Friday, April 25, 2014

Larry Summers; Wrong Again

The supposed mainstream economists have absolutely no idea about what macro economic forces causes what. There is no logic to what they say and a complete ignorance of economic history.

This morning prior to an Export Import Bank meeting, Larry Summers, former Treasury Secretary, President of Harvard University and lifelong darling of leftist economists, was on Bloomberg TV discussing economic policy. I can’t quote him exactly but here is the gist of what he said. Export Import Bank subsidies (some of which go to healthy large corporations like Boeing) support US exports and labor. He added that he can’t understand why some economists oppose those subsidies and at the same time support corporate tax reduction, which, he said, only add to corporate profits. This is a perfect example of the Lefts one dimensional thinking and their complete ignorance of how capitalism works.

So far as corporate profits go he is right, but only to a point. A reduction in the corporate tax rate would boost profits temporarily, but (everything being equal) competition would kick in and prices would decline below where they were before the tax cut. The former tax revenue would find it’s way into the customers pockets, not the shareholders.

In a free market system a product is priced in order to return the maximum profit to shareholders. But, that price is not freely arrived at. Competition determines what that maximum price is, and if everyone competing eliminates an expense (as in corporate taxes) at least one competitor will reduce prices proportionately, forcing everyone else to do so.

Of course a profit is necessary to survive, putting a floor on prices, but in theory that price level was determined before the tax reduction and would remain the same afterwards. Better marketing, cheaper production costs and a host of other things always cause variations in pricing and profitability, but these things are ongoing with or without tax reductions. If the coffee growers price goes down you can be sure after an adjustment period the supermarket price will go down as well. The first Ford car cost about $5,000, but after Henry Ford successfully reduced production costs with his assembly line, the price came down to $500. It is no different with taxes.

I will only briefly mention the other positive ramifications of corporate tax reduction. Cheaper prices that would result are a benefit that every consumer enjoys, not only that reviled 1%. Consumer price reductions equate to an earnings increase for everyone, although liberal economists are loath to point that out. And although this simple concept seems too abstract for geniuses such as Summers, lower taxes and thus lower prices support wealth production and economic growth.

My question is, are these ridiculous one dimensional (in a multi dimensional universe) liberal economic theories honestly (albeit foolishly) believed, or are the always decorated liberal economists really doing leftist marketing disguised as scholarship?



Tuesday, April 1, 2014

How Did Obama Get Elected?

How is it possible that Barack Obama got reelected? One might explain his original ascendency, however unlikely, to his hidden nature, something the press studiously avoided talking about. But to make the same mistake again is almost unfathomable. He is a man that sat in the pews of a racist, Jew hating, America hating preacher and called him his mentor. He refers in his autobiographies (the plural is not a typo, he has two of them) to Frank, who is Frank Marshall, another mentor. Marshall was a lifelong communist, as thus an apologist for Joseph Stalin, the murderer of 80 million people. He cut his teeth in Chicago politics at the home of Bill and Bernadette Ayres, convicted domestic terrorists. He attended events for fundraisers for Hamas, terrorists in the middle east. And if anyone doubts that past is prologue, he has governed using the same destructive principles that the aforementioned rogues gallery advocate. Who would vote for such a man? How could this happen?

The founding fathers believed that a representative democracy could only flourish if the voters had a vested interest in the long term health of the country. It is often the case that the long and short term interests are opposite one another. Some men are willing to delay gratification in order to enhance long term benefits, while others seek instant gratification at the expense of long term health. Our founding fathers understood that allowing everyone to vote was a recipe for disaster. Too many voters would opt for instant gratification regardless of the longer term costs. It was almost self evident that any system embracing one man one vote was doomed to fail.

The fathers wanted to insure that only voters with a long term interest qualified to vote. Because women were considered ignorant in the ways of government and business, and a man not owning property was thought to be too young and inexperienced to cast a thoughtful ballot, or simply unqualified by virtue of his station in life, they were excluded from voting. Land was prized above most  things (this was a time when Ben Franklin said of our agrarian society, “All wealth will come from the ground.”), so that or a minimum amounts of land, savings or taxes paid were used as a criteria to qualify to vote.

Below are quotes illustrating the thinking at that time. It applies today as much as it did then. My thesis is that if only people with a vested interest in the long term survival of the US were voting, this aberration of an Obama re-election could never have happened.

'Property requirements were widespread. Some colonies required a voter to own a certain amount of land or land of a specified value. Others required personal property of a certain value, or payment of a certain amount of taxes. Examples from 1763 show the variety of these requirements. Delaware expected voters to own fifty acres of land or property worth £40. Rhode Island set the limit at land valued at £40 or worth an annual rent of £2. Connecticut required land worth an annual rent of £2 or livestock worth £40.

John Adams, signer of the Declaration of Independence and later president, wrote in 1776 that no good could come from enfranchising more Americans:
Depend upon it, Sir, it is dangerous to open so fruitful a source of controversy and altercation as would be opened by attempting to alter the qualifications of voters; there will be no end to it. New claims will arise; women will demand the vote; lads from 12 to 21 will think their rights not enough attended to; and every man who has not a farthing, will demand an equal voice with any other, in all acts of state. It tends to confound and destroy all distinctions, and prostrate all ranks to one common level.

The true reason of requiring any qualification, with regard to property, in voters, is to exclude such persons as are in so mean a situation that they are esteemed to have no will of their own. If these persons had votes, they would be tempted to dispose of them under some undue influence or other. This would give a great, an artful, or a wealthy man, a larger share in elections than is consistent with general liberty. 

Interesting that the quote above believes limiting who can vote would protect against wealth having an undue influence. What has happened since the one man one vote policy was adopted is not that wealthy individuals have gained undue influence, but the government itself has become the wealthy force that trades favors for votes. The never ending expansion of the social programs has provided a framework for Democrats to gain and expand power. These programs have proven to be cancers destroying the nations economic and social fabric under the false banner of compassion, but they succeed in garnering votes. 

Most Democratic voters have no idea what philosophy the party employs, they don’t know who the Vice President is, who their senator is, or anything else related to the economy, civics or the legal system. But they do know how to apply for welfare, food stamps, aid to dependent children, heating subsidies  rent subsidies and Obama phones, and they know what party to vote for to insure the money for these programs keeps flowing.    

Whether these laws limiting voting accomplished their purpose, or could have been crafted better is open to debate. Even if there was merit at the time to the prohibition on women voting, it certainly would be an absurdity today. But the idea that letting the entire public vote would destroy the democracy is as true today as it was then. In order to expand the class of uninformed voters, the Obama crowd routinely insults our intelligence with nonsensical claims such as arguing that identifying oneself at a polling place is undemocratic and an undue burden. To the contrary it is both democratic and a small step in the right direction if this nation is to survive.

Early critics of a democratic system said a democracy can only exist until the voters learn they can vote themselves the other guys money. I fear our system, one man one vote, will prove those early critics right. We are seeing it in real time with the election of the most unqualified, most dangerous, man to ever run for much less hold the office of the President. He is an ideologue with no sense of history, no experience in the real world, no understanding of capitalism or any other economic system, whose world view has been shaped by intellectually arrogant and intellectually bankrupt, unaccomplished, fringe radicals.