Economics

Have you noticed Congress and administrations periodically claim they will save a great deal in some government program by ending “waste, fraud, and abuse,” and then provide a “number” representing the obtainable savings? Yet few ever ask how the waste, fraud, and abuse got there in the first place, and why they are not taken out of every other government Read More ›

This article, published by The Claremont Institute, mentions Discovery Institute Senior Fellow George Gilder: Around this time, another revolution was underway, one that would also change how Republicans viewed government. This was supply-side economics — —or “Reaganomics.” Ronald Reagan learned from supply-siders like Arthur Laffer, George Gilder, and Paul Craig Roberts that taxes matter, and that cutting excessive tax rates Read More ›

Do you think your tax money should be given to international bureaucrats who give destructive advice to American policymakers? Well, that is what is happening — and worse yet, some unthinking souls in the news media and Congress have treated some of these detrimental recommendations with undeserved deference.  A few examples should suffice. The Organization for Economic Co-operation and Development Read More ›

Do you know why the retiring Federal Reserve chairman is praised so highly? He made fewer mistakes “pricing” the U.S. dollar than some of his recent predecessors. The “price” referred to is the short-term interest rate — the rate the Fed charges banks that borrow from the Fed. If you think for a moment, you might find it odd that Read More ›

STRASBOURG, France. Is it a sensible idea to move the site of government every three weeks? This is precisely what the European Union does every month, since much of its government moves back and forth — with great wagon trains of trucks carrying government papers (and the luggage of the European parliamentarians) — between this picturesque city in the Rhine Read More ›

The president’s tax reform panel’s report is due at the end of this month, but don’t hold your breath if you were looking for the reform that is really needed. Preliminary signs are the panel will recommend relatively modest (but several desirable) changes to the federal tax system. For decades the present income tax system, with its tens of thousands Read More ›

If you had to list 10 freedoms that are important to you from your most to your least important, how would you rank them? You might ask your family and friends the same question, and I expect you will find the lists and priorities quite different.Those who work in the media are likely to rank freedom of the press near Read More ›

Two adjoining building lots with beautiful views of the Gulf of Mexico were for sale. One was purchased by Mr. Charles Ant, an engineer, and the other was purchased by Mr. Teddy Grasshopper, a lawyer. Each lot was 6 feet above sea level. Scientists had calculated there was a 10 percent chance of a 5-foot storm surge, a 5 percent Read More ›

If you bought a home 10 years ago for $100,000 and just sold it for $300,000, have you engaged in price gouging? Most people would say “no,” provided there were willing buyers and sellers of both sides of the transaction merely responding to the market at the time.
As a result of hurricanes Katrina and Rita, some politicians have demanded prosecution of “price gougers.” In many states, like Florida, “price gouging” is illegal. The Florida statutes say, “It is illegal to charge unconscionable prices for goods or services following a declared state of emergency.”

Hmmm, I know what the law means when says burglary or murder are illegal, but an “unconscionable price”?

So I looked in Webster’s Dictionary, and found unconscionable is defined as “excessive; extortionate” and gouge is defined as “to extort from or to swindle.”

Assume you were a regular blood donor but had an accident in which you lost a considerable amount of blood. Do you think you should increase or decrease the size and frequency of your blood donations until you recover?

Though most politicians are smart enough to answer, “decrease the blood donations,” many seem not smart enough to understand that, when you take an economic hit, you don’t want to unnecessarily add burdens to the economy. I refer to the call from some politicians to increase taxes or not extend President Bush’s tax cuts to “pay” for New Orleans. (Note: Not making the tax cuts permanent is the same as a tax increase because tax rates therefore would be higher than now.)

The tax increase proponents seemingly cannot grasp that taxes reduce our economic vitality. When taxes rise, the economy slows. When taxes are reduced, job creation and economic growth accelerate. Those who do not understand the role of incentives are always surprised when tax revenues increase, as they did after the Reagan and recent Bush tax cuts, and fall or stagnate when tax rates increase. (For instance, the capital gains tax now — at a maximum 15 percent — produces many times the tax revenue it did when the rate was 40 percent, even after adjusting for inflation and the economy’s size.)

Raising tax rates can increase government revenue over the long run, if the rate is low enough to only have a minimal effect on incentives to work, save and invest. Unfortunately, almost all major U.S. taxes are at rates where the disincentive effects of any rate increase eventually swamp any short-term revenue gains. Almost any tax rate increase can augment revenues in the very short run (the next week or month), before people and businesses have time to adjust their behavior, which most often result in lower long-term tax revenue.