Hurricane Warning!

George Noga

Hurricane season began on June 1 and provides the common thread for this post. It addresses hurricanes, climate change, price gouging and economics of storms

By: George Noga – June 5, 2016

    To observe the beginning of hurricane season, we address a trio of hurricane related topics: (1) climate change; (2) storm economics; and (3) price gouging. As you have come to expect, our analysis of these issues is not the usual pap you find elsewhere.

Hurricanes and Climate Change

    The last hurricane to hit Florida was Wilma in 2005. This 10-year hurricane-free streak dwarfs the prior record of 5 years that stood for 165 years. This is especially remarkable considering 40% of all hurricanes impact Florida. This decade of  clement weather follows dire predictions by global warmists that hurricanes would be more frequent, last longer, have stronger and more intense winds and cause more damage.

    Warmists also warned of  many more severe weather events worldwide. Munich Re, one of the world’s leading reinsurance companies, performed the first ever analysis of global weather-related losses incorporating normalization adjustments for inflation, population growth, wealth increases and other variables. Its study concluded there was “no statistically significant trend for total weather-related events in the past 20 years“.

    Let’s suppose a hurricane hits Florida. Global warmists and their media sycophants instantly will cite it as incontrovertible evidence of climate change. I hope we avoid hurricanes again in 2016; but if one should hit, brace yourself for the inevitable onslaught of self righteous prattle – but remember, it has been 165 years since there have been fewer hurricanes and weather losses are trending downward worldwide.

Hurricanes and Putative Economic Benefits

    It is a testament to economic illiteracy that this question persists in the 21st century. Yet, in the aftermath of any disaster, the media trot out this fusty canard. A reductio ad absurdum is all that is needed to give it the lie. If a mega-disaster struck destroying everything, we clearly are worse off despite any increased economic activity it may spawn in the short run. Following is an example of the relevant economic analysis.

    Postulate there is a small island with aggregate wealth of $1 million in homes and property. Economic growth is slow and some on the island are unemployed. A storm destroys the entire wealth of the island. The whole population works for one year and succeeds in rebuilding everything. Looking at statistics, GDP was $1 million, much higher than normal, and unemployment was zero. Yet the overall wealth of the island is unchanged and, in fact, is much less than it would have been without the storm.

Hurricanes and Price Gouging

    Americans accept that prices for the same product vary under different conditions. They understand why hotel rooms in small college towns cost more the weekend of a big game and why tickets for the big game cost more than a regular game. We readily accept all these things; why should it be any different following hurricanes?

    Take the case of generators. Entrepreneurs, at some peril, drive to other cities to buy generators to sell for what buyers willingly pay. Some may pay a lot if they stand to lose thousands of dollars of food stored in freezers; some just may want the convenience of electricity. Every decision and price is voluntary and non-coercive. Soon, the price of generators returns to equilibrium. With anti-gouging laws, everyone does without generators; any intrepid souls who supplied them are subject to arrest, public scorn and to pandering by economically illiterate politicians and media.

    There is no such thing as price gouging. Prices in free markets convey accurate, truthful and valuable information about the value of a good or service at a point in time. In contrast, government prices (think: rent control, rationing) always are lies. In which kind of society would you rather live – one based on voluntary cooperation of people in free markets or one based on government lies, force and coercion?

The next post on June 12th revisits the 2016 US national election.

Inequality in America V – Putting it All Together

George Noga

Surprising answers to questions about inequality in America

By: George Noga – May 29, 2016

   Even socialists agree inequality from newly created wealth (even massive wealth a la Gates and Jobs) is an unalloyed benefit to society because it is the best metric for how well an economy is innovating, becoming more productive and responding to the needs of all people. Inherited wealth is mostly dissipated in a few generations, heavily taxed and often used charitably. Last, if Social Security and Medicare benefits were capitalized and included in wealth measurements, inequality would plunge markedly.   At the outset of this series, I promised to explore and to answer many questions about inequality in America based on facts and logic. Following are the answers.

    It is nigh impossible to get an accurate picture of inequality of income due to deeply flawed statistics based on AGI and household income, inconsistencies between income cohorts and flawed comparisons that don’t track the same people over time. One conclusion is certain. Accurate data would show much less inequality of income. Progressives oppose disparity in pay between CEOs and workers but are okay with similar clefts for athletes and movie stars. Steve Jobs took a nearly bankrupt Apple and created $750 billion of value; he made $2 billion, or 0.27%; was he overpaid?

    Data based on spending shows sharply less inequality; the lowest income cohort spends $2 for each $1 of income. There is no inequality based on taxation (including payroll taxes) as America has one of the most progressive tax systems in the world. Nor would a $15 minimum wage reduce inequality; less than 1% earn the minimum and their average household income is $50,000. Young, poor, minorities and the unskilled are harmed by minimum wage laws. The truly poor need jobs not a higher minimum wage. Progressives claim a moral imperative to increase the minimum wage knowing aforehand it creates unemployment. Where is the morality in that?

    The chasm between reality and rhetoric is wide. All measures of inequality, Gini, Theil and MLD, are markedly worse under Clinton compared to Reagan and under Obama versus Bush 43. Inequality is fueled by progressive policies including: (1) tepid economic growth; (2) higher taxation; (3) opposition to school choice; (4) energy policies; (5) ObamaCare; (6) opposition to trade; and (7) spending, debt and deficits. It is progressive dogma that creates inequality despite its self righteous rhetoric.

    All metrics show less inequality in Europe; however, we must ask if that is a good thing or a bad thing. Many Europeans lead lives of quiet desperation with no economic mobility and a permanently moribund economy; they even refuse to reproduce or to defend themselves. Europe produces no innovations in electronics, software, drugs or even pop culture. The former USSR would have scored favorably on measures of inequality as does Botswana; where everyone is poor, there is no inequality. The Gini coefficient for happiness in America is the highest in the world; that says it all!

    There are some things we should do to reduce inequality. Foremost is to stop corporate welfare as wealth created by government is illegitimate. Too big to fail needs to be eliminated as this is but another form of government largess. Capitalism must be based on both the carrot and the stick. Most Americans understand and accept inequality created by the marketplace; their beef is with government playing favorites.

    At its beating heart, inequality is mostly an imaginary problem. The vapid dogma of progressivism is incapable of solving real problems; therefore, it creates a series of phony problems for political maskirovka. As demonstrated in this series, progressives have created the very inequality they now hypocritically rail against. In sum, inequality in America is not a serious problem except when created by government.

The next post June 5th entitled “Hurricane Warning” is particularly pithy.

Inequality in America IV – Reality versus Rhetoric

George Noga

There is an abyss between what progressives say and do. They vehemently condemn inequality while advocating policies that create and exacerbate it.

By: George Noga – May 22, 2016

    There is a staccato drumbeat from progressives asserting there is a grave and metastasizing crisis of inequality in America. In this fourth part of our series, we reveal the specific policies of Obama and progressivism that result in greater inequality.

1. Tepid economic growth is the 900-pound gorilla. Under Obama, coming off a bad recession, there has never been a year with 3% growth. It is the worst economy ever under these circumstances. The lack of growth is due to Obama’s policies for taxes, regulation and health care amidst great uncertainty. A languishing economy coupled with tiny wage gains is radioactive for poor and minorities and exacerbates inequality.

2.  Black youth unemployment is over 50%. Obama refuses to consider a temporary entry level wage. Instead, he wants to increase the federal minimum wage by 40%.

3.  Higher taxes are like steroids for inequality. Obama’s tax increases on dividends, capital gains and small business constrain capital investment and are a death-knell for job creation. His refusal to lower the corporate tax rate keeps trillions locked up abroad instead of financing jobs at home. Tobacco taxes have skyrocketed, disproportionately harming the poor; one pack a day costs $1,000 a year more in taxes – more inequality.

4.  Opposition to free trade is harmful. Obama deserves credit for the TPP; however, progressives led by Clinton and Sanders are demagoguing it to death and want to kill it. The underclass benefits more than any other group from free trade. For liberals however, obeisance to labor unions trumps the welfare of the underclass.

5.  Opposition to school choice keeps poor kids in failing schools. School choice is not only the civil rights issue of our time, it is a potent economic issue. Liberals choose to pander to teachers unions while throwing poor kids under the school bus. Lack of school choice could very well be the number one contributor to increased inequality.

6. Higher prices for food and energy wreak havoc on the poor. Food prices have surged due to Obama and progressive support for ethanol subsidies. Energy takes 25% of the income of poor families but only 10% for a high income household. The average price of a kilowatt hour was up nearly 40% under Obama – until the recent drop in oil and gas prices – which occurred despite, not because of, Obama’s policies.

7.  ObamaCare is a disaster and poor Americans bear its brunt. Health care costs are rising along with taxes to fund it while access and quality of care plummets. Doctor shortages, rationing and death panels will have more impact on the poor. Meanwhile, the legions of 29ers and 49ers are growing due to perverse incentives in the ACA.

8.  Obama’s spending, debt and deficits savage savings. Poor elderly Americans have seen incredibly low interest rates damage their lives. For every $25,000 a retired couple has in savings, monetary policy under Obama costs them $100 per month.

9.  Increasing the minimum wage fuels inequality. Progressives claim a moral imperative to raise the minimum wage knowing it costs poor and minority jobs. The real minimum wage always is zero, and that is exactly what the wage will be for many.

10.  Obama has created a poverty trap. If a low-middle income family with children has a second worker enter the labor force, the effective tax rate on the extra earnings is up to 80% due to phaseout of benefits. Under Obama, the number of single earner households has increased 2.6 million and households with no earners by 5 million.

    Every one of the above factors increases inequality and every one is a creature of progressive dogma. The difference between progressives’ rhetoric and reality is indeed a bottomless abyss. Progressives created the inequality in America they now demonize.

Part V, the final post in this series, is scheduled for May 29th.

Inequality in America III – The $15 Minimum Wage

George Noga

Advocates of the $15 minimum wage agree it is bad economics but justify their support on moral grounds. What is moral about putting poor people out of work?

By: George Noga – May 15, 2016

   The reference in the preheader is to California Governor Jerry Brown. His actual quote is: “Economically, minimum wages may not make sense but morally, socially and politically it makes sense. . . .” The previous year Brown stated raising the minimum wage would “put a lot of poor people out of work“. It seems that for progressives, creating more unemployment among the poor now has become a moral imperative.

    Governor Brown has company. As with all progressive causes, there are two groups of supporters. At the core there always are special interests, in this case labor unions. Many union contracts contain automatic built-in differentials over minimum wage. Unions also support it because it prices the poor and minorities out of the labor market, reducing competition for lower paying jobs. The second group consists of do-gooders who are both soft-hearted and soft-headed; they are, in-effect, shilling for the unions.

    Minimum wage has been a leitmotif in America since 1938 when it began at $.25 per hour. In nearly eight decades since, it has been thoroughly studied by economists and there is virtual unanimity among them that the economic effects are harmful. Economics doesn’t get more basic than when the price of anything (labor) is increased, there will be less of it. Children with lemonade stands understand this. Following are some other things you may not know about minimum wages in America.

1. Minimum wage affects less than one percent of all workers and most who earn the minimum wage do so for six months or less before receiving raises. Virtually no heads of households or full time workers earn the minimum wage.

2. The average household income for a family with someone earning the minimum wage is $50,000. Most receiving the minimum wage aren’t poor; they are spouses or teenagers living at home, like the kid who delivers pizza to buy gas for his BMW.

3. A majority of those in poverty don’t work; they need jobs, not a higher minimum wage. Raising the minimum wage makes it much harder for them to find jobs.

4. The young, poor, minorities and unskilled are disproportionately harmed by raising the minimum wage. Raising the minimum reduces the EITC (earned income tax credit) thereby negating much or all of the benefit of a higher minimum wage.

5. There is consistent and copious empirical evidence that raising the minimum is a death-knell for the poor and minorities; every time it goes up, they lose hundreds of thousands of jobs. With each increase, business has more incentive to automate or to relocate (if it is a state increase) and to put even more people out of work.

    It seems clear enough that raising the minimum wage does not reduce inequality in America; it does the opposite. Even though only one percent of workers earn the minimum, that still amounts to 1.25 million people. The last increase resulted in over 300,000 jobs lost – nearly all poor and minority. That is a recipe for more inequality.

    Progressives claim a moral imperative to raise the minimum wage, even knowing it puts poor people out of work. They do this for their own self esteem. However, the real minimum wage always is zero, zilch, nada and not what progressive kool-aid drinkers deign to make it. And zero, zilch, nada is exactly the wage many more poor people will receive with a $15 minimum wage. I have one word to describe this: immoral!

Part IV of Inequality in America – Reality versus Rhetoric – will be posted May 22.

Inequality in America III – The $15 Minimum Wage

George Noga

 Advocates of the $15 minimum wage agree it is bad economics but justify their

support on moral grounds. What is moral about putting poor people out of work?
By: George Noga – May 15, 2016

    Governor Brown has company. As with all progressive causes, there are two groups of supporters. At the core there always are special interests, in this case labor unions. Many union contracts contain automatic built-in differentials over minimum wage. Unions also support it because it prices the poor and minorities out of the labor market, reducing competition for lower paying jobs. The second group consists of do-gooders who are both soft-hearted and soft-headed; they are, in-effect, shilling for the unions.    The reference in the preheader is to California Governor Jerry Brown. His actual quote is: “Economically, minimum wages may not make sense but morally, socially and politically it makes sense. . . .” The previous year Brown stated raising the minimum wage would “put a lot of poor people out of work“. It seems that for progressives, creating more unemployment among the poor now has become a moral imperative.

Minimum wage has been a leitmotif in America since 1938 when it began at $.25 per hour. In nearly eight decades since, it has been thoroughly studied by economists and there is virtual unanimity among them that the economic effects are harmful. Economics doesn’t get more basic than when the price of anything (labor) is increased, there will be less of it. Children with lemonade stands understand this. Following are some other things you may not know about minimum wages in America.

  1.    Minimum wage affects less than one percent of all workers and most who earn the minimum wage do so for six months or less before receiving raises. Virtually no heads of households or full time workers earn the minimum wage.
  2.    The average household income for a family with someone earning the minimum wage is $50,000. Most receiving the minimum wage aren’t poor; they are spouses or teenagers living at home, like the kid who delivers pizza to buy gas for his BMW.
  3.    A majority of those in poverty don’t work; they need jobs, not a higher minimum wage. Raising the minimum wage makes it much harder for them to find jobs.
  4.    The young, poor, minorities and unskilled are disproportionately harmed by raising the minimum wage. Raising the minimum reduces the EITC (earned income tax credit) thereby negating much or all of the benefit of a higher minimum wage.
  5.    There is consistent and copious empirical evidence that raising the minimum is a death-knell for the poor and minorities; every time it goes up, they lose hundreds of thousands of jobs. With each increase, business has more incentive to automate or to relocate (if it is a state increase) and to put even more people out of work.

It seems clear enough that raising the minimum wage does not reduce inequality in America; it does the opposite. Even though only one percent of workers earn the minimum, that still amounts to 1.25 million people. The last increase resulted in over 300,000 jobs lost – nearly all poor and minority. That is a recipe for more inequality.

Progressives claim a moral imperative to raise the minimum wage, even knowing it puts poor people out of work. They do this for their own self esteem. However, the real minimum wage always is zero, zilch, nada and not what progressive kool-aid drinkers deign to make it. And zero, zilch, nada is exactly the wage many more poor people will receive with a $15 minimum wage. I have one word to describe this: immoral!

Part IV of Inequality in America – Reality versus Rhetoric – will be posted May 22.

Inequality in America II – Income, Taxation and Spending

George Noga

Part II of our series, Inequality in America, focuses of inequality of income.

By: George Noga – May 8, 2016

  There are numerous and mind-numbing statistical methods for calculating income inequality. The Census Bureau alone reports the Gini coefficient, Theil index and MLD (mean logarithmic deviation). Many of these statistics do indeed show more inequality now than in past decades; however, peeking inside the numbers is revealing. Note: Most data herein are from US Census Bureau and BLS reports published in 2013-2014.

   By every measure extant, inequality rose more under Clinton than Reagan – Theil at double and MLD at triple the rate. The same is true with Obama’s first six years vs Bush 43. The Gini coefficient rose triple the rate under Obama; MLD rose 37% more; and Theil is up sharply while it fell under Bush 43. It is not a giant leap to deduce that most of the putative increase in income inequality results from progressive policies.

   Despite all the esoteric statistics, we really know very little about income inequality because all the data are – to use a highly technical term – crapola! Every study is fatally flawed by inconsistencies and limitations affecting source data; the major flaws are:

  1. Statistics are based on AGI (adjusted gross income) and not on all income. Much income is not included in AGI, such as contributions to IRA and 401(k) plans. AGI excludes the non-taxable portion of Social Security, EITC, Medicare, Medicaid and SNAP. Every one of these, if included in AGI, would significantly reduce inequality.
  2. Data use household instead of individual income. This renders all comparisons between time periods and income quintiles meaningless because the number of people per household changes over time and also changes between quintiles. For example, the number of one-person households has sharply increased in recent years (mostly in the bottom income quintile) making it appear there is more inequality among households even though, in reality, there is much, much less inequality among individuals.
  3. Quintiles are inconsistent. The top quintile has 3.2 people per household whereas the bottom quintile has 1.7; the income in the top quintile must be spread among twice as many people as the bottom quintile. It also means there are 25 million more people in the top quintile versus the bottom. Use of household data paints a deeply flawed picture of increased inequality between income cohorts – inequality that doesn’t exist.  
  4. Aggregate statistics don’t compare the same groups. Statistics showing inequality increasing over time don’t track the same people. New people (most poor immigrants) keep entering the back of the line, skewing all data downward. If they tracked the exact same people (and excluded new people), the data would show decreasing inequality.

   Does our tax system result in inequality? In one word, no. The US has one of the most progressive tax regimens in the world. Even Social Security and Medicare are somewhat progressive when taking (as should be done) the benefits into account. Moreover, increasing marginal tax rates on the wealthy would not result in their paying more in taxes – a principle well documented and even codified in Hauser’s Law.

   No discussion of income inequality would be complete without genuflecting to the so-called gender gap. However, economic analysis shows that the gap between incomes of men and women completely disappears when properly adjusting for level of education, type of degree, experience, hours worked and level of danger.

   The Census Bureau also reports data on spending by income quintile. The lowest quintile spends $2 for every $1 of reported income. Some of this comes from the underground economy – which logically is the province mostly of that cohort. If we were to gauge inequality based on actual spending rather than on fatally flawed measures of income, the effect would be a signal decrease in inequality in America.    

The next post in this series on May 15th addresses the $15 minimum wage.

Inequality in America Part I – Wealth and Inequality

George Noga

Is inequality of wealth beneficial or detrimental to society?

By: George Noga – May 1, 2016

    A persistent meme in America during this political season is inequality. We hear it from presidential candidates and Occupy Wall Street; it has been a liberal shibboleth for well over a decade. But what is inequality; is it good or bad; how is it measured; how much is too much; how much is too little; what is the reality versus the rhetoric?

    How much inequality exists in wealth, income, taxation and spending; is it increasing or decreasing? Does increasing the minimum wage alleviate inequality? Which government policies create or exacerbate inequality? How does inequality in America compare to Europe? What, if anything, should we do to increase or reduce inequality? We analyze these questions and more with facts and logic in this five-part series.

    Let’s begin with wealth. Socialists and Utopians want no inequality whatsoever but that has proven disastrous throughout human history. Nor is the paradigm of a few oligarchs or caudillos with great wealth amidst grinding poverty for the masses a desired model. In the real world, there is no Goldilocks point where inequality is just right. So, what, if anything, can we discern about inequality of wealth in America?

    An economic analysis of wealth in a market economy provides some lessons. It is a cardinal economic principle, and one recognized even in the former USSR, that the amount of newly created wealth is a good measure of how well an economy (or society) is serving the needs of all its people. In a capitalist economy, wealth is created by providing a product or service consumers voluntarily buy. Thus, a society minting many new millionaires is a boon to everyone – rich and poor alike – as it proves that the economy is innovating, becoming more efficient and serving people’s needs.

    Dynastic wealth often is viewed differently. Many who accept the nouveau riche rail against old money that was inherited rather than earned. Consider though, that one motivation of the person who created the wealth was to provide for his family and progeny, a universal human sentiment. If wealth was confiscated after the death of the creator, this surely would diminish the incentive to create the wealth in the first place.

    History informs that most dynastic wealth is dissipated within three generations by spreading it over more heirs and by poor stewardship. Furthermore, federal and state estate taxes take a 40% to 50% bite each generation. An additional large tranche of generational wealth is bequeathed for charitable purposes. Foundations (Ford, Hughes, Getty, Rockefeller, Gates, Templeton, et al.) have long played a key role in health, education, the arts, science and improving life for all Americans.

    The dynastic wealth remaining in tact after three generations is truly minuscule due to (1) spreading it over  an ever-expanding pool of future beneficiaries; (2) prodigal spending and poor investment decisions by heirs; (3) estate taxes every generation; and (4) charitable giving. Moreover, it continues to provide investment capital, benefiting the entire economy. Arguably, the acceptance of a modest amount of residual dynastic wealth is a small price to pay for the societal benefits of the original wealth creation.

    A logical deduction is that inequality in wealth is not only acceptable but desirable. People like Bill Gates or Steve Jobs  accrued great wealth because their efforts benefited hundreds of millions, or even billions, of people. Newly created wealth often is in proportion to the number of people benefited. Therefore, we can further deduce that even billionaires accruing great wealth (the top tenth of one percent), and the vastly increased inequality that results therefrom, is beneficial to everyone in society.

Part II  – Inequality of income, taxation and spending will be distributed May 8th.

Is Scandinavian Success Due to Socialism?

George Noga
Hillary Clinton and Bernie Sanders claim the success of Scandinavian countries is due

to socialism and the US should emulate them. We explore the veracity of those claims.
By: George Noga – April 24, 2016

     To be more responsive to current events, this week’s posting takes on a topic that has dominated the news in recent weeks. As usual, none of the media has gotten the story right. Moreover, I had planned to address this issue anyway because there is a lack of awareness and understanding among most Americans about Scandinavia. The MLLG five-part series,Inequality in America, is now rescheduled to begin May 1st.

     For as long as I remember, whenever I have discussed politics or economics with liberal interlocutors, they invariably cite Scandinavian countries (usually Sweden) as veritable Utopias and as proof that socialism can work; recently, both Bernie Sanders and Hillary Clinton did the same. Let’s begin with a brief economic history of Sweden.

    Sweden was agrarian in the nineteenth century and so dirt poor it sent waves of immigrants to the USA. Beginning in the final quarter of that century, Sweden turned to free enterprise. Because of property rights, free markets and capitalism, Sweden grew rich. Circa 1970, Sweden took a hard left turn; taxes soared, welfare expanded and private enterprise was discouraged. The result was crime, drug addiction, massive bureaucracy, welfare dependency and emigration by successful Swedes.

     By the 1990s Swedes had come to view socialism as a colossal failure. They rolled back subsidies and taxes and again encouraged free markets. Leftist governments were replaced with right-leaning ones; they embraced free trade and economic freedom. The stories of Norway and Denmark are similar to that of Sweden. Today all three enjoy dynamic market economies, albeit with robust social insurance programs and concomitantly high middle class taxes. Politically, they continue to move rightward.

     Nordic countries are able to adopt vigorous social programs only because of highly successful capitalist, market economies that produce wealth, combined with their acceptance of high middle class taxes. Socialism never has created anywhere near the degree of wealth necessary for a Scandinavian level of social benefits. Sweden is not prosperous because of socialism; it is prosperous because it survived socialism!

     Scandinavian countries are considered economic successes; however, they don’t compare favorably with America. If Sweden were a US state, it would be among the very poorest alongside Mississippi. In terms of purchasing power, Sweden is 30% more expensive than America. In Denmark, the top 10% control 80% of the wealth, a higher percentage than in the USA and not exactly a socialist paradigm of equality.

     Following are the four principal truths we should take away from the economic experience of Scandinavian countries – Bernie and Hillary take note.

1. They are not prosperous because of socialism. They tried socialism; it proved to be a monumental failure economically and socially; the people, understanding this, thoroughly rejected and repudiated it and replaced it with a capitalist, market economy.

2. The only possible way to generate the wealth to afford extensive social programs as found in Sweden, Denmark and Norway is from a relatively unfettered capitalist, market economy. Socialism has never produced a successful economy.

3. The only way to pay for the social programs is through ultra high taxes on the middle class – 20 percentage points higher than in the USA. The taxes always must fall on the middle class because there never are enough rich people to pay for it all.

4. The Scandinavian model only works in small, homogeneous populations with deeply shared and ingrained values, social and cultural cohesion, and a middle class willing to accept extraordinarily high rates of taxation. It can’t be emulated in the USA.

The next MLLG post on May 1st begins our five-part series: Inequality in America

Truths About Tax Inversions

George Noga
Obama’s attack on tax inversions is nothing but liberal anti-business class warfare
and demagoguery that caters to widespread ignorance and causes economic harm.
By: George Noga – April 17, 2016

     A goal of the new MLLG blog is to be more responsive to current issues; in that spirit, this post addresses corporate tax inversions (such as the Pfizer-Allergan merger stymied by the Obama justice department) with a perspective you will not encounter elsewhere. Upcoming posts will focus on the $15 minimum wage and inequality in America including a comparison with Nordic countries – Sweden and Denmark.

     A tax inversion is the relocation of a US corporation’s headquarters to a lower tax nation (usually via merger with a foreign company) so that it “inverts”, i.e. becomes a foreign corporation for US tax purposes. The benefits to the inverting company are twofold: first, tax on income earned abroad is payable at the much lower foreign rate; second, foreign profits can be returned to the US without further taxation. Following are the principal truths you should know about corporate tax inversions.

  1. Tax inversions are an imaginary enemy! Progressives can’t solve real problems facing America such as terrorism, economic growth or failed schools. Instead, they pander to their base and to low-information voters by conjuring imaginary enemies such as tax inversions, climate change, institutional racism, campus rape culture, inequality and war on women. Yes, it’s really that simple.
  2. Corporations don’t bear the tax burden. Taxes may be collected from businesses but the burden (those who ultimately pay the tax) falls on all Americans via higher prices as corporate taxes are passed on to consumers. Business taxation is misdirection intended to beguile voters into accepting higher overall taxes.
  3. Taxation intentionally is opaque. Politicians make taxation opaque so Americans are fleeced with as little push-back as possible. It’s always in taxpayers’ interest for taxes to be direct and transparent. Liberals instead disguise tax collections, always preferring borrowing or stealthy tax increases to cutting spending or raising taxes directly. That’s why they strongly prefer business taxes.
  4. Inversions can be beneficial. Following an inversion, cash can be brought back to the US without added tax and invested to create American jobs. The increased productivity from this investment helps all Americans in the long run.
  5. The rule of law has been abandoned. In its place is retroactive, capricious, ad hoc and arbitrary imposition of political power. It is precisely this imperative of political dogma over the rule of law that is responsible for the economic malaise of the past seven years, creating slow economic growth and tiny wage gains.
  6. Inversions can be ended quickly and easily. The US corporate tax rate is the highest in the world at 41% (35% federal, 6% state). Everyone agrees it should be lowered and the $2+ trillion overseas should come home. A political solution is low hanging fruit; however, President Obama sees more value politically in keeping the issue alive for continued class warfare and demagoguery.

     As long as liberals remain in control, trillions of dollars will remain offshore and working Americans will continue to suffer low growth and wage stagnation. All this damage accrues solely because Obama chooses to flog imaginary enemies for perceived political gain while failing to deal with the real problems facing America.

The next post is April 24th and begins our series: Inequality in America.

Hypocrisy of Jefferson-Jackson Day

George Noga

Democratic Party Jefferson-Jackson Day Dinners are now being held. The hypocrisy

in its honoring of slaveholders and genocidal Indian fighters is too rich to ignore.

By: George Noga – April 10, 2016 

   Although this posting has Democrats in its cross-hairs, I am obliged to repeat that our MLLG blog is non-partisan. We disdain both major political parties. Our lodestar is the same as our name, i.e. more liberty and less government. Sometimes however, hypocrisy is so glaring it cries out for attention; this is one of those times.

    The Democratic Party’s annual gig is the Jefferson-Jackson Day Dinner, so named  because they regard Jefferson and Jackson as the founders of the Democratic Party. To say it is pregnant with hypocrisy is an understatement. Let’s review the historical record of Jefferson and Jackson as it pertains to slavery and Native Americans.

  • Both Jefferson and Jackson owned slaves. Jefferson was the only founder and president who did not free his slaves – even upon his death.
  • The cruelty of Jackson’s Indian removal policy (“The Trail of Tears“) is legion and remains an enduring stain on American national honor.
  • Jackson was ruthless in the Creek War and in later wars against the Choctaws, Cherokees, Chickasaws and Seminoles. His nickname was “Indian killer“.
  • Jackson was in command while his troops butchered Indian women and children following battles or massacres; some called it (and still call it) genocide.
  • Jackson was an aggressive defender of slavery; this was in sharp contrast to Washington, Madison and Monroe all of whom regarded it as a moral evil.
  • Jackson supported the spread of slavery to the territories and he once publicly called opponents of slavery “monsters“.

    Contrast the above with recent events where obsequious Democrats caterwauled over perceived transgressions regarding confederate flags on license plates or flying on state capitol grounds – which incidentally were first put there by Democrat governors. Unctuous Democrat leaders used terms such as bigotry, racism and oppression while calling for boycotts of any events held in South Carolina or any other offending state.  

    Republicans have their annual event, the Lincoln-Douglass Day Dinner, named after Abraham Lincoln and Frederick Douglass. Imagine if the Republicans’ annual dinner was called the Custer-Duke Day Dinner after George Custer and David Duke? The yowling and mewling of Democrats and their media sycophants would be incessant.  

    Democrats are considering a name change but can’t find prominent Americans of Democratic persuasion to use in place of Jefferson and Jackson. It seems they consider all potential historical figures imperfect and can’t find even one who passes through every politically correct filter extant. They may just abandon people’s names altogether and go with something anodyne like the “Fairness and Equality Day Dinner”.

    Since all historical figures now are imperfect to progressives, where does it all end? Can we judge a person as a whole giving credit for accomplishments while being less judgmental about flaws that were not considered as such contemporaneously but only now in today’s uber-correct political atmosphere? If the present trend continues there will be no statues or portraits left standing or hanging anywhere in America.  

    For now, let’s simply savor the juicy hypocrisy of the most politically correct and intolerant group in America naming its greatest honor for unreformed slaveholders, racists, genocidal Indian fighters and the perpetrator of the infamous Trail of Tears.