Monday, August 16, 2010

Allocation of Scarce Resources

David Merkel summarizes our economic problems perfectly on

Governments are bad allocators of capital.  They borrow money and allocate it to where the political return is the highest.  Those projects may bump up GDP in that year but do little for future GDP.  This is the lie of C+I+G=Y.  Yes, in the short run that works, but in the long run, money spent by consumers and investors yields far more for growth in the economy than government spending.  Our government is only interested in the short run, given their short-run fixation on the election cycle.

Consumers choose what helps them in the short-run, and Investors the long-run.  The government has non-economic motives — their actions merely harm the situation.  Better they should reduce taxes broadly than try to target certain areas that have clever lobbyists.

To put it bluntly; politicians have no incentive to create long term prosperity, stability, or safety and therefore believe that spending other peoples money  regardless of how inefficiently that money is spent — will create short term illusions needed for reelection.

Tuesday, August 10, 2010

Eleven Strategies

David Boaz writes in 1997 on The Freeman:

About a century ago a group of brilliant Italian scholars set out to study the nature of the state and its monetary affairs. One of them, Amilcare Puviani, tried to answer this question: If a government were trying to squeeze as much money as possible out of its population, what would it do? He came up with eleven strategies that such a government would employ. They’re worth examining:

1. The use of indirect rather than direct taxes, so that the tax is hidden in the price of goods

2. Inflation, by which the state reduces the value of everyone else’s currency

3. Borrowing, so as to postpone the necessary taxation

4. Gift and luxury taxes, where the tax accompanies the receipt or purchase of something special, lessening the annoyance of the tax

5. Temporary taxes, which somehow never get repealed when the emergency passes

6. Taxes that exploit social conflict, by placing higher taxes on unpopular groups (such as the rich, or cigarette smokers, or windfall profit makers)

7. The threat of social collapse or withholding monopoly government services if taxes are reduced

8. Collection of the total tax burden in relatively small increments (a sales tax, or income tax withholding) over time, rather than in a yearly lump sum

9. Taxes whose exact incidence cannot be predicted in advance, thus keeping the taxpayer unaware of just how much he is paying

10. Extraordinary budget complexity to hide the budget process from public understanding

11. The use of generalized expenditure categories, such as education or defense, to make it difficult for outsiders to assess the individual components of the budget

Notice anything about this list? The United States government uses every one of those strategies—and so do most foreign governments. That just might lead a cynical observer to conclude that the government was actually trying to soak the taxpayers for as much money as it could get, rather than, say, raising just enough for its essential functions.

In all these ways, government’s constant instinct is to grow, to take on more tasks, to arrogate more power to itself, to extract more money from the citizenry. Indeed, as Jefferson observed, The natural progress of things is for liberty to yield and government to gain ground.

Monday, August 2, 2010

Enough Already

As shown by Enough Already NY, we are subject to the following taxes:

Alcohol Tax
Cable TV Tax
Cell Phone Tax
City 911 Surcharge
City Sales Tax
City Utility Gross Receipts Tax
Corporate Income Tax
Electricity Tax
Entertainment Tax
FCC Subscriber and FCC Universal Charges
Federal Excise Tax
Federal Universal Service Fee
Gross Revenue Tax
Home Phone Tax
Hotel Occupancy Tax
Individual Income Tax
Motor Fuel Tax (Gas and Diesel)
MTA Commuter Transportation District Tax
MTA Excise Tax
MTA Payroll Tax
MTA Sales Tax
MTA Surcharge
Natural Gas Tax
Parking Garage Tax
Property Tax
Sales Tax on Supply and Delivery
Sales and Use Tax on Company Purchase
State 911 Surcharge
State and Local Sales Tax
State Surcharges
State Franchise Tax
Tobacco Tax
Weekday Peak-Hour Cab Surcharge
Weeknight Cab Surcharge
Other Miscellaneous Business Taxes
Other Miscellaneous Personal Taxes and Surcharges

Lao-tzu and Libertarianism

David Boaz writes:

"The first known libertarian may have been the Chinese philosopher Lao-tzu, who lived around the sixth century B.C. and is best known as the author of the Tao Te Ching."

Libertarianism: A Primer (page 27)

Selected chapters of the Tao Te Ching support this claim:

60 - Governing a large country
is like frying a small fish.
You spoil it with too much poking.

Center your country in the Tao
and evil will have no power.
Not that it isn't there,
but you'll be able to step out of its way.

Give evil nothing to oppose
and it will disappear by itself.

75 - When taxes are too high,
people go hungry.
When the government is too intrusive,
people lose their spirit.

Act for the people's benefit.
Trust them; leave them alone.

81 - True words aren't eloquent;
eloquent words aren't true.
Wise men don't need to prove their point;
men who need to prove their point aren't wise.

The Master has no possessions. The more he does for others,
the happier he is.
The more he gives to others,
the wealthier he is.

The Tao nourishes by not forcing.
By not dominating, the Master leads.

Chapter 13 also states that "hope is as hollow as fear".