In the minds of many people around the world, including in the United States, the term “capitalism” carries the idea of unfairness, exploitation, undeserved privilege and power, and immoral profit making. What is often difficult to get people to understand is that this misplaced conception of “capitalism” has nothing to do with real free markets […]
When you type a website address into a browser, you might have noticed that the letters “http” appear at the front. “HTTP” stands for Hypertext Transfer Protocol. In typing a Web address, you are actually sending an HTTP command to transmit that website to you. Hypertext Transfer Protocol is the means by which information is […]
Some people are saying it is just what the doctor ordered. Others are saying that the cure is worse than the disease.The Affordable Care Act? Reengagement in Iraq? Tea Party bullying in the GOP?Not this time. Just as protracted in the corridors of Congress and the White House is the debate over the proposed reform […]
In 2012, money mandarins running the European Union chose stagnation over restructuring. Here’s a consequence of that choice: expectations for a self-sustaining economic recovery keep getting crushed.Two years ago, European Central Bank (ECB) chief Mario Draghi promised to do “whatever it takes” to hold the eurozone together. He bluffed nervous investors into believing in a […]
Picture the scene. It’s 2020. You’re at the checkout in a convenience store with a carton of milk. But you’ve got no cash and you’ve left your cards at home. No problem. You scan your right index finger; the green light flashes. Purchase approved and you leave. Easy.Is this a realistic vision of the future, […]
“In the beginning, all the world was America.” — John Locke“The Garden of Eden was a perfect place,” my friend Manuel explained. “Man had free will. He could live in harmony with nature and God — and everything would be fine. But if he defied God, the stain of original sin would be on his […]
After a week of reckoning about the American oil and gas boom… I’ve got to get something off my chest.I can’t stand it when a coworker takes credit for something I did.Whether it’s a special report I wrote or just a little investing trick I found on my own — if someone takes it and […]
It might sound like the latest new product from Apple, but IPAB is actually the newest major legal challenge to Obamacare.Recently, a three-judge panel in the 9th Circuit Court of Appeals in San Francisco heard arguments about the Independent Payment Advisory Board, or IPAB, a 15-member panel created by the Affordable Care Act and empowered […]
Americans have come to believe that the IRS and the income tax are inevitable parts of our lives. After all, most everyone alive today has lived his entire life under federal income taxation.It wasn’t always that way. For some 125 years, the American people lived without having any tax imposed upon their income.The obvious question […]
Here’s a fun fact: Although we all hate the U.S. dollar, as it continues to hemorrhage wealth, its foothold as the world’s reserve currency isn’t going to disappear overnight.A Russian gas deal with China won’t change that — as we’ll highlight below.But before we get to the nitty-gritty, let’s dive into a story that’s right […]
Franklin Delano Roosevelt famously used the term “forgotten man” in a 1932 speech to describe those at the bottom of the economic pyramid who, he felt, government should aid.But the originator of the phrase “forgotten man” had a whole different meaning in mind. He aimed to expose the seeming good intentions of government to reveal […]
“As the nation’s central bank, the Federal Reserve derives its authority from the Congress of the United States. It is considered an independent central bank because its monetary policy decisions do not have to be approved by the President or anyone else in the executive or legislative branches of government, it does not receive funding […]
The Keynesian disaster recovery plan has been to lower rates, force people to take more risk in search of yield, and entice others to borrow and spend and, magically, more jobs will be created. If people won’t buy stocks, central banks will.Back in 2011, Ben Bernanke, when asked if QE2 was driving up stock prices, […]
In September 2009, when President Obama made a primetime speech pitching his not-yet-passed health care overhaul, he made the following promise: “I will not sign a plan that adds one dime to our deficits — either now or in the future. Period.” To prove his seriousness, he further promised that “there will be a provision […]
Whatever your views on the role of government, one thing is clear: There will be no way to pay for it if the economy doesn’t grow. And I’m not talking by a measly percentage point or two. If we can’t find our way back to 5% annual economic growth or above soon, America’s accumulated federal […]
According to the Bureau of Labor Statistics, consumer prices are rising at a 2.1% annual rate. This suggests to us that the current stock market boom will die with a bang, rather than a whimper.Fed economists say they don’t think inflation rates are rising. They think the most recent reading is a fluke. But why […]
Real progress happens through real people, ideas, and innovations. Not by legislation argued and debated in Congress. Right now, one of the most influential technologies is changing the way people do business. And reinventing the future in the process.
Innovation can change the world… if the world lets it. Unfortunately, society’s gatekeepers make it a point to constrain, regulate, and control these ideas. But their power is limited, and the power of innovation is too great. Unfortunately for regulators, there are some technologies they can’t control.
“Everything is proceeding as I have foreseen.” — Emperor Palpatine, The Return of the JediJon Stewart made great comedic hay during the Bush Administration out of the enormity of Dick Cheney’s “Sith Lord” malevolence. Events in Iraq in the past week have made especially palpable Cheney’s Palpatine-like quality.As Iraq unravels, you may suspect that Cheney might now […]
Entrepreneurs are high-tailing it out of the United States, and it’s the politicians’ faultThe U.S. government is driving some of its most productive citizens abroad. The only beneficiaries are countries such as Singapore and Switzerland, which offer sanctuary to Americans fleeing avaricious Uncle Sam.Three years ago Eduardo Saverin, one of Facebook’s founders, joined 1,780 other […]
Politicians love raising the minimum wage because they don’t have to ask voters to pay more in taxes. They just dump the costs onto shop owners. But they don’t act like politicians and go into debt to pretend like they have all the money in the world. They face real world situations. And sometimes that means replacing workers with more affordable options...
A cushy job in Hawaii that pays six figures. A beautiful girlfriend/boyfriend. Job security and professional experience that gives you plenty of future opportunities. Would you throw that all away to do what you think is right? Last year, one government contractor did just that. And now you see the world the government tried to hide from you.
As the world gets more digital, people forget about the benefits of transacting in cash. And government officials know that.
Regulation is supposed to keep you safe and make the economy function smoothly. At least that’s what they tell you in the news. But there’s another cost to regulation. One that you won’t hear about unless you have to deal with directly. And for the people in the economy who do, they’re the ones who have to pay the final cost.
The experts will tell you the recession is over, but they’re only torturing the data to hide the truth. The economy never recovered from the downturn it experienced. But the downturn happened in 2000, not 2008. The country’s been in the middle of a 14 year recession and hardly anyone knows the truth.
All paper currency has a shelf life. It could be 5 years or 500 years, but at some point, the value of any paper currency eventually reaches zero. That's why, for centuries, people have turned to one shiny metal to safeguard their personal store of wealth. And, as Jim Rickards explains, you still have that option. Read on...
Edward Snowden’s one year visa in Russia expires at the end of next month. With only a few weeks left before he finds himself without a safe country to live in, he sat down to give an exclusive interview. Here are the most important things he wants you to remember from his recent sacrifice.
Robert Reich who was secretary of labour under Bill Clinton wrote an article that he called “The Seven Biggest Economic Lies”. I intend to show the reader how deeply flawed this article is in the hopes that sound economic principles may get the attention that they deserve. I will not take his statements out of context but rather quote them in their entirety.
Robert Reich’s writes: 1. Tax cuts for the rich trickle down to everyone else. Baloney. Ronald Reagan and George W. Bush both sliced taxes on the rich and what happened? Most Americans’ wages (measured by the real median wage) began flattening under Reagan and have dropped since George W. Bush. Trickle-down economics is a cruel joke.
If you cut taxes and keep spending like a drunken sailor like G.W. Bush and Reagan did, you need to make up the difference by either printing money or borrowing, which are forms of taxation as well. So in fact, using those two presidents as examples of why low taxes don’t work is inaccurate. Money printing and borrowing are less visible than outright taxation so politicians can claim that they cut taxes while taxing us through the back door.
On the other hand if you really cut or eliminate taxes, and at the same time reduce or eliminate government spending, there will be more accumulation of capital which leads to higher real wages.
About 100 years ago, about 98% of the population worked the land in food production. Today, farmers in advanced economies have all kinds of machinery and technology which has made them more productive. This has a twofold effect of improving the earnings of farmers and lowering food costs for the entire population. People will object by saying that farmers today do not earn much, but if you compare the standard of living of a farmer today with that of a farmer 100 years ago, you will understand what I mean.
This whole process of wealth creation is made possible through the accumulation of capital which is what farmers in poor countries do not have. Today only 2% of our population is engaged in farming thereby allowing the rest of the population to produce goods and services that were not available or were too costly for widespread consumption back when we were all farmers. This higher productivity leads to a better standard of living for everyone and government taxation impairs this process.
Robert Reich’s writes: 2. Higher taxes on the rich would hurt the economy and slow job growth. False. From the end of World War II until 1981, the richest Americans faced a top marginal tax rate of 70 percent or above. Under Dwight Eisenhower it was 91 percent. Even after all deductions and credits, the top taxes on the very rich were far higher than they’ve been since. Yet the economy grew faster during those years than it has since. (Don’t believe small businesses would be hurt by a higher marginal tax; fewer than 2 percent of small business owners are in the highest tax bracket.)
Ask yourself: Would you put your capital at risk and work hard only to retain as little as 9% of what you produced? When people are faced with such punitive tax rates they take their capital elsewhere, avoid taxes, or stop working altogether.
Reich believes that the rich stood idle while the government took 70 to 91% of their income, which is very naive. Not only were there endless loopholes in the tax code, but each time taxes are raised the rich put their money into tax free investments. Let us not forget also that those were the golden days of bank secrecy and offshore money heavens, and taking money out of the country was very easy.
Robert Reich’s writes: 3. Shrinking government generates more jobs. Wrong again. It means fewer government workers – everyone from teachers, fire fighters, police officers, and social workers at the state and local levels to safety inspectors and military personnel at the federal. And fewer government contractors, who would employ fewer private-sector workers. According to Moody’s economist Mark Zandi (a campaign advisor to John McCain), the $61 billion in spending cuts proposed by the House GOP will cost the economy 700,000 jobs this year and next.
If this were true then why not employ everyone in the government.
Mr. Reich talks as if the government paid for all those jobs with resources dropped from heaven. The truth is that every dollar spent by government is a dollar that has to be taken from somewhere. If I spend my money on a suit, or if I invest it, I also generate jobs, and they will be productive jobs. I don’t need the government to spend the money for me.
Governmental employees and contractors piggyback their jobs on the rest of us.
Robert Reich’s writes: 4. Cutting the budget deficit now is more important than boosting the economy. Untrue. With so many Americans out of work, budget cuts now will shrink the economy. They’ll increase unemployment and reduce tax revenues. That will worsen the ratio of the debt to the total economy. The first priority must be getting jobs and growth back by boosting the economy. Only then, when jobs and growth are returning vigorously, should we turn to cutting the deficit.
There are so many economic fallacies concentrated in that short paragraph! I will simplify my answer by asking you to ask yourself some simple questions: When you have personal economic troubles, do you spend more? Do you borrow to spend more?
Remember, economics works in exactly the same way for one individual, a family, a company or a country. What is true for one individual is true for a country. To claim the opposite is like to claim that there is no gravity in government offices.
Robert Reich’s writes: 5. Medicare and Medicaid are the major drivers of budget deficits. Wrong. Medicare and Medicaid spending is rising quickly, to be sure. But that’s because the nation’s health-care costs are rising so fast. One of the best ways of slowing these costs is to use Medicare and Medicaid’s bargaining power over drug companies and hospitals to reduce costs, and to move from a fee-for-service system to a fee-for-healthy outcomes system. And since Medicare has far lower administrative costs than private health insurers, we should make Medicare available to everyone.
Mr. Reich talks about “bargaining power” but why doesn’t this great bargaining power work with the military industrial complex? Or with the post office which the government could never run profitably in spite of having a monopoly?
The reality is that government never does anything efficiently and always uses its leverage to benefit special interest groups which is why healthcare is so expensive. Why do you think insurance companies supported Obamacare?
When the government restricts the number of medical schools we can have, the number of doctors we can have, or if it restricts supply of services with licensing hurdles, it benefits corporations and professional groups at the expense of the rest of the population, at your expense.
If we want lower costs and better service, we need more competition, not less.
Robert Reich’s writes: 6. Social Security is a Ponzi scheme. Don’t believe it. Social Security is solvent for the next 26 years. It could be solvent for the next century if we raised the ceiling on income subject to the Social Security payroll tax. That ceiling is now $106,800.
Well, actually, Social Security fits the definition of a Ponzi scheme to the letter, which is “an investment operation that pays returns to its investors from their own money or the money paid by subsequent investors, rather than from any actual profit earned by the individual or organization running the operation”.
Mr Reich claims that Social Security “is still solvent” for another 26 years, but this is a feature of all Ponzi schemes: they are solvent for a while until their new incoming money is less than the payouts. Bernie Madoff was “solvent” until he no longer was able to pay. Raising the ceiling on income merely postpones the inevitable end of all Ponzi schemes.
Robert Reich’s writes: 7. It’s unfair that lower-income Americans don’t pay income tax. Wrong. There’s nothing unfair about it. Lower-income Americans pay out a larger share of their paychecks in payroll taxes, sales taxes, user fees, and tolls than everyone else.
For once I agree with Reich. It is not unfair that the lower-income classes don’t have part of their income taken from them by force, this is a great thing.
What is unfair is that the rest of the population is subject to this theft. Remember that slaves did receive part of what they produced in the form of food and shelter. The difference between taking 90% of someone’s income as in the case of slavery, and taking 30% in taxation is only a difference in degree.
Most of the failures in Mr Reich’s reasoning have to do with not looking at the unseen consequences of the policies he advocates. The reader may be interested in Bastiat’s famous essay “That which is seen and that which is not seen” which is a wonderful explanation of this common fallacy.