Tag Archives: Economic Illiteracy

News

How well are Democrat Party policies working out in socialist Europe?

3 Comments
Brain vs Heart, from: theawkwardyeti.com
Brain vs Heart, from: theawkwardyeti.com

Last night, I watched the Democrat debate, and I saw a bunch of people “solve” all of the worlds problems with their hand-waving and happy-talk. Almost no evidence for the effectiveness of any policy was offered, and rarely did anyone pointed to numbers showing that their past actions had succeeded.

At one point, the King of the Clowns Bernie Sanders pointed to Denmark as proof that his socialist ideas would all work.

So I thought we might take a quick look at see how socialism is doing in Denmark, and in Europe more generally.

This is from the government-run news media in Canada, the CBC.

They write:

More than a quarter of Japan’s citizens are at least 65, making it the world’s fastest aging country. In Canada, about 16.1 per cent of us are seniors.

Right now in Japan, there’s a higher demand for adult diapers than children’s diapers, economist Michael Moffatt says, a “stunning statistic” that illustrates one of the main reasons why the country’s economy has been treading water for the better part of two decades.

“They haven’t been able to find a way to get their economy to grow in a significant way while still being able to support an older population,” the Richard Ivey School of Business professor said.

Japan’s GDP has grown at an average rate of 1.3 per cent for the past 25 years, according to the World Bank, dropping from averages of more than five per cent annual growth in earlier decades.

Yes, that’s because Japan’s solution to economic growth has been the Democrat solution: stimulus spending, massive borrowing, low (and decreasing) interest rates. It’s Obamanomics, and guess what? It doesn’t work there, either.

More:

Sweden and Denmark are the “places we need to turn to,” Foot said, in crafting economic and health policy to manage the shift in demographics. While the countries take different approaches, they all focus on health care, offering programs akin to pharmacare or following up with seniors in their homes after a visit to the hospital.

And while Sweden’s residents are not collectively older than Japan’s, about a quarter of the country’s 9.5 million residents are at least 60, according to Global Age Watch.

The public purse covers most home-care and long-term care in both Sweden and Denmark.

Unsurprisingly, they are among the highest taxed countries in the European Union, according to Eurostat. In 2013, Sweden topped the list, while in 2014 it was Denmark.

Policy-makers in Canada will have to make similar choices when it comes to taxes, Foot said, arguing more tax revenue will be needed, although there may be alternative ways of collecting it.

Foot said Ottawa and the provinces could look at taxing different sources, like foreign exchange or stock market transactions.

“If the state or government doesn’t step in, we’ll see poverty rise amongst our senior population,” he said. “We’ll go back to the days when poverty rates in that population were upwards of 30 per cent.”

So, massive government intervention in the free market in the areas of health care has not actually helped them, it has hurt them. And what happens to marriage rates and birth rates when you take 50-70% of a man’s salary? Does it make him start a business and hire other people? Does it make him want to marry? Does it make him want to have children? Are men happy when their wives are forced to work, and when their children are taught by public school teachers and monitored by government social workers? Do men like it when they pay taxes to other people to decide what their family will amount to and what their children will believe? Big government has a corrupting influence on character, turning people away from marriage, family and work.

The Democrat candidates in the debate want to turn us into Greece. They assume (somewhat naively) that all other behaviors will remain constant as they ramp up government spending and then borrow and tax to pay for it. But anyone who thinks about the problem for more than 5 seconds can see that businesses and individuals do not keep on doing what they were doing when spending and taxes increase. To be a Democrat is to not understand basic economics. It is to persist in childhood, having tantrums, ignoring how incentives change for everyone who is affected by childish policies.

Maybe the CBC is too conservative… let’s go to the BBC, they are hard leftists. What does the BBC say?

They say this:

As German Chancellor Angela Merkel is fond of repeating, the EU accounts for just 7% of the world’s population and a quarter of its gross domestic product (GDP) but as much as half of its welfare spending.

[…]Social expenditure per person in the EU in 2012 (the most recent year available, using a harmonised definition) was €7,600 (£5,540), but with a range from €18,900 (£13,800) in Luxembourg to just €927 (£675) in Bulgaria. The UK figure was €8,700 (£6,340).

Interestingly, average EU spending per citizen is almost the same as in the United States and well below that in Switzerland, after adjusting for price differences. Typically, poverty relief, health and pensions are much the biggest components of welfare spending, whereas unemployment benefits cost relatively less.

Sounds like a Democrat paradise, right? This is the Holy Grail to socialists like Bernie Sanders and Hillary Clinton.

More:

Over the past 15 years, the average fertility rate (children per woman) in the EU has been 1.54, ranging from barely over 1.3 in Hungary and Spain, and 1.36 in Germany, to 1.8 in the UK and just under two in Ireland, France and Sweden.

According to the “main scenario” of the latest Eurostat population projections, Germany’s population has already started to shrink and is expected to fall from 82 million in 2013 to 74 million by 2050.

Well, wait now. Democrats told me that if we just nationalize everything that the private sector does, and raise tax rates on job creators and investors, and make all the women get out of their homes and work like men, and criminalize homeschooling, and marginalize Christianity, and abort the next generation of workers, and pay single mothers welfare to raise future criminals, and enact no-fault divorce to get men out of the homes, and teach children to have premarital sex at age 12 so that men get sex without having to marry first, then men and women would just be as interested in starting businesses, working hard, getting married and parenting as they were before? Are you telling me that letting the government control everything, and taking most of what people earn to pay for it, actually discourages people from starting businesses, working, marrying and having kids? Who is going to pay for all these expensive social programs, then?

And this is what Democrats hold up as perfection – heaven on Earth. Instead of closing their eyes to reality and wishing we were Europe, why don’t they actually look at Europe first? And maybe take a first-year course in economics.

News

UK Supreme Court rules against Christian B&B couple’s conscience rights

1 Comment

Dina sent me this article from the UK Telegraph about a recent Supreme Court decision from the UK.

Excerpt:

The devoutly Christian owners of a Cornish hotel who refused to allow two gay men to take a double room have lost their final appeal to the Supreme Court. It ruled that Peter and Hazelmary Bull had discriminated against the couple, even though they had long operated a rule that unmarried guests had to sleep apart. One of the judges, Lady Hale, said such a case would have been unthinkable less than two decades ago, and it is a measure of how both the law and societal norms have changed that the Bulls should have found themselves in such a predicament.

It is also a pity this matter was not settled amicably when the Bulls made an offer of redress; but campaigners were intent on making an example of them. The aggrieved men, Martyn Hall and Steven Preddy, who were in a civil partnership, were supported by the Equalities and Human Rights Commission (EHRC). The Bulls were perplexed as to why the EHRC should act against them, since their right to exercise their religious beliefs was being set against that of the men not to be discriminated against on the grounds of their sexual orientation.

Dina also sent me this article from the pro-gay Spiked Online.

Excerpt:

[A]s the systematic unequal treatment of gays has ended, so another problem has grown. One pernicious social force has been replaced by another: the willingness of the state to outlaw minority or eccentric views and behaviours. State-backed oppression has yielded to state-backed intolerance.

The Bulls have been hauled before the courts and told they can no longer practise what they preach. To deny a couple the right to make a living in a manner consistent with their Christian values is draconian. The Bulls’ fate is similar to that of Lillian Ladele, an Islington marriage registrar, and Gary McFarlane, a Relate counsellor, who were both sacked after declining to provide their professional services to lesbians and gays. Equality laws did for them all.

The problem here is not, as it appears, merely a slap in the face to Christians. It is a slap in the face to the right of all individuals to act free of state control absent a compelling reason for intervention. As John Stuart Mill put it in On Liberty (1859): ‘The only purpose for which power can be rightfully exercised over any member of a civilised community, against his will, is to prevent harm to others.’

As if to satisfy Mill’s harm principle, the Supreme Court went in search of Preddy and Hall’s ‘harm’. What they found was that when the Bulls’ house rules were explained to Preddy and Hall, they found it ‘upsetting’ and ‘very hurtful’. Even in the touchy-feely twenty-first century, where self-esteem is seen as so important and so fragile, this is pretty lame.

The Supreme Court judge, Lady Hale, may have been aware that this ‘affront to their dignity’, as she put it, was not the sort of harm, in the Mill sense, that should justify the state’s coercive power. She bolstered her argument by linking Preddy and Hall’s hurt feelings to a bigger historical picture. ‘We should not underestimate’, she said, ‘the continuing legacy of those centuries of discrimination, persecution even, which is still going on in many parts of the world’.

Fascism happens when the normal desire for compassion is taken out of the family context and becomes the policy of a powerful feminist welfare state. And that’s when it becomes a threat to the right of individuals to make moral judgments and to exercise religious liberty.

The EHRC, you’ll remember, was a project of the Labour Party of the UK, which is the socialist party in the UK. There is also a communist party called the Liberal Democrats. The striking thing is that many church-attending Christians not only vote for the Labour Party, but they also vote for the Liberal Democrats, which are even more liberal. A lot of this is because British Christians are so far to the left on economic issues that they sort of go along with the assault on their own religious liberty out of ignorance. They vote for bigger and bigger government, and then they are surprised when they actually get it.

The same thing happened in Canada with the Liberal Party and their introduction of Human Rights Commissions and Human Rights Tribunals, which criminalize offending people with free speech. The very Christians that voted for expanding government to reduce poverty were the ones who were then persecuted by the same big government they voted to create. This goes to show why we need to have better economics knowledge among Christians, because many of us are voting for left-wing parties because we think that private, voluntary charity can be replaced with government-controlled redistribution of wealth. Not only does that not work to reduce poverty, but in the end, we lose our liberties, too.

In the UK, you’ll find a lot of Christians who think that rent control is a good thing, that price controls are a good thing, that raising minimum wage is a good thing, that tariffs on imported goods are a good thing – positions which are generally viewed as incorrect by academic economists across the ideological spectrum. That’s why churches need to teach the Christian worldview, including economics. The UK church should be training Christians to undo this ignorant, patriotic confidence that UK Christians have in their welfare state. We all have a lot of work to do to educate ourselves on how the Bible applies to the real world (e.g. – economics), or else we will end up undermining our own liberties.

Additionally, I find it very frustrating that so many churches are so focused on providing emotional comfort and a sense of community to the people in the pews that they neglect to talk about these religious liberty issues. Pastors don’t want to alert ordinary Christians about how dangerous it’s becoming to take unpopular stands on issues like gay rights in public – it’s scary and divisive and drives people away from church. You’re not going to hear them trying to apply the Bible to moral issues or economic issues, etc. from the pulpit, because that spoils the “experience” and “the show” – the comfort and entertainment that people expect from church. We need to do better at helping Christians to be aware of threats to our liberties. They need to be trained to connect their faith to specific laws and policies in the real world.

News

Canada’s tax revenues steady as they lowered corporate tax rates

4 Comments
Canada: Corporate tax cuts, not stimulus spending
Canada: Corporate tax cuts, not stimulus spending

From the Daily Caller.

Excerpt:

The chart shows Canada’s federal corporate tax revenues as a share of gross domestic product (GDP) and the federal corporate tax rate. The tax rate plunged from 38 percent in 1980 to just 15 percent by 2012. Amazingly, there has been no obvious drop in tax revenues over the period.

Canadian corporate tax revenues have fluctuated, but the changes are correlated with economic growth, not the tax rate. In the late 1980s, a tax rate cut was followed by three years of stable revenues. In the early 1990s, a plunge in revenues was caused by a recession, and then in the late 1990s revenues soared as the economy grew.

In 2000, Canadian policymakers enacted another round of corporate tax rate cuts, which were phased in gradually. Corporate tax revenues initially dipped, but then they rebounded strongly in the late 2000s.

The rate cuts enacted in 2000 were projected to cause substantial revenue losses to the Canadian government. That projection indicates that the reform didn’t have much in the way of legislated loophole closing. But the chart shows that the positive taxpayer response to the rate cut was apparently so large that the government did not lose much, if any, revenue at all.

In 2009, Canada was dragged into a recession by the elephant economy next door, and that knocked the wind out of corporate tax revenues. However, it is remarkable that even with a recession and a tax rate under 20 percent, tax revenues as a share of GDP have been roughly as high in recent years as they were during the 1980s, when there was a much higher rate. Jason Clemens of the Macdonald-Laurier Institute notes that Canadian corporate tax revenues have been correlated with corporate profits, not the tax rate.

If a corporate tax rate is high, there is a “Laffer effect” when the rate is cut, meaning that the tax base expands so much that the government doesn’t lose any money. Estimates from Jack Mintz and other tax experts show that cutting corporate tax rates when they are above about 25 percent won’t lose governments any revenues over the long run.

This data is no surprise to supply siders – we expect this because of past experience with tax cuts.

Tax cuts: do they work?

Consider this article by the Cato Institute discusses how the Reagan tax cuts affected the unemployment rate.

Excerpt:

In 1980, President Carter and his supporters in the Congress and news media asked, “how can we afford” presidential candidate Ronald Reagan’s proposed tax cuts?

Mr. Reagan’s critics claimed the tax cuts would lead to more inflation and higher interest rates, while Mr. Reagan said tax cuts would lead to more economic growth and higher living standards. What happened? Inflation fell from 12.5 percent in 1980 to 3.9 percent in 1984, interest rates fell, and economic growth went from minus 0.2 percent in 1980 to plus 7.3 percent in 1984, and Mr. Reagan was re-elected in a landslide.

[…]Despite the fact that federal revenues have varied little (as a percentage of GDP) over the last 40 years, there has been an enormous variation in top tax rates. When Ronald Reagan took office, the top individual tax rate was 70 percent and by 1986 it was down to only 28 percent. All Americans received at least a 30 percent tax rate cut; yet federal tax revenues as a percent of GDP were almost unchanged during the Reagan presidency (from 18.9 percent in 1980 to 18.1 percent in 1988).

What did change, however, was the rate of economic growth, which was more than 50 percent higher for the seven years after the Reagan tax cuts compared with the previous seven years. This increase in economic growth, plus some reductions in tax credits and deductions, almost entirely offset the effect of the rate reductions. Rapid economic growth, unlike government spending programs, proved to be the most effective way to reduce unemployment and poverty, and create opportunity for the disadvantaged.

The federal revenues as a % of GDP were steady.

The conservative Heritage Foundation describes the effects of the Bush tax cuts.

Excerpt:

President Bush signed the first wave of tax cuts in 2001, cutting rates and providing tax relief for families by, for example, doubling of the child tax credit to $1,000.

At Congress’ insistence, the tax relief was initially phased in over many years, so the economy continued to lose jobs. In 2003, realizing its error, Congress made the earlier tax relief effective immediately. Congress also lowered tax rates on capital gains and dividends to encourage business investment, which had been lagging.

It was the then that the economy turned around. Within months of enactment, job growth shot up, eventually creating 8.1 million jobs through 2007. Tax revenues also increased after the Bush tax cuts, due to economic growth.

In 2003, capital gains tax rates were reduced. Rather than expand by 36% as the Congressional Budget Office projected before the tax cut, capital gains revenues more than doubled to $103 billion.

The CBO incorrectly calculated that the post-March 2003 tax cuts would lower 2006 revenues by $75 billion. Revenues for 2006 came in $47 billion above the pre-tax cut baseline.

Here’s what else happened after the 2003 tax cuts lowered the rates on income, capital gains and dividend taxes:

  • GDP grew at an annual rate of just 1.7% in the six quarters before the 2003 tax cuts. In the six quarters following the tax cuts, the growth rate was 4.1%.
  • The S&P 500 dropped 18% in the six quarters before the 2003 tax cuts but increased by 32% over the next six quarters.
  • The economy lost 267,000 jobs in the six quarters before the 2003 tax cuts. In the next six quarters, it added 307,000 jobs, followed by 5 million jobs in the next seven quarters.

The timing of the lower tax rates coincides almost exactly with the stark acceleration in the economy. Nor was this experience unique. The famous Clinton economic boom began when Congress passed legislation cutting spending and cutting the capital gains tax rate.

Tax revenues increased after the Bush tax cuts – due economic growth.

Those are the facts. That’s not what you hear in the media, but they are the facts.