U.S. Has The Most Progressive Tax System

This will likely come as a surprise to President Obama and other Democrats who think THE RICH aren't paying enough tax (or maybe it won't, since facts never seem to stop them from repeating falsehoods)

Among Developed Countries U.S. Has The Most Progressive Tax System

	1. Share of taxes of the richest 10%	2. Share of market income of the richest 10%	3. Ratio of shares for richest 10%  (1/2)
Australia	36.8	28.6	1.29
Austria	28.5	26.1	1.1
Belgium	25.4	27.1	0.94
Canada	35.8	29.3	1.22
Czech Republic	34.3	29.4	1.17
Denmark	26.2	25.7	1.02
Finland	32.3	26.9	1.2
France	28	25.5	1.1
Germany	31.2	29.2	1.07
Iceland	21.6	24	0.9
Ireland	39.1	30.9	1.26
Italy	42.2	35.8	1.18
Japan	28.5	28.1	1.01
Korea	27.4	23.4	1.17
Luxembourg	30.3	26.4	1.15
Netherlands	35.2	27.5	1.28
New Zealand	35.9	30.3	1.19
Norway	27.4	28.9	0.95
Poland	28.3	33.9	0.84
Slovak Repub.	32	28	1.14
Sweden	26.7	26.6	1
Switzerland	20.9	23.5	0.89
United Kingdom	38.6	32.3	1.2
United States	45.1	33.5	1.35
OECD-24	31.6	28.4	1.11

The Court's Naive Liberals

While last week's Supreme Court Wal-Mart decision was about class actions, it offered some insight into the way the "liberals" on the court think about how a business should be run.

In her opinion, Ruth Ginsburg opined that jobs should be numerically classified to eliminate "arbitrary and subjective criteria." Promotions should be determined by written tests or seniority, not by managers choosing "on the basis of their own subjective interpretations." In others words, business shop operate the way the government does.

Justice Ginsburg and the others clearly demonstrate an utter lack of understanding of how a business must operate in a competitive environment. Efficient operations depend on holding managers accountable for performance. That absolutely requires "arbitrary and subjective criteria" -- such as how to please a customer, when to fire an employee, when to promote one. If you don't do that, your business operates, well, like government -- which in a competitive environment is a terminal strategy. Won't life be grand when Wal-Mart is forced to operate like the DMV?

Sucess Bad. Failure Good.

Monty Pelerin has some brilliant insights about our President.

Obama's ideology blinds him to relevant variables.  Incentives, institutional frameworks, profit and loss, individual initiative, saving and investment, hard work, etc. have no role in his simplistic world. He is a political creation with no experience in relevant matters.  He does not understand markets, business, meeting a payroll, or managing an organization.  This vacuum in knowledge produces failed economic results because policies do not consider the relevant variables for economic success.
In Obama's world, success and failure are moral rather than economic outcomes.  Success is a marker for evil.  Failure is due to someone else's success rather than personal shortcomings.  Failure represents passivity, the choice to not exploit others.  Proper moral behavior produces failure.
For Obama, economics itself is inconsistent with morality.  Hence economics itself must be evil.  This view of the world is both simple and ignorant. 
Individual success is simply a microcosm of national success.  It too is achieved by exploiting others.  That explains Obama's "Joe the Plumber" moment.  If the pie is fixed in size, the rich make others poor.  That is the fallacy underlying Obama's belief that people are entitled to only so much income or wealth. In his mind, he has a right, probably a moral obligation, to confiscate and redistribute wealth. The rich and successful must be punished at some level of success.  Their success causes the poor their pain.
Talent, hard work, ingenuity, risk-taking, etc. are not relevant in Obama's third-grade level of economic understanding.  As expressed by Tom Sowell, "[w]hether at home or abroad, Obama's ideology is an ideology of envy, resentment and payback."

Read the whole thing. http://www.americanthinker.com/2011/06/president_quixotes_legacy_confused_ill-educated_and_not_too_bright.html

Why Medical Costs Keep Rising

Recently, some new drugs have been developed that have shown the ability to extend the life of men with prostrate cancer by up to two years (see NY Times story). Good news, right? Treatment with these drugs can cost $90,000. Is it worth $90,000 to extend your life by a year or two? Maybe. Or maybe you'd rather die a little earlier and put that in your grandchildren's college fund. But what if that treatment were only a few hundred dollars? Makes the decision a lot easier doesn't it.

The way we structure medical plans right now, that treatment will only cost you a few hundred dollars because Medicare (most prostate cancer patients are over 65) will pay for it (which really means your children and grandchildren are forced to pay for it with payroll taxes). So rational decision making by the affected parties (the patient and his family) is effectively truncated in favor of government policy that diverts more and more resources to medical treatment.

Apocalypse Now (or Maybe Later)

It sometimes seems that the volume level on environmental disaster rhetoric is getting louder. But maybe not. Below are some predictions that were made on Earth Day 1970. These are largely the same sorts of people who have now joined today's Global Warming cacophony.


“We have about five more years at the outside to do something.”
• Kenneth Watt, ecologist
“Civilization will end within 15 or 30 years unless immediate action is taken against problems facing mankind.”
• George Wald, Harvard Biologist
“We are in an environmental crisis which threatens the survival of this nation, and of the world as a suitable place of human habitation.”
• Barry Commoner, Washington University biologist
“Man must stop pollution and conserve his resources, not merely to enhance existence but to save the race from intolerable deterioration and possible extinction.”
• New York Times editorial, the day after the first Earth Day

“Population will inevitably and completely outstrip whatever small increases in food supplies we make. The death rate will increase until at least 100-200 million people per year will be starving to death during the next ten years.”
• Paul Ehrlich, Stanford University biologist
“It is already too late to avoid mass starvation.”
• Denis Hayes, chief organizer for Earth Day
“By the year 2000, if present trends continue, we will be using up crude oil at such a rate…that there won’t be any more crude oil. You’ll drive up to the pump and say, `Fill ‘er up, buddy,’ and he’ll say, `I am very sorry, there isn’t any.’”
• Kenneth Watt, Ecologist
“ . . . . in 25 years, somewhere between 75 and 80 percent of all the species of living animals will be extinct.”
• Sen. Gaylord Nelson
“The world has been chilling sharply for about twenty years. If present trends continue, the world will be about four degrees colder for the global mean temperature in 1990, but eleven degrees colder in the year 2000. This is about twice what it would take to put us into an ice age.”
• Kenneth Watt, Ecologist

The Mortgage Mess: A Screenplay

Someday they'll make a movie about how the "housing bubble" and the "mortgage mess" came to be. If I were a Hollywood screenwriter, I would imagine it as a dialogue between Benny the Banker and Lenny the Liberal.

Lenny: You know, Barney, the American dream is about owning your own home. Wouldn't it be great if more people could do that?
Benny: Sure would Lenny. But, frankly, there's a limit as to how many people qualify for mortgages.
Lenny: But that's only because your lending standards are too strict. You'll only lend to people with good credit, and a sizable down-payment.
Benny: Of course.  You think we're in the business of making loans people can't pay back? We'd have to charge them unaffordably high rates to compensate for the risk.
Lenny: But what if we get the government  -- through Fannie Mae and Freddie Mac -- to guarantee those loans so that you'll be sure to get paid back? Then we've reduced your risk.
Benny: Not really. Even if you guarantee them so that we can make the interest rate lower, people who buy  homes with little equity might just walk away from the loan if they can't pay, and then we'll be stuck with a lot of foreclosures.
Lenny: But if you assume home prices go up every year, that's not going to happen. They almost always have.
Benny: But what if they didn't?
Lenny: I have a personal assurance from Barney Frank that they won't. After all, who would know better than he?
Benny: Okay. With Barney Frank and Fannie Mae behind it, what could possibly go wrong? Let's roll.

Jobs Bargain

Cree Inc., an LED lightbulb maker received $5.2 million in "stimulus" payments to "create jobs". According to Recovery.gov, that $5.2 million created 3.02 jobs. That’s $1,716,171 per job. What a deal. And you were wondering why the country is going broke fast? How many more of those jobs can we afford, Mr. Obama?

Drink Up

I happen to love wine. Which is why I so appreciate all the rest of you taxpayers funding the Walter Clore Wine and Culinary Center in Richland, WA. It's only a short 4 hour drive from Seattle or Portland (or a six hour plane ride for the taxpayers in Boston who helped fund it). It's a very lovely place where, if you taste enough wine, you can forget about how much debt your government is piling up every day to pay for the truly important things -- like a wine center in the middle of Washington.

It's Like a Baseball Game

About once a day I hear someone complain that capitalism is "flawed" and  "imploding". Capitalism is not "imploding". What is imploding is the system of distortion caused by governments trying to thwart the workings of capitalism -- i.e. substituting political goals for economic ones.

Imagine the Commissioner of Baseball instructed the umpires to change how they called plays whenever a game was not producing the outcome he wanted. Most of the players would stop playing the real game of baseball and start playing the game the Commissioner had in mind each day. When attendance and profits started dropping, somebody would inevitably complain that the game of baseball was fundamentally "flawed" and "imploding".

Budget Solution: Pay Market Rates

Andrew Biggs at AEI documents that reducing federal employee compensation to market levels could save taxpayers $77 billion per year. He estimates that Federal workers receive a salary premium of 14 percent, and a benefits premium of 63 percent. http://www.aei.org/docLib/AEI-Working-Paper-on-Federal-Pay-May-2011.pdf

There's been lots of argument about the validity of these calculations, and while you can legitimately argue whether it's a 63% premium or a 30% premium, you can't argue with the fact that the quit rates are low and the ratio of applicants to openings is high.  If nobody quits federal jobs and everybody wants to have them, then that’s the market telling you that these are pretty sweet positions.

A Tale of Two States

As reported in The Wall Street Journal 37% of all new jobs since the recovery (June, 2009) have been created in Texas. That's because Texas has no income tax, is a Right to Work state, has low regulatory burdens on business, and has implemented tort reform that drove down litigation costs. Quite obviously these are conditions conducive to doing business and growing economically. Unlike, say, California, which lost 11,400 jobs during the same period.

One of the advantageous of Federalism is that it allows the states to try different approaches in government. The evidence here is pretty striking. Yet Washington continues to try to make the national economy more like California than Texas.

Smart Investment

In the last election cycle, Barney Frank raised $356,316 from the securities and investment industry. Tuesday he had another big find raiser in New York for the investment community. Of course, all these New York bankers are just intensely interested in Massachusetts representation, right? Or maybe these people are just really smart about how they invest their money. Buying favors from Congress has a higher ROI than bonds or sticks or hedge funds these days.

Gasoline Demand is Not as Inelastic as You Think

Molly Espey examined 101 different studies* and found that in the short-run (1 year or less), the average price-elasticity of demand for gasoline is -0.26. That is, a 10% hike in the price of gasoline lowers quantity demanded by 2.6%. In the long-run (longer than 1 year), the price elasticity of demand is -0.58; a 10% hike in gasoline causes quantity demanded to decline by 5.8% in the long run.

This is why the Cassandras who predict that the price of oil (and derivative products) will continue upward are always wrong. And why there is money to be made shorting the bubble. The hard part is figuring out when it will deflate.

*Explaining the variation in elasticity estimates of gasoline demand in the United States: A meta-analysis
Espey, Molly
Energy Journal. Vol. 17, no. 3, pp. 49-60. 1996

Did He Really Think No One Would Notice?

The auto industry has added 113,000 jobs over the past two years,”said the President in proclaiming the success of the GM and Chrysler bailouts. Well, he's actually right. Except that GM and Chrysler employ 16,500 fewer people than they did in 2009. The gains have all come from Ford, Honda, Toyota, VW, Nissan, et al. I'm glad to see the auto industry growing, but it's not because of anything the government did.

Make Bad Loans or Else

Sometimes you just have to shake your head about the Brits. The British government today threatened the country's banks with "punitive taxes" if they fail to "meet lending goals set by the government". So let's examine this. It's not bloody likely that the banks are failing to make loans that they think will be profitable. Ergo, we have to presume that the loans not made are being declined because they are too risky to be profitable. So the government is saying that if the banks fail to operate in such a way as to lose money, they will tax away whatever money they do make.
Didn't the Brits watch what happened when the US government incented US banks to make shaky loans in the sub-prime mortgage market?

The Marignal Utility of Demagoguery

Time seems to move so quickly, that it's good to go back now and then -- in this case just three years. Listen to the President (http://youtu.be/WpSDBu35K-8) decry the "additional $4 Trillion of debt we got under George Bush . . . That will change when I'm President of the United States." Yep. He zipped past that milestone in his first year in office.

The other fascinating part of the video is that even when Charlie Gibson confronts him with the evidence that raising capital gains taxes does not generate any more Federal Revenue, he still persists. Apparently, for him, the visceral satisfaction of "sticking it to the The Rich" is so great that it overwhelms the reality that doing so works against his stated objective. In economic terms, he derives more utility from the demagoguery than from the actual cash he wants to spread around.

Tip of the Iceberg (Titanic Debt)

Dennis Cauchon writes in USA Today that the annual budget deficit of $1.5 trillion is a mere pittance compared to the $5.3 trillion in new obligations that the government added in 2010. There is now over $60 trillion in unfunded liabilities for which we all are obligated-- about $1/2 million per household. How many of you are planning to pony up that kind of cash to meet these obligations?

You say you didn't know about this? Government accounting "standards" allow these liabilities not to be booked until they are actually paid for [note to all CFOs out there. Don't try this yourself or the government will send you to jail for fraud].

Deserting the Sinking Ship

Austan Goolsbee is leaving the White House economic team. This is the fifth advisor in the last 2 1/2 years to leave President Obama.

Exactly how good an advisor was he?  In a 2007 op-ed for The New York Times, he derided those who called sub-prime mortgages "irresponsible." He preferred to describe them as "innovations in the mortgage market" to expand the pool of home-buyers. Well, that was certainty a good piece of advice. Oops. He is also famous for pointing out the huge numbers of start-up companies who fail "for lack of government support." Or possibly for lack of a viable business model. You just never know.

Reportedly Obama does not even get daily economic briefings anymore. But understandably, he doesn't want to get daily feedback on how miserably he and his team have been performing. The captain of the Titanic at some point probably tired of getting updates from his crew as well. I imagine that the navigators would have left the ship, too, if they could have.