of inequality has been far greater in the United States. International differences in wage-setting institutions and income-transfer programs may explain the different outcomes. They may also help account for the higher unemployment rates in many other developed economies, a perspective that casts the U.S. experience in a more favorable light.

This is all precisely true…Did you like that last part, though? The U.S. in a more favorable light for lower unemployment…THE HORROR!!

But then they get to the “solution” and something really cool happens. They dismiss ALL of the above as completely irrelevant:

Individual and communal acts of charity will always play a role in reducing the adverse effects of income inequality, but significant reductions of inequality will depend upon the government’s power to tax, transfer, and regulate. Inevitably, however, redistributive policies involve real costs, in terms of both their economic impact and the infringements of property rights that accompany them. Thus there is a trade-off between equity and other values. To minimize the damage to these other values, two principles of policy design-efficiency and efficacy-should guide us as we evaluate proposals for reducing inequality.

If a policy is efficient, it will achieve its redistributive goals at minimal cost to the economy as a whole. Perhaps surprisingly, the criterion of efficiency is usually better served by policies that treat the symptoms, rather than the causes, of inequality.

For instance, to the extent that import competition is a source of downward pressure on low-skilled wages, protectionist trade policy could counteract the trend. Yet protectionism comes at a high cost to consumers and trade-dependent sectors of the economy. More efficient would be a policy that directly enhanced low-skilled workers’ incomes, whether through training, subsidies, or minimum wages.

So, technological changes, globalization, a lack of education in the workforce is best solved by simply “taxing, transferring, and regulating.” The source of the problem is simply not important. Well there you go. At least they acknowledge the “trade off” between property rights and equity.

The rest of the article continues to argue against itself in the most extraordinary ways, and it’s really fun to read. Within a couple of paragraphs, training and minimum wages are supported and then not supported. A good idea would have been for the Applied Ethics Department of Santa Clara University to go have a little conversation with the Economics department of Santa Clara University. It might’ve resulted in a slightly less ridiculous article. So OK, this isn’t really the best article to illustrate the argument on the “Income Inequality Crisis.” But it illustrates pretty well how rhetoric can so quickly and easily win out over science, logic and reason.

The Income Gap

Not!

WASHINGTON (Reuters) - A pickup in consumer spending and strong exports powered economic growth ahead at its fastest rate during the third quarter since the beginning of 2006, according to a government report on Wednesday.

While the Democrats and my colleagues continually complain about how bad this administration is, I PTL every day we don’t have a (more) socialized economy like the ones in Europe.

My new favorite Democrat in the US of A just happens to represent my hometown. Nick Gautreaux of Abbeville has proposed to eliminate the personal income tax in Louisiana.

Gautreaux’s bill would keep in effect the tax rates and tax brackets on personal income taxes but would lower the amount paid by individuals by 10 percent a year until the tax is phased out by Jan. 1, 2016. For example, in the present tax year, taxpayers would pay 90 percent of their tax bills to the state and 80 percent next year.

But my favorite is this quote:

“This gives a break to the working-class people,” he said. “For the last several years we have had a surplus. . . . That tells me we are overtaxed. . . . It is time to give taxpayers a tax break. Why should government grow and add more and more programs?”

Can someone get Howard Dean on the phone? This guy needs to sit down with Nancy Pelosi and company and set them straight.

When the dollar talks back - Opinion - International Herald Tribune

I guess that the joyride can’t last forever - at some point you’ve gotta pay the tab. As my dad is fond of saying, “There ain’t no free lunch.”

We’ve already seen that this government will do anything to ensure dollar hegemony, but there are forces here that may be unstoppable. This administration has pursued a fiscal policy that is clearly unsustainable - while at the same time, allowing the rise of a formidable currency competitor in the Euro.

A run on the bank is hard to stop . . .

One of his last interviews linked above. So rarely do I shake my head yes during an interview!

A good quote not to be buried in a comments section.

From Hayek, …”the arrogation of arbitrary powers by Parliament was regarded by the spokesman of the American colonies as the ultimate cause of te break with the mother country. This was most clearly expressed by one of the profoundest of their political philosophers, James Wilson, who

‘rejected Blackstone’s doctrine of parliamentary sovereignty as outmoded. The British do not understand the idea of a constitution which limits and superintends the operations of the legislature. This was an improvement in the science of government reserved to the Americans.

Back to Hayek, “We shall not further consider here the American attempt to limit in their Constitution the powers of the legislature, and its limited success. It in fact did no more to prevent Congress from becoming primarily a governmental rater than a truly legislative institution…

Sadly he is right. The root of the problem is not private influence of government, but rather the unlimited nature of our government.

I recently spoke with a brilliant young man with a somewhat lucrative job; he only had to work for three months out of the year and spent the rest of the time traveling to Europe and telling friends and college students how great his job was. Just a couple of years out of college and had little savings and no credit card. I talked with him a little bit about the rules of the game that big institutions, like banks and the IRS, set up for peons like us to follow. He asked me if there were some book he could read so he could know what the rules were.

Posted at 10:46 pm by Johnny B

	Posted by BP @ 08/07/2006 09:25 AM PDT
	You mentioned “investevangelists”…that’s a great word and I don’t think I’ve heard it. The worst example is Suze Orman…who gave up her licenses a few years back so she couldn’t be sued for giving bad financial advise. So how do I join your system? Can I get started without any money?

Posted at 10:49 pm by Johnny B