'Just Asking'

'Just Asking'

Thomas Sowell

May 19, 2015



In a recent panel discussion on poverty at Georgetown University, President Barack Obama gave another demonstration of his mastery of rhetoric -- and disregard of reality.

One of the ways of fighting poverty, he proposed, was to "ask from society's lottery winners" that they make a "modest investment" in government programs to help the poor.

Since free speech is guaranteed to everyone by the First Amendment to the Constitution, there is nothing to prevent anybody from asking anything from anybody else. But the federal government does not just "ask" for money. It takes the money it wants in taxes, usually before the people who have earned it see their paychecks.

Despite pious rhetoric on the left about "asking" the more fortunate for more money, the government does not "ask" anything. It seizes what it wants by force. If you don't pay up, it can take not only your paycheck, it can seize your bank account, put a lien on your home and/or put you in federal prison.

So please don't insult our intelligence by talking piously about "asking."

And please don't call the government's pouring trillions of tax dollars down a bottomless pit "investment." Remember the soaring words from Barack Obama, in his early days in the White House, about "investing in the industries of the future"? After Solyndra and other companies in which he "invested" the taxpayers' money went bankrupt, we haven't heard those soaring words so much.

Then there are those who produced the wealth that politicians want to grab. In Obama's rhetoric, these producers are called "society's lottery winners."

Was Bill Gates a lottery winner? Or did he produce and sell a computer operating system that allows billions of people around the world to use computers, without knowing anything about the inner workings of this complex technology?

Was Henry Ford a lottery winner? Or did he revolutionize the production of automobiles, bringing the price down to the point where cars were no longer luxuries of the rich but vehicles that millions of ordinary people could afford, greatly expanding the scope of their lives?

Most people who want to redistribute wealth don't want to talk about how that wealth was produced in the first place. They just want "the rich" to pay their undefined "fair share" of taxes. This "fair share" must remain undefined because all it really means is "more."

Once you have defined it -- whether at 30 percent, 60 percent or 90 percent -- you wouldn't be able to come back for more.

Obama goes further than other income redistributionists. "You didn't build that!" he declared to those who did. Why? Because those who created additions to the world's wealth used government-built roads or other government-provided services to market their products.

And who paid for those roads and other government-provided services if not the taxpayers? Since all other taxpayers, as well as non-taxpayers, also use government facilities, why are those who created private wealth not to use them also, since they are taxpayers as well?

The fact that most of the rhetorical ploys used by Barack Obama and other redistributionists will not stand up under scrutiny means very little politically. After all, how many people who come out of our schools and colleges today are capable of critical scrutiny?

When all else fails, redistributionists can say, as Obama did at Georgetown University, that "coldhearted, free-market capitalist types" are people who "pretty much have more than you'll ever be able to use and your family will ever be able to use," so they should let the government take that extra money to help the poor.

Slippery use of the word "use" seems to confine it to personal consumption. The real question is whether the investment of wealth is likely to be done better by those who created that wealth in the first place or by politicians. The track record of politicians hardly suggests that turning ever more of a nation's wealth over to them is likely to turn out well.

It certainly has not turned out well in the American economy under Barack Obama.

Jobs: How to create them

Jobs: How to create them

By John Stossel Published April 29, 2015
FoxNews.com





I took a camera to Times Square this week and asked people, “What creates jobs?” Most had no answer.

One said, “stimulus!” What? Government creates jobs? No!

I suppose it’s natural that people think government creates jobs because politicians always say that.
Humans have needs and desires. Entrepreneurs see those needs as opportunity. They hire people not out of generosity or because government told them to -- but because it’s profitable to employ people if they produce valuable goods.

“We’ve now created more than 10 million,” said President Obama. But that just meant that he took office at the start of the recession, and finally job creation resumed.

He didn’t cause that. In fact, his taxes and complex regulation slowed job creation.

His 2012 presidential election rival, Mitt Romney, was a little more free-market-oriented, but he sounded like Obama when he talked about jobs. He had “a plan” to add 12 million. Don’t assume his plan was just to get government out of the way of the private sector -- Romney said it’s a bad idea to cut government spending during a recession.

FDR’s New Deal was the dawn of belief that jobs flow from government. FDR didn’t seem to care whether jobs people did were productive or sustainable. He just wanted something done about the “armies” of unemployed. If they weren’t given jobs, they might become a real army and revolt.

Now that government has lots of power, people look to it to create jobs. Communist countries had five-year plans. They didn’t work.

That’s because jobs come from government getting out of the way and letting employers produce goods.

Every new layer of regulations sounds nice -- protecting the environment, providing more health care, forbidding discrimination against disabled people -- but most rules do more harm than good.

Humans have needs and desires. Entrepreneurs see those needs as opportunity. They hire people not out of generosity or because government told them to -- but because it’s profitable to employ people if they produce valuable goods.

If it’s not profitable, that means those people would be better employed doing something else. The prices customers are willing to pay and the wages workers accept are the best indication of which jobs can be done profitably and therefore ought to be done.

But politicians don’t trust business owners to make those decisions. Some also resent it if entrepreneurs succeed without kissing the politicians’ ring.

President Obama famously said, “If you’ve got a business, you didn’t build that. Somebody else made that happen.”

I’d think Hillary Clinton would have learned from the outcry that followed, but no -- she then said, “Don’t let anybody tell you that it’s corporations and businesses that create jobs! That old theory, trickle-down economics, has been tried. That has failed.”

But it hasn’t failed. Free markets lifted a billion people out of poverty during Hillary’s career. She just won’t acknowledge it. Lawyer-politicians aren’t comfortable with creative destruction they don’t control. They prefer central planning.

That’s why Hillary also said, “I voted to raise the minimum wage. And guess what? Millions of jobs were created.”

This, too, is absurd. Politicians act as if they can wave a magic wand and grant everyone more money. But minimum wage laws don’t create jobs. They just make lower-paying jobs illegal. Some of those jobs go away. That’s basic economics.

The effect on the economy is small because 95 percent of American workers earn more than the minimum. But the more employers are forced to pay, the fewer people they’ll hire. McDonald’s responded to recent demands for higher wages by making plans to replace cashiers with automated services. Once more, political “solutions” create new problems.

People need jobs, and millions find dignity in work, but not from jobs that others are forced to provide. People want to be genuinely useful. They don’t just want to go through the motions.
More and more, Americans want jobs that have meaning and “purpose,” says John Havens, author of “Hacking Happiness.” “Purpose” usually means creating actual wealth.

Governments talk about five-year plans and false guarantees of stability, but truly futuristic thinking happens when governments leave people free to explore, innovate and profit. If the politicians don’t screw that up, that process will create jobs we haven’t even imagined yet.

Economics for Everyone

Good real-world explanations of how economics and government intervention affects all of us (in seen and unseen ways)

‘Popular Economics’ Presents Economics For The Everyman
Many economists have physics envy, causing their obsession with esoteric, complex charts and formulas. John Tamny’s new ‘Popular Economics’ instead explains the miracles of free human action.

By Jared Meyer
MAY 5, 2015

“Popular Economics: What the Rolling Stones, Downton Abbey, and LeBron James Can Teach You about Economics,” by John Tamny. Regnery (April 2015), $27.99.

You’re an economist and you don’t even know it. Oh, and your high school economics teacher didn’t know anything. These are two of the main points of John Tamny’s new book, “Popular Economics.”


Tamny, who edits RealClearMarkets and the political economy section of Forbes, uses his 240-page book to remind everyone of the importance of applying basic economic principles to understand the world. Topics previously viewed as boring or confusing, such as capital gains, comparative advantage, anti-trust law, and currency devaluation, clarify though entertaining connections to popular culture.

Tamny echoes the insights of the great nineteenth-century French political economist Frédéric Bastiat throughout the book. People justify too much government policy based on its “seen” positive effects. However, a policy’s negative “unseen” effects are just as real, and can more than outweigh any promised benefits.

Economics Can Be Intriguing

As for the blame, Tamny places it squarely on economists for “mystifying” their profession. Instead of working to describe human action and how voluntary exchange leads to value creation, modern economics has become obsessed with overly complex formulas and charts that are far-removed from reality. Many people detest the hours they had to spend sitting in an Econ 101 class.
As for the blame, Tamny places it squarely on economists for ‘mystifying’ their profession.

But this is not an indictment of the students or a problem with actual economics. The problem arises with how the subject is taught and viewed by academic economists who often suffer from a form of physics envy.

Economics studies human action, so encompasses an inherent problem with attempting to model this with the precision expected of the physical sciences. People left to their own devices are diverse in their ideas, perspectives, and motivations. The Progressive mindset is that greater government control over individuals makes it easier to predict outcomes. However, free choice and innovation do not lend themselves to accurate prediction by mathematical models.

People do not always act rationally, especially when it comes to money. This is just one way in which the real world is much more complex than neoclassical economic models suggest (and most economists wish). Even when economists have laudable intentions, they cannot guarantee their predicted outcomes as long as prices change and individuals have freedom to choose. Better to leave individuals free to create value though innovation and trade.

The Abortive Effects of Big Government

What are some of ways to understand economics under the Tamny, anti-economics-as-physics approach? First, the rich will be just fine if politicians raise their tax rates. Don’t stop reading here, as that is not the point. When marginal tax rates creep up, government takes more and more money from innovative, successful people. Every dollar that Sergey Brin, Peter Thiel, or Jeff Bezos lose to taxes is another dollar they cannot invest in the next promising entrepreneur. This is how companies such as Uber, Facebook, and Apple all got their start.
Every dollar that Sergey Brin, Peter Thiel, or Jeff Bezos lose to taxes is another dollar they cannot invest in the next promising entrepreneur.

Entrepreneurs need capital, and the only way government can accrue capital is to take it from citizens through taxes. Instead of flowing to entrepreneurs from those who have been successful, this redirects capital towards “wasteful government spending” (what Tamny claims is a redundant phrase).

Against the seemingly-endless calls for more government spending to create jobs, Tamny argues that “the important question is not how much should government spend to create something as transformative and life-enhancing as the internet, but how much sooner would something as transformative and life-enhancing as the internet appear without the heavy spending of government?” John Maynard Keynes is probably rolling in his grave.

Government bureaucracy is rarely (accurately) described as innovative—as every Department of Motor Vehicles or U.S. Post Office visitor knows. Moving to regulation, Tamny’s main argument is that regulators are always a step or more behind their peers who work in industry, as the best and brightest rarely pursue rigid, tedious government jobs when potential fortunes tantalizingly wait in the private sector.

This is one reason no government bureaucrat could have foreseen the economic appeal or effect of any Apple product, much less designed it. Every time politicians and regulators look down at their iPhones, iPads, or Apple watches, they should be reminded just how the economy actually grows.

We’re All Millionaires Now

The benefits of economic growth extend far beyond tech billionaires. Advances in Internet technology, which remains one of the least-regulated sectors of the economy, have allowed most Americans to carry millions of dollars in their pockets. This means, as Tamny explains, is that the capabilities of all the features in a mid-tier iPhone would have cost over $3 million the year before Bill Clinton was elected president. The opportunity to earn massive profits is what propelled cell phones from the comical bricks the top 1 percent of 1 percent of Americans toted around in the early 1980s, to today’s pocket-sized phone-camera-encyclopedia-television-computer hybrids.
The capabilities of all the features in a mid-tier iPhone would have cost over $3 million the year before Bill Clinton was elected president.

On income inequality, Tamny writes that “growing income among the top earners is a sign that enterprise is being rewarded and technology is advancing… a decline in wealth inequality would be cause for worry, because it would signal reduced opportunity for the ambitious and a stagnating standard of living for everyone else.”

Since those who occupy the top rungs on the income-distribution ladder change, and they earn their fortunes by providing value to others, income inequality “simply does not matter” in a society that allows new entrepreneurs and investors to take chances that could pay off in a rise to the top. In other words, income inequality provides incentives to invest in the proverbial next big thing, then it transforms that next big thing from a luxury good into a common good.

In addition to the smartphone example, much of the latest technology is offered free to users. Everything from Facebook to Twitter to Google search costs users no money. The information age has extended its near-endless benefits to those with low incomes.

Everyman Economics

As for money, many people, including key policymakers, view saving as a waste. They adopt the archaic view that when someone saves a dollar it sits idle as if it were simply hidden under a mattress. This is not true. Instead, saving or investing money allows capital to move from those who have little use for it now to those who do. A dollar saved is a dollar spent—just more effectively. No one would honestly argue that a professional athlete who wastes his millions on useless toys and ends up penniless is doing the right thing for himself or the economy. Yet this is essentially the thrust behind government stimulus spending for the sake of spending.
Those who tune out when they hear the word economics perk their ears when topics such as cars, movies, or sports are discussed.

Too often people view markets (or governments) as a single-acting body. Rather, as Tamny writes, “Markets are not a living breathing organism any more than an economy is. Markets are simply people with differing views on the price of just about everything. For that reason, markets cannot be said to function properly or improperly; they just function” (italics in original). For this reason, distant bureaucrats cannot control the economy. When policymakers do try to control markets, they skew the important information that true market prices convey.

Tamny covers a variety of other controversial topics including the estate tax, energy independence, and outsourcing. The first he argues is bad, the second pointless, and the third positive. He is persuasive, along with his assessment of how presidents Hoover and Roosevelt mishandled and prolonged the Great Depression.

Even those well-versed in Tamny’s view of economics will walk away from reading the book as more-effective communicators of their views. Those who tune out when they hear the word economics perk their ears when topics such as cars, movies, or sports are discussed. Others, especially those who hated economics in school, will realize that they, too, act as economists every day. “Popular Economics” shows that the keys to economic growth are as easy to understand as why LeBron James applies his talents by playing basketball instead of football.

Jared Meyer is a fellow at Economics21 at the Manhattan Institute for Policy Research. You can follow him on Twitter @JaredMeyer10.