Spending Crisis – Part I

George Noga
At root, the spending crisis is moral rather than economic.
Spending Crisis – Part I
Introduction and Background

By: George Noga – April 28, 2019

           This is the first post in our series about the spending crisis. It is a spending crisis and not a debt or deficit crisis because it is the spending that drives both the debt and deficits. It is a moral rather than an economic crisis because preventing the crisis requires only summoning the national will to control spending. It is about who we are as a people, what kind of country we bequeath to our children and our national security and survival. I have marshalled all the facts, logic and wordsmithery I possess to explain this crisis in an objective and non-political manner.

Our series is in four parts. Part II, Analyzing the Data, will be distributed May 5, Part III, Possible Solutions, on May 12, and Part IV, Can Catastrophe Be Averted?, on May 19. The full series is now on our website www.mllg.us. The series was reviewed in advance by three experts with diverse viewpoints. I carefully considered all their feedback, incorporated much of it and offered to publish any dissenting opinions.

         In addition to my MBA, CPA background, I have studied economics for 50 years. I devoted much of one summer in Montana to constructing a quantitative model of the US economy, including the deficit, which has proven to be highly accurate. I have been writing about the crisis of spending, debt and deficits for over a decade.

Background Information

         US GDP now is $21.0 trillion; the public debt is $16.3 trillion, while the total debt is $22.2 trillion. This results in a public debt to GDP ratio of 77.6% and a total debt to GDP ratio of 105.7%. The $5.9 trillion difference between the total debt and the public debt consists of intragovernmental debt, which mostly is money owed to Social Security and, to a lesser extent, to FHA and other agencies. For example, when Treasury spent the Social Security surplus, it issued special non-negotiable bonds.

        Throughout this series we use the public debt ratio and not the total debt ratio because intragovernmental debt is notional, with interest accrued and not paid in cash. It is analogous to writing yourself an IOU. Most who cite the higher total debt ratio do so out of ignorance or as a scare tactic. However, there are some credible sources who believe total debt is more relevant than public debt. If they are right, our debt ratio is 105.7% and not 77.6% and America is much worse off than described in this series.

           There are some who minimize the seriousness of the current ratio because it was higher (115%) in the aftermath of WWII (the only time prior to 2009 it was above 50%) and America easily recovered. However, the WWII deficit saved America from totalitarianism and was transitory. Afterward, war expenses ceased, Social Security ran surpluses, Medicare didn’t exist and demographics were favorable. Now, the deficit is structural; Social Security, Medicare and pensions run huge deficits and demographics are bleak. We are in the tenth year of an economic expansion and growth is 3%; yet, the FY 2019-2020 deficit will be $1.1 trillion and increasing each year thereafter.

       It must be noted that many states, counties and cities also are in serious debt trouble and will, at some point, require federal government bailouts. Private debt is hovering at an all-time high. The world debt to GWP (Gross World Product) ratio currently is 84% and spiraling upward. Global debt (public and private) is $230 trillion and is over 300% of GWP. Although these issues are beyond the scope of this spending crisis series, they deserve at least some recognition.

          We close with some examples that seem to defy expectations. Japan’s debt ratio is 250%, but dedicated pension assets lower the effective ratio to 110%. The NIKKEI index is down 46% from 1989 and economic growth is 1% amidst chronic deflation. Greece’s ratio hit 180%; it avoided default due to its small size and bailout by the EU. It’s economy contracted, pensions were halved and there was social and political upheaval. Italy, with a 130% ratio, is following in Greece’s tracks. Even though they avoided default, Japan, Greece and Italy did not escape the consequences of massive debt; they all have suffered lost generations and their crises are far from resolved.

Next on May 5th is Part II of our series about the spending crisis.

Earth Day 2019: Print This Email!

George Noga
Fight back against paternalistic, proselytizing, political preening.
Earth Day 2019: Print This Email!
By: George Noga – April 21, 2019

        “Please consider the environment before printing this email” is a common liberal animadversion appended to personal and business emails; it is wrong for four reasons: (1) it gratuitously injects politics into a non political situation; (2) the sender is clueless that it is a divisive political statement; (3) it is virtue signaling; and (4) it is factually wrong as printing does not harm the environment, but actually helps save our forests.

      Progressives would (rightfully) take umbrage if emails were appended with: “Please consider adoption before abortion”. It is even worse when businesses make political statements. Why would businesses, which would not deign to hector you about contentious political issues, arrogantly foist their ersatz environmental views about paper products on customers? You can and should push back. When I receive an offending personal email, I attach the following subscript to my reply.

         Please print this email. Trees are a farmed product grown expressly for paper. It makes no more sense to conserve paper to save trees than it makes to conserve cloth to save cotton. Paper is natural, biodegradable, organic, renewable and sustainable. Working forests employ millions of Americans and help the environment by providing clean air and water, wildlife habitat and carbon storage. There are more trees planted commercially each year than are consumed; there are more trees than 100 years ago. Failure to print hastens the conversion of forests into strip malls and parking lots.

         When I receive an offending business email, I append the preceding paragraph but also let them know that I resent their presumptive and unwanted intrusion into my personal life by injecting politics into a business relationship. I usually couple this with a demand that they remove my name from all their lists. When I receive responses from businesses, they claim they weren’t being political; they arrogantly and ignorantly believe there is universal agreement that conserving paper helps the environment. Well, if that were true, then what is their purpose in adding it to all their emails?

Tree Glut Causes Humongous Price Drop

 

         In the southeast US timber growing region, there is a veritable glut of trees which has driven prices down 50% to 70% and is causing growers steep losses. The volume of southern yellow pine (used for paper) has quadrupled in recent decades as many farmers replaced cropland with trees. In total, 2.2 million acres were replaced. Prices now are so low that it sometimes isn’t worth the cost to harvest trees. Somehow, this surfeit of trees, decades in the making, has eluded progressive tree huggers.

      Actually, I fully agree with the environmentalists’ admonition to “consider the environment before printing“. However, they (surprise) got it backwards. By all means, you should consider the environment – and then go right ahead and print all you want, the more the better. By printing, you can take great satisfaction in knowing you are doing your part to help the environment and to save our great American forests.

Next on April 28 MLLG begins its new series about the spending crisis;
This is by far our most thorough and analytic presentation of this issue! 

Hillary Loses 2016 Popular Vote Election

George Noga
AOC’s mother fled New York for Florida to escape sky-high taxation.
Hillary Loses 2016 Popular Vote Election
By: George Noga – April 14, 2019

       We are reminded ad nauseum by HRC and her media acolytes that she won the 2016 popular vote. The subtext is that Trump stole the election and it delegitimizes him, the electoral college and our republic. I heard this fusty canard once too often and sliced and diced the numbers – and came to a startling conclusion: Trump wins and Hillary Clinton loses a 2016 popular vote election. Here are the numbers.

       There were 136,669,276 total votes cast, of which HRC received 65,853,516 (48.18%) and Trump 62,984,825 (46.09%). In a true popular vote election however, there would have been a runoff because no candidate got an outright majority. In a runoff, HRC putatively gains Jill Stein’s (Green Party) 1,457,216 votes and Trump picks up Gary Johnson’s (Libertarian Party) 4,489,221 votes. The totals then would be Trump 67,474,046 and Clinton 67,310,732. I did not count the votes of the 26 other candidates, which were inconsequential and would have been split nearly equally.

          In the scenario above, Trump wins the popular vote by 163,314. Of course, in a popular vote election Trump and Hillary both would have campaigned differently with the outcome likely close. However, when you hear some latte left liberal regurgitate the HRC popular vote fairy tale, you now have the ammo to set them straight.

        Moreover, by one reckoning, Trump is the most legitimate president of our time. In office, he has done exactly what as a candidate he said he would do. He is totally transparent (maybe even too transparent) about telling Americans what he is thinking at any given time. The voters got precisely what they voted for, unlike say Barack Hussein Obama, who ran as a centrist but governed from day one as a progressive.

Blanca Ocasio-Cortez (BOC) Flees New York for Florida

         Alexandria Ocasio-Cortez’s mother (BOC) lived in New York most of her life; she worked two jobs as secretary and cleaning lady. Despite her hard work, BOC could not afford to live in New York. In an interview following her recent move to Eustis, Florida, she said, “I figured it was time to move to Florida.” She called her move a “no-brainer” and went on to say, “I was paying $10,000 per year in real estate taxes in New York but now I am paying $600 in Florida. It’s stress-free down here.”

        While AOC was running for Congress, BOC said, “She is fighting for the working class; she is fighting for immigrants.” AOC’s first act was to help kill 25,000 well paying Amazon jobs that would have been a godsend for workers. Based on her tax and spending positions, AOC will turn New York into even more of a hell hole for working class families. By her own account, BOC is working class and is overjoyed to bolt New York; her actions speak volumes as do the actions of millions of other New Yorkers who, like BOC, have escaped New York to stress-free states.

Progressive Paroxysms 

    Progressives have been having paroxysms over politically incorrect statues, monuments and murals. It is difficult not to conflate their actions with the Taliban’s barbaric erasure of history. It brings to mind a passage from Orwell’s 1984: “Every book has been rewritten, every picture repainted, every statue, street and building renamed and every date altered.” . . . . . . Once upon a time, Leftists used to say, “I disapprove of what you say, but I will defend to the death your right to say it.” Now they say, “I disapprove of what you say and I will stop you from saying it.“

Next, on April 21st, is our special Earth Day 2019 posting; don’t miss it!

Political Principles and Fake Media Honors

George Noga
Americans prefer to vote for the fool they know rather than for the devil they don’t.
Political Principles and Fake Media Honors
By: George Noga – April 11, 2019

          Previously, we blogged about some key non-partisan principles of American politics ; (1) there are no permanent majorities; (2) the longer any party is in power, the greater the chance it will lose; and (3) the role of money. Now, another principle, i.e. the power of incumbency.  We will identify more principles in future postings.

Principle: The Power of Incumbency

           In the 126 years since 1893 there have been only two elected presidents who lost reelection in a head-to-head race. Hoover lost because of the Great Depression and Carter lost due to economic disaster and fecklessness. Throughout history, Americans strongly prefer to vote for the fool they know rather than for the devil they don’t.

       And yes, this bedrock principle of American politics applies to our current president. According to econometric models with sterling track records for picking presidential winners, Trump would be a heavy favorite if the election were held today. Donald Luskin of TrendMacrolytics, which tracks GDP growth, gas prices, income, inflation, tax burden and payrolls, has Trump with 294 electoral votes in a blowout. Yale/Fair asserts Trump will win 54% to 46% even with just a mediocre economy. Politico says Trump has a strong shot at winning reelection in a landslide.

           Anything can – and likely will – happen between now and November 2020, but it would be a huge mistake to underestimate the power of incumbency. By the way, you won’t see anything like this (see infra) in the New York Times or on CNN.

Democrat Party 2020 Platform

          Based on their own proclamations, democrats stand for: reparations for slavery, a new wealth tax, impeachment, late-term abortion and infanticide, 70% top income tax rate, giving felons and 16-year-olds the vote, refusal to repudiate anti-semitism, free college tuition, Medicare for all, abolition of the electoral college, amnesty for illegal aliens, packing the Supreme Court, federal jobs guarantee for all, $15 minimum wage, green new deal (no air travel or cows and one car per family), abolishing ICE, major cuts to defense, abolishing filibusters, single-payer (government) health care, federal licensing and control of large corporations, gun control, nationalizing voter registration, abolishing or changing the Senate, imposing democratic socialism, statehood for DC and Puerto Rico and tearing down the existing walls on our southern border. With popular ideas like these, how can democrats possibly lose?

Journalistic Honors: The Pulitzer Prize and The Cronkite Award

          Recently, my wife and I spent a few weeks in a remote venue with access only to the New York Times and CNN. I had forgotten how truly horrid they are. There was no line demarcating news and opinion; they covered only stories fitting their narrative; and much of it was fake. They persisted in ballyhooing Trump-Russia collusion long after it was dead obvious to most regular people that it was mighty thin gruel.

         It is therefore fitting that the most prestigious journalistic honors are named after purveyors of fake news. Joseph Pulitzer was a scurrilous, muck-raking yellow dog publisher, best known for his fake news promoting the Spanish-American War. Walter Cronkite achieved his acclaim based on fake reporting of the Tet offensive. Moreover, these awards are given only to progressive journalists who toe the party line.

Fake reporters reporting fake news receive fake journalism

awards named for fake journalists famous for fake reporting.

       These journalism awards are so fake they inspired us to come up with similar awards for other professions such as: the Kevorkian/Gosnell Prize for Excellence in Medicine, the Bernie Madoff Award for Distinction in Finance or the John Gotti Prize for Accomplishment in Law Enforcement. We could go on, but you get the drift.

Next on April 14th – Did HRC really win the 2016 popular vote?

Wanted: More Millionaires and Billionaires

George Noga
Newly minted millionaires and billionaires are essential for a thriving society.
Wanted: More Millionaires and Billionaires
By: George Noga – April 7, 2019

         Alexandria Ocasio-Cortez condemned “a system that allows billionaires to exist“. Her chief of staff tweeted “Every billionaire is a policy mistake.” Pocahontas called billionaires “freeloaders“. Bernie Sanders said “Billionaires’ insatiable greed is having an unbelievably negative impact on the fabric of our country“. The economic illiteracy of such people is staggering. Even the laughable commie economists (oxymoron) of the old USSR understood that new millionaires were vital to economic success.

      In a market economy, one becomes rich only by creating a product or service voluntarily purchased by sovereign consumers. The more people helped, the greater the wealth. Sam Walton, Bill Gates, Steve Jobs and Jeff Bezos became billionaires by improving the lives of hundreds of millions, or even billions, of people. Newly created wealth is the best metric for gauging how well a society is innovating and serving the needs of its people. A society with no new wealth creation is stagnating.

        Many who well understand that wealth creators are vital to America’s prosperity, nonetheless believe inherited wealth is evil. They are wrong; however, we leave that issue for another day. We do note however that almost all great wealth is dissipated within three generations due to the ever-increasing number of heirs, estate taxes, charitable bequests and poor decision making. Also, much of the motivation of the original wealth creators was to provide financial security for future generations.

        Not only is the latte left dead wrong about wealth creation, its positions on many other economic issues – tax rates, minimum wage, free college, Medicare for all and rent control – are voodoo economics and nothing short of modern day witchcraft.

Income tax rates/minimum wage: These were subjects of full postings on March 3 and 10 respectively and are available on our website: www.mllg.us. In those posts, we showed that higher tax rates do not result in more tax revenue and that minimum wages are insidious and harmful, especially to the people they purport to help.

Free college: Social science degrees from overcrowded schools, with courses taught by graduate assistants, are cruel hoaxes. The inevitable result is a surfeit of psychology, sociology and hyphenated-studies majors driving for Uber. Free college devalues all college degrees and the added competition from more degrees suppresses wages. There will be more degreed people seeking the same number of jobs requiring degrees.

Rent Control: Government creates housing shortages by restricting development and then compounds it by enacting rent control. They blame landlords when the problem is due entirely to government failures. Ultimately, it leads to more homelessness.

Medicare for all: The bill Democrats introduced in Congress provides for rationing and reinstitutes the dreaded Obamacare death panels. Even the Canadian system, which is better than many, is a failure; see our July 22, 2018 post entitled “Canadians Flock to Whitefish“. In Canada, the median wait time between referral and treatment is 21 weeks and years in some provinces. Over one million Canadians (3%) are on wait lists when same day service is inexpensive and readily available in the USA.

        Progressives prefer to attack the wealthy rather than to improve the lot of the poor; they care more about appearances, class warfare and political talking points than about results; it is much easier to demagogue billionaires than it is to reduce poverty. Instead of billionaires being policy mistakes, good economic policy fosters creation of more billionaires. Most Americans don’t resent success, they want to achieve it!

Our next post challenges Hillary Clinton’s claim to winning the 2016 popular vote.

Jussie Smollett’s America

George Noga
If America is a crucible of hate as the left believes, there should be many acts of racism. Yet, there are so few such incidents that progressives must invent them.
Jussie Smollett’s America
By: George Noga – March 31, 2019

           I have written often about Matt Shepard and the “hate crime of the century” and I am disappointed with myself for initially believing the media version of Matt’s death because I could not reconcile the reported facts with the America I know and love. I had similar disbelief when I first heard the media reports about Jussie Smollett.

       Racial hoaxes have been a progressive staple since at least the 1987 Tawana Brawley episode. Al Sharpton created the fraud, falsely accusing four white men of raping a black woman. Although the Brawley hoax was debunked, Sharpton vaulted into national prominence, made millions in media deals, ran for president and visited the Obama White House 82 times. He has never apologized. Sharpton established the paradigm that there is much to gain and little to lose by creating racial hoaxes.

       Everyone is familiar with, inter alia, the Duke lacrosse and UVA hoaxes, but there have been many more. Following are 20 hoaxes since Trump’s election, all hyped by the media. There are many more, but the following list provides a good sampling.

  1. Muslim woman at University of Michigan alleged threats for wearing hijab.
  2. Bisexual student fakes Trump-inspired hate crime.
  3. Ashley Boyer in Philadelphia reported phony racial slurs and threats.
  4. Louisiana woman made up story of attack by a man wearing a MAGA hat.
  5. Member of black church arrested for vandalizing his own church.
  6. NY woman falsely claimed subway attack by Trump supporters.
  7. Man set his own car on fire and painted racial slurs on his own garage.
  8. Native American falsely claimed harassment by Trump supporter.
  9. Muslim student at Beloit College wrote anti-Muslim slurs on his dorm door.
  10. Israeli man perpetrates bomb threats against synagogues and Jewish schools.
  11. St. Olaf black student sent racial threats.
  12. Air Force Academy prep school student wrote racist notes targeting himself.
  13. Kansas State student wrote racist graffiti on his own car.
  14. Missouri high school student of color wrote racial slurs on school mirrors.
  15. In Texas, a Mexican woman fabricated a note with anti-Hispanic slurs.
  16. A NY woman made up a story about white teens yelling racial slurs.
  17. Drake University student made five racially charged threats – against himself.
  18. Anti-Semitic vandalism in NY was work of Democrat activist.
  19. A black parishioner in MS burned his church and blamed Trump supporters.
  20. Trump inspired hate crime stories promulgated by Native American.

The left believes America is a crucible of hate and violence and a cauldron of racism and bigotry inhabited by gun-toting, homicidal, psychotic homophobes. In such a country there should be numerous and frequent racist acts. Yet, there are so few such incidents that progressives and diversity-crazed bureaucrats must invent them. In truth, racist incidents in America are rare exceptions to what is now the norm.

       The real hate crime is the visceral contempt, revulsion and loathing progressives and the media have for America, which was on full display throughout the Smollett hoax. The left seeks to destroy America’s moral legitimacy in order to increase its power and to give them license to harass opponents. The American left, once known for compassion and justice, is now consumed with hatred – for America.

Our next post is entitled: “More Billionaires Wanted”.

Socialism vs. Capitalism: Results – Theory – Morality

George Noga
“Tyranny is the political corollary of socialism, as representative government is the political  corollary of a market economy. To suggest otherwise ignores history.”  (Ludwig von Mises)
Socialism vs. Capitalism: Results – Theory – Morality
By: George Noga – March 24, 2019

        Apologists for socialism disingenuously compare ideal socialism to the actual practice of capitalism. What if we compared ideal capitalism to real-world socialism? In this post, we compare results to results, theory to theory and morality to morality.

The Results of Socialism Compared to the Results of Capitalism

       No serious economist argues socialism produces better results than capitalism. Socialism never has created sustained prosperity. It can only achieve a brief illusion of prosperity by plundering a nation’s wealth, confiscating assets, inflating, borrowing, nationalizing, and printing worthless currency. But it always ends the same way, i.e. starvation amidst plenty. Socialism’s failures are legion: the USSR, Venezuela, Cuba, North Korea and the Chicoms. It never has worked for more than 25-50 people, such as a family, clan or tribe, where familial bonds supercede economic considerations.

In just the past 25 years (per the World Bank) capitalism has cut extreme poverty by 75% – equal to 1.2 billion human beings, with an additional 50 million being lifted out of poverty each year. Every day, another 135,000 people escape poverty. Today less than 10% of the world’s population live in extreme poverty and it could end within our lifetime. This is by far the greatest economic accomplishment of all time, thanks to capitalism. Capitalism’s successes also are legion: the USA, Western Europe, Japan, the Nordics, Singapore, Canada, Australia, Botswana, New Zealand and South Korea.

The Theory of Socialism Compared to the Theory of Capitalism

        Under ideal socialism, the governing values of the citizens are community and equality; they view their economic well being as a common enterprise. They share the work according to their abilities and no one demands extra benefits due to greater talent or work effort. All inequalities due to undeserved advantages or disadvantages are eliminated. In this socialist utopia, all the people are economically equal.

        Ideal capitalism means self interest and markets. Some citizens are more talented,  exert more effort or take greater risks; hence, some are wealthier than others. But this arouses no envy because all the citizens are unselfish. When someone is in need, neighbors help. Just as in the socialist utopia, the citizens care about each other and value community. All of the good aspects of the socialist utopia are present but so are additional benefits such as innovation and the production of more and better goods.

          If one assumes people under ideal socialism are entirely altruistic, then it is only fair to make the same assumption under ideal capitalism. Moreover, the free market isn’t dependent on altruism and it functions even when comity is in short supply. Socialism always fails, in theory and practice, because it is fundamentally opposed to human nature; people are hard wired to respond to self interest and to incentives.

The Morality of Socialism Compared to the Morality of Capitalism

        Comparing results to results is no contest; capitalism wins hands down. But when comparing ideal to ideal, capitalism also wins because, if people act altruistically, the incentives of capitalism produce greater prosperity. Socialists distort by comparing an idealized version of socialism to non-idealized capitalism and by assuming people act selflessly under socialism but selfishly under capitalism. What if we compared ideal capitalism to socialism as actually practiced – with its mass murders, brutal dictators, starvation, grinding poverty and human desperation as in say, Venezuela?

        Capitalism, non-coercive cooperation in markets, is also superior morally. People succeed only by providing goods valued by their fellow man. The most potent force on earth is a consumer armed with a free choice; even a large corporation can’t force anyone to buy its products. The political corollary of socialism is tyranny and it inevitably results in starvation amidst plenty; there is nothing moral about that.

Next: Hotel Europe – you can check out any time, but you can never leave.

SunRail – Incivility – AOC – War on Religion

George Noga
SunRail could buy a new Toyota Prius for every commuter and save $50 million!
SunRail – Incivility – AOC – War on Religion
By: George Noga – March 17, 2019

           SunRail: In our post of August 26, 2018, we provided the math showing how SunRail could pay every rider $35 for Uber and save money; go to www.mllg.us. to read it. But wait, it gets even uglier! SunRail could buy each rider a new Toyota Prius every two years and save $50 million. The math is simple. It costs SunRail $34 million annually to operate, or $68 million for 2 years. SunRail’s daily ridership is 3,500 and a basic Prius costs $21,500 less a $4,500 tax credit. SunRail could buy 3,500 Priuses for $60 million with $8 million left over. The used Priuses then can be sold for $12,000 each, netting $42 million and increasing the taxpayer savings to $50 million.

           Covington Students: This passage by C.S. Lewis, from 1952, (edited for length) is apropos to the incident involving the Covington students. “Suppose one reads a story of atrocities. Then suppose something turns up suggesting the story might not be true, or not so bad as first made out to be. Is one’s first feeling “Thank God, even they aren’t so bad as that.” or, is it a feeling of disappointment and a determination to cling to the first story for the sheer pleasure of thinking your enemies as bad as possible? If it is the second, it is the first step in a process which will make us into devils. If we give that wish its head, later on we shall wish to see grey as black and then to see white itself as black. Finally, we shall insist on seeing everything as black and not be able to stop doing it and we shall be fixed forever in a universe of pure hatred.”

         AOC’s Green New Deal: Ocasio-Cortez was at it again stating, “The world will end in 12 years if we don’t address climate change.” She called the fight against climate change her generation’s “WWII”. Alarmists have predicted Armageddon for decades; in 2009, Al Gore said, “New York City will be under water by 2015.” If Earth’s 7.7 billion people are going to perish in 12 years, the only way to save the planet is to attack China and India to halt their CO2 emissions, which are 40% of the world’s. There is nothing the US and Europe can do on their own. What is the point of the green new deal, which affects only the US, if we all are dead by 2030. You will know AOC is serious when she publicly calls for attacking China and India.

        War on Religion: Diane Feinstein attacked Notre Dame law professor Amy Barrett saying, “The dogma lives loud within you“. This was followed by attacks from Senators Kamala Harris and Mazie Hirono on the Knights of Columbus and then by the entire liberal mob on Karen Pence. But 21st century progressivism is itself a rabid, militant religion and far more dogmatic than Christianity. It has its pantheon of gods: climate change, abortion-on-demand and group identity. It has a Garden of Eden where man fell from grace via toxic masculinity, heteronormativity, intersectionality, white privilege, cultural appropriation, microaggressions and lack of criticality.

         Its demons are guns, religion and CO2; its Great Satan is Donald Trump. Its angels are windmills and biofuels. Its sacraments are recycling and virtue signaling. Its eucharist is gluten free, non-GMO organic food. It seeks to silence, persecute and shame apostates. Salvation is only possible through sustainability, inclusion, diversity, empowerment, checking privilege, social justice, equity and tolerance. Whew!

Coming March 24th – Capitalism vs. Socialism in Theory and Practice.

The $15 Minimum Wage

George Noga
Progressives believe putting poor people out of work is now a moral imperative.
The $15 Minimum Wage
By: George Noga – March 10, 2019

        Jerry Brown said raising the minimum wage “puts a lot of poor people out of work”. He elaborated, “Economically, minimum wages don’t make sense, but morally, socially and politically it makes sense“. This was a rare moment of truth for liberals, who believe creating unemployment among the poor now is a moral imperative.

         The minimum wage has been a liberal leitmotif for 80 years, since its inception in 1938 at $.25 per hour, even though it is antiempirical and thoroughly discredited by economists of all persuasions, who are near unanimous that it is economic poison, harming the people it purports to help. Even children with lemonade stands understand when the price of anything (labor) goes up, there will be demand for less of it.

        As with all progressive causes, there are two groups of supporters. At the core, there always are special interests, in this case labor unions, whose contracts contain automatic differentials over minimum wage. Unions also support it because it prices the poor and minorities out of the labor market, thereby reducing competition for lower paying jobs. The second group are virtue signallers doing it for self esteem. Like all other warm, fuzzy, feel-good bromides, it enables soft hearted and soft headed liberals to retreat into their plastic bubbles and to revel in their pristine intentions.

         Following are but five of the problems with the minimum wage:

1. It is bad economics, disproportionately harming the poor, minorities, young and low skilled by putting them out of work. Every time the minimum wage goes up, hundreds of thousands of jobs are lost. Each increase further incentivizes businesses to relocate and/or to automate. More robots anyone? It leads to greater inequality in America.

2. It involves less than 1% of workers. Most who earn minimum wage do so for six months or less; virtually no heads of household or full time workers are affected.

3. Most minimum wage workers are not poor. The average household income for a family with someone earning the minimum wage is over $50,000; they are spouses and teenagers living at home – like the kid who delivers pizza to buy gas for his BMW.

4. Those in poverty need jobs, not a higher minimum wage. A majority of those in poverty don’t work and raising the minimum wage makes it harder for them to find jobs. Remember: the real minimum wage always is zero, zilch, nada, niente.

5. The earned income tax credit is reduced. By lowering the EITC, the benefit of a higher minimum wage is substantially negated and creates disincentives to work. Moreover, those receiving unemployment and welfare do not benefit in any way.

          In our last post on Hauser’s Law (on our website: www.mllg.us) and this post on minimum wage, we sought to address timely economic issues in an insightful, factual, principled manner not usually found in the media; I hope we succeeded. Please feel free to email us at mllg@cfl.rr.com with any questions or comments; we will try to respond, but please allow some time as we do not frequently check that email.

       Of course, we couldn’t resist taking our usual jabs at progressive politics even though we have many left-leaning readers, who I appreciate and from whom I hear regularly. I would like to believe that this blog prompted some of them to reconsider their positions about raising marginal tax rates and the minimum wage.

Next on March 17th: SunRail, AOC, Covington KY students and incivility.

Hauser’s Law: Why You Can’t Soak the Rich

George Noga
Taxpayers are not sheep docilely waiting to be shorn.
Hauser’s Law: Why You Can’t Soak the Rich
By: George Noga – March 3, 2019

        There are 7 reasons it is impossible to soak the rich by raising income tax rates; there is only one way it can be done – revealed herein. Full disclosure: I have firsthand knowledge of this by virtue of being a CPA tax professional and, during the 1970s and 1980s, the founder and CEO of one of the largest tax shelter firms in America.

Why You Can’t Soak the Rich With Higher Tax Rates 

1.  Hauser’s Law: Tax revenue remains constant at 18% of GDP (20% in good times, 16% in bad times) regardless if the top rate is 28% or 92%. This has been true for the 75 years since WWII. Later in this post we explain why Hauser’s Law works.

2. Elasticity of Taxable Income: ETI is a variant of Hauser’s Law and is measured by comparing tax returns before and after tax increases. For incomes above $500,000 the ETI is -1.2, which means the higher rate collected less money than before. For capital gains and dividends, the ETI shows that virtually no added tax is collected.

3. The rich are not the same people: The highest bracket taxpayers are not the same people each year. Someone who runs a family business with modest income suddenly becomes rich for one year when the business is sold. It is precisely such ordinary people (rich for one year only) who get caught in the crosshairs of high tax rates.

4. There is no way to identify the rich: Government (thankfully) has no data on wealth, only on certain types of income – which is a poor surrogate for wealth. It is impossible to soak the rich if there is no way to know who they are. Also see #3 supra.

5. Corporate taxes are not paid by owners: Businesses and corporations collect taxes but the money they pass along to government is not their money. Nearly all business taxes are passed along to consumers as higher prices – extremely regressive.

6. There aren’t enough rich: Not only are they different people from year to year, there just are too few of them to make soaking them worthwhile. The only way to raise significantly more revenue within the current tax code is to tax the middle class.

7. The income of the truly rich is not taxed as ordinary income; it is capital gains.

Why Hauser’s Law Works and ETI is Negative

        Hauser’s Law appears counterintuitive; why would government collect the same percentage of taxes when the top rate is 92% as it collects when it is 28%? The answer lies in human behavior; people are not sheep docilely waiting to be shorn. Higher rates incentivize people to go to great lengths to reduce taxes. They will work, save and invest less; barter, retire earlier; hide, defer and underreport income, convert ordinary income to capital gains and not realize capital gains without offsetting losses.

        They employ tax shelters; shift income to lower bracket family members; seek out tax-free income; change the amount, location and composition of taxable income; exploit ambiguities and loopholes; shift income to corporations; lobby aggressively for tax breaks, move from one place to another – even outside the US; move into the occult economy; employ top tax lawyers and accountants and much more – mostly legal.

How to  Soak the Rich – Using the Tax Code

       There is only one way to soak the rich and that is with lower tax rates. It works for the same reasons that Hauser’s Law works; the rich become disincentivized to take measures to reduce their tax bill. Whenever rates drop, the rich pay a much higher share of taxes than before. The 2003 Bush tax cuts resulted in the largest tax increase on the rich in American history; they paid over double what they paid when Carter was president. It works every time, but you won’t hear it from AOC and her compadres.

Our next post debunks another liberal shibboleth, the $15 minimum wage.