Miller Time

I really don't think Bob Schieffer understands what Joe is saying. But until Cubachi provides some more Christie clips, consider this your Commonsense Conservative Porn fix:

Chris Christie Contrasts Common Sense vs. Government Drones

Some fresh Chris Christie awesomeness [Hat Tip: Cubachi]

Another reason to decentralize government. Why should states have to fill out a thousand-page application to get money from the US government? Let the feds tax us less, and each state can raise that revenue instead.

I Want Your Money

This looks very promising:

Words Mean Things: Surrendering the High Ground

Good old Jazz Shaw and I engaged in a little back-and-forth via Twitter today, sparked by his tweet:

Dear Congress: You can keep all the Bush tax cuts, but you have to cut spending. This isn't rocket surgery.

I responded by pointing out the missing word in that first clause:

@JazzShaw Not "tax cuts". Tax RATE cuts, which INCREASED tax revenues. Expiration will REDUCE tax revenues.

In subsequent volleys, Jazz assured me that I was reading in meaning he hadn't intended (that the two parts were linked, so that the "tax cuts" would result in lower revenue, which then must be "paid for" by the spending cuts). I'm glad to hear I was wrong about that, but I still believe that we should always refer to "tax rate cuts", and avoid even the appearance of linking tax rate cuts to spending reductions, in order not to surrender ground in policy debates.
I wasn't just reacting to Jazz when I tweeted that, but to the kind of "argument" provided yesterday by Nancy Skinner on Freedom Watch with Andrew Napolitano:

Now, I don't for a moment mean to compare Jazz to Nancy, who seems to fill the same role for Andrew as Alan Colmes did for Sean Hannity: mindlessly repeating Democratic talking points that serve as hanging curve balls to be smacked out of the park. You can almost see her flipping through the list of liberal shibboleths (shall I go Palin and coin the portmanteu "lib-oleths"?) until she could find one that fit the situation at hand.

But when we debate on their terms, we unnecessarily handicap ourselves. As you can see in the above clip, Nancy spewed such a barrage of BS that Charlie Gasparino got stuck dealing with only one particularly large pile of it (the idea that money in the hands of higher-bracket earners has a smaller "multiplier" than money "redistributed" into the hands of lower-income people who will use it to consume more, thereby providing a "stimulus" to the economy). I think Don Boudreaux was trying to make the same point as mine but it got lost in the crosstalk. (Note to Napolitano: Try having two guests instead of three; it might make cut down on that.)

I don't want to get bogged down debating the Laffer Curve here, but to put it simply, the idea is that higher marginal tax rates will change the behavior of high-bracket earners. They may put in less time on the job to spend more with the kids, or divert money that would have gone into investing in new production capacity (which means more jobs for lower-bracket folks) and put it in tax shelters like municipal bonds. These alternative investments aren't expected to make as large of a profit, but after the effects of the tax rates are considered, the taxpayers figure they'll actually get to keep more. This pulls capital out of the economy and somewhat depresses the rates paid on the tax-sheltered investments.

Either way, if the marginal rate goes above a certain point, it will actually result in lower revenues for governments. Leftists refer to a tax rate reduction as a "tax cut" that must be "paid for", even when the tax rate reduction produces the same or higher revenues, in effect paying for itself. Note that even a rate reduction that goes below the point of maximum revenues can still meet that standard, because for any point above the maximum, there exists a point below it that brings in the same revenue.

The reason the "Bush" tax rate cuts, like the "Reagan" cuts before them, worked so well, is that they reduced those highest marginal tax rates to a level where people could improve their after-tax income by concentrating on making their investments profitable, and stop worrying about the tax implications. The money that was tied up in arcane shelter instruments came back to create new jobs. Tax revenues went up in real dollars under both the "Reagan" and "Bush" tax rate cuts.

However, there was a difference. The earlier cuts were "permanent", meaning that they would remain low until Congress took action to increase them again (during the Clinton administration) but the "Bush" cuts had a built-in expiration date, which will see them end this year unless Congress extends them with Jazz' permission. For several years now, taxpayers have been making investment decisions recognizing that Democratic majorities in Congress are very unlikely to "cut taxes on the rich", so the high-bracket marginal rates are nearly certain to rise back to pre-Bush levels.

Restoring those tax rate cuts, and committing to keep them for several years, will not need to be somehow tied to spending reductions to "pay for" them. As they have done before, they will again pay for themselves. Using our opponents' terminology of "tax cuts" reinforces their ability to frame the debate in terms of fiscal responsibility. We need to convey that cutting rates will actually be a tax increase. Everyone understands that a business can cut prices and increase revenues. We need to talk about tax rate cuts as putting taxes "on sale".

[Even if those tax rate reductions do result in lower revenues, we can't allow ourselves to be in favor of that being an excuse to raise the taxes. Government spending always costs us, regardless of how it's "paid for". But that is a topic for another day.]
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A lesson for our times: The Cookies

Posted with the Author's permission

The Cookies
by Andrew Michaels
Copyright© 2010 by Andrew Michaels

A mother was contemplating a dilemma. Normally, she assigned cleaning the toilets as a grungy chore for misbehavior. But none of her five children had misbehaved enough to be assigned the chore, and the toilets really needed to be scrubbed.

Then she had an idea. She took five large cookies from a tray of leftovers from her latest ladies meeting, put them and a ziplock bag, and called all of her children to her. "I need the toilets cleaned," she told her children, "and I will give the five cookies in this bag to the one who cleans them." She then offered the task to her children beginning with the oldest. Each made an excuse: "Sorry, Mom, I have too much homework." "I promised my friends I would play ball with them." "I told Becky that I would come by." "I need to finish my school project today." Finally, she came to the youngest. He thought about the last time that he had to clean the toilets, and how the smell had almost made him sick. Then he thought about how delicious those cookies would taste. "OK, I will do it," the youngest told his mother.

He gathered the cleaning supplies, and went to each of the three toilets in the house, scrubbing them thoroughly. By the time he came to the third toilet, he was against almost sick from the smell. But he forced himself to finish, them reported to his mother that he was done.

Mother inspected the toilets, expecting to have to point out some areas for rework. She was impressed that her youngest had done a thorough job, not rushing through the task just to get finished. "You have done an excellent job," she told her youngest, "and here is your reward!", handing him the bag of cookies.

The child opened the bag of cookies, the delicious smell wiping out the nausea from the odor of the toilets. He started to reach into the bag for the first cookie.

"Not so fast," his father spoke. The father had come in the door from work just before the mother handed the boy the cookies, and decided he needed to teach a valuable lesson. "What were you planning on doing with those five cookies?"

"Eating them?" the youngest replied.

"Don't you think it is greedy for you to eat all five cookies?" his father continued.

"Not really, since I earned them," the son answered. "All of my brothers and sisters were offered the opportunity to earn the cookies. I only got the job because they refused."

"Regardless of that, we need CHANGE in this household. I cannot continue to reward selfish and greedy behavior in my house. Give me the bag," the father demanded.

The boy reluctantly handed the bag of cookies to his father. The father took the bag, and distributed one cookie to each of the siblings, leaving the smallest cookie in the bag and returning it to his son, who was in tears.

"From each according to his ability, to each according to his need," the father quipped, repeating a quote he had heard from Barack Obama. He was so proud to live in a country that had elected Barack Obama as president, a country that valued fairness above all else, a country that would no longer excuse greed and selfishness, just because someone supposedly "earned" their money.

...

The lesson had been well learned. No child ever volunteered to do another task in the house, no matter how great the reward the mother offered. Once the oldest figured out that they could call human services if the parents ever did anything to punish them, and shared that secret with his siblings, they ignored the threats of their parents. No child ever did another chore, spending their days in idleness and fun. As each came of age, they proudly took their place in public housing and on the welfare rolls, continuing their idle existence. The father could not figure out where the mother had gone wrong with their upbringing.

The End

Krista Branch: Remember Who We Are

Can't wait for the official video to come out. Here's a unofficial one for Krista Branch's new song:

Reason TV: Evolutionary Psychology

I've been planning on writing a series of posts about how our species evolved into its current condition, and how that process has influenced the way people think about the organization of society. Here is a husband-wife team of researchers into the very topic. Listen to what they have to say; it helps to explain a lot we need to be looking at.

Cookie Dough

The deluge of red ink generated by the current Congress and Administration has brought into sharp focus the phenomenon of inflation. Unfortunately, as seems to be the case on virtually every area where government action impinges upon economies, there's so much disinformation that people don't understand what's going on. So, I'm going to explain it in really simple terms. This could take a while, so settle down in your easy chair and we'll start off with a story about Mrs. Smith's cookies....

Every Saturday morning, while Mr. Smith is down at the office catching up on work, Mrs. Smith and her three kids have a regular routine. Each of them has a list of chores to do; Mom's list includes baking a batch of chocolate chip cookies to reward them for getting the jobs done. She always bakes an even dozen, nice large cookies, which allows for each of them to have three cookies.

One day, the eldest, Johnny, tells his mom that it isn't fair that he does more work than his younger brother and sister, but gets the same reward, and insists that he should get four cookies instead of just three. Mrs. Smith thinks about it, and makes thirteen cookies so that Johnny can get four, while everyone else only gets three. Well, you don't have to be Nostradamus to predict out what happens next. Mary thinks she's doing more than little Billy, so she ought to get four cookies too, so the week after Mrs. Smith makes fourteen cookies. Now Billy is upset because he doesn't get as many as his older brother and sister, and he wants four cookies too!

Soon they're up to sixteen cookies, four each. But Mrs. Smith isn't mixing up a larger batch of cookie dough; she's just making each cookie 33% smaller than she did before. Everyone has more cookies, but since there's not any more dough, they aren't getting more to eat.

If you can understand the difference between "more cookies" and "more dough", then you're well on your way to understanding inflation.

Once upon a time, money was based on some objective standard of value. Many tribal cultures that herded animals used livestock in their trading activities. The very word "pecuniary" came to English from the Latin word for cattle, "pecus". But cattle are not interchangeable; some are of superior value to others, (as the President's penchant for Wagyu beef demonstrates) making accounting with such a "currency" rather imprecise.

Humans have always considered certain minerals to be precious; the varying quality issues that plague the use of livestock to measure value go away once the technology exists to refine metals such as silver and gold to standardized levels of purity. Those metals are entirely fungible. Most cultures that possessed that technology settled upon either or both of those two metals to define their currency. The US Dollar was originally based upon the Spanish Dollar, a 90% silver coin (about 25.5g silver content) produced in Mexico and Peru as well as Spain itself. Our Constitution forbids any state from making anything other than gold or silver coin legal tender, which suggests the extent to which those the Framers considered those two metals good objective measures of wealth.

What does this have to do with cookie dough? Back when gold and silver were used in coins, governments would sometimes "debase" the coins by reducing their precious metal content. When that happened, even though the new coins had the same name and nominal value as the old ones, they weren't worth as much. Johnny may not realize that his four new cookies have no more dough in them than the three old cookies, but his stomach is no more full. Some people may not notice that the new coins have less silver or gold than the old ones, but some do. When governments put more money into an economy in proportion to the goods and services that money can buy, it drives prices up in that same proportion. If there are 33% more dollars in circulation, with the same level of production, what once cost $3 will cost $4.

This is where the Clever Kids will complain that you can't argue by analogy, and the Cookie Dough Story is far too simplistic. Of course, it's simplistic, because, as I've said before, all economics discussion is "all other things being equal". Fiscal policy doesn't exist in a vacuum; increases in the supply of dollars don't just relate to the goods and services in the US economy, because those dollars can be spent anywhere in the world. Further, inflation depends not only on how many dollars are in circulation at any given point in time, but also on expectations of the future. But the long-term relationship cannot be denied; stable prices depend on stability of the ratio of the money supply to the goods and services available for that money to purchase.

Since we no longer make any pretense of tying our currency to an objective standard of value, and instead leave it to the Board of Governors of the Federal Reserve System to manage the money supply (within the constraints of the spending authorized by Congress and the willingness of the market to purchase instruments of US Government debt), there can no longer be a sudden increase in the money supply such as followed the discovery of gold and silver deposits in the New World. Changes in the money supply are now entirely under the control of the government. It is therefore particularly galling that an asset held over a period of time may be sold at a paper "profit" representing nothing more than the inflation of the money supply.

Consider that with the low inflation rate of 3% per year, an asset need only be held for nine years and nine months for it to experience a purely paper increase in value by the same 33 1/3% as the Smith family cookies. And then, the same government that created that inflation will tax that 33 1/3% "profit". At the 20% capital gains tax rate set to return soon, the paper value of the asset must exceed the inflation rate by a quarter (3.75% if inflation is 3%, 5% if inflation is 4%, etc.) just to leave enough after paying the IRS (not including any state income tax) to have money worth the original purchase price of the asset. An honest tax code would index all capital gains to inflation, so that these paper gains are not taxed.

But under our current tax code, inflation is a double tax. As the above shows, it taxes as "income" these illusory gains. It is also a hidden tax on cash assets (including bank accounts, or contractual obligations of others to pay future amounts defined as some number of dollars. The uncertainty of how severe inflation may be in the future acts as a powerful disincentive to make long-term investments. A common criticism of US corporate culture is the obsession with "this quarter's profits", to the detriment of long-term considerations. How sophisticated are our betters in Europe, who make five-year plans, the Japanese who think in decades, or the Chinese who think in centuries! Well, is it any wonder, under the circumstances?

When people weigh investment decisions, they have to factor in the inherently uncertain nature of the returns to be had. It's one thing to sell your labor today for a specific amount of money; you know exactly what value you'll be getting in exchange for the time and effort you invest to earn it. But a decision to spend today in the hope that it will pay off many years hence is based on considering a wide range of possibilities: A continuum of returns, starting at none and increasing, with various probabilities for each, can be estimated and quantified. The popularity of lotteries and casinos indicates that some people are willing to make a bet that is unlikely to pay off, but that is self-correcting. The people who make rational decisions about risk and reward (and return with the capital to continue doing so) will always limit the former as compared to the latter.

Government policies introduce further uncertainty into that calculus (and I mean "calculus" quite literally; if you don't use that branch of mathematics, or rules of thumb derived from it, in making investment decisions, you probably aren't doing a good job of it). There is great risk that the money supply will be greatly inflated, robbing our currency of its value, and paper profits will then be taxed away, in reality robbing the asset of part of the little value it retains. Combine that with the knowledge that the Bush tax cuts will go away automatically, little if anything is likely to be done about it, and whatever is done will likewise be temporary (the next Congress will want to fiddle with taxes again; it's just what they do), and you have a recipe not for tasty cookies, but for economic disaster.
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Interview with a Zombie

Not with our friend Zombie, mind you...

Let the NAACP explain this

At an Atlanta tea party meeting....

I am America

Incorporation Insanity

I feel like I'm in a Twilight Zone episode. Yesterday, I was celebrating the RKTBA victory in McDonald v. Chicago in the chat room of The Ed Morrissey Show when the discussion turned to the crucial question of whether the Fourteenth Amendment had "incorporated" the Second Amendment to bind the states as well as the "Federal" government against infringing gun rights.

My reaction was described as "barking". I can't believe that learned men and women can read the same words I read and come to the conclusions they have reached. Either I'm barking mad, or they are.

I responded that the Second Amendment doesn't need to be "incorporated", because it applied to all levels of government ever since December 15, 1791. Just read its text:

A well regulated Militia, being necessary to the security of a free State, the right of the people to keep and bear Arms, shall not be infringed.

There isn't a word there saying that the "Federal" government can't infringe that right, but States can, unlike the First Amendment, which plainly opens with the phrase "Congress shall make no law..."

Somehow, the notion has become popular that the Constitution only defined the limitations on the powers of the "Federal" government, and did not limit the powers of the States. But that's complete nonsense: Article I, Section 10 explicitly restricts State power, Article IV is all about the States, and Article VI places limits on State laws.

The Tenth Amendment says:

The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.

I see this as yet another case of the Constitution helping to define the powers of States: It leaves it to the people of each state to write their own constitutions to determine what powers to grant the state government, provided that nothing in the Constitution either gives that power to the "Federal" government or places it off-limits to the states.

Since the Tenth Amendment was proposed en masse with eleven others, including the Second, one could plausibly argue that its wording informs or restricts the meaning of the Second. In my analysis, the only glimmer of a theory under which the Second Amendment doesn't apply to the States is found here. This reading of the Tenth basically says "If the Constitution doesn't come right out and use the word 'state' in declaring a limit on government power, then that limit only applies to the 'Federal' government, not the states".

But I'm not buying that reading. When I read the Declaration of Independence, the Articles of Confederation, the original Articles of the Constitution, Federalist Papers, and the Bill of Rights, I come to the inescapable conclusion that when any of those documents speak of rights of the people that must not be infringed, they mean that those rights are superior to the powers of any government, and a government which infringes those rights, in doing so is violating its very reason to exist.

[Click on the title above, or date stamp below, to see the full article.]So, am I barking mad, or is the judicial consensus so far from what our first Congress meant when they proposed the Second Amendment, and the states understood when they ratified it, that I just seem insane as a sane man must appear in a world gone mad?

Time Perspectives

Watch this, and think about what it's saying. Then think some more. This is about a fundamental problem that seems to be getting worse, not better.

Awesome campaign Ad

For some reason, I can't embed this:

America's new culture war: Free enterprise vs. government

Arthur C. Brooks had a column in yesterday's Washington Post (?!?).

Read it. Print it out. Email it to your friends. He nails it!

Money quotes:

"When it comes to support for free enterprise, we are essentially a 70(for)-30(against) nation.

"Free enterprise brings happiness; redistribution does not. The reason is that only free enterprise brings earned success."

"The 70 percent majority, meanwhile, believes that ingenuity and hard work should be rewarded."

"What matters most to Americans is the commitment to principle, not the exercise of power. The electorate did not repudiate free enterprise in 2008; it simply punished an unprincipled Republican Party."