I have not posted anything from Dr. Williams lately, but that does not mean he has not written anything worthwhile. You could do worse than reading his column regularly at Townhall.com.
First, for all you Christian kiddies out there: Remember that taxes are not charity.
Caring vs. uncaring
George Orwell admonished, "Sometimes the first duty of intelligent men is the restatement of the obvious." That's what I want to do -- talk about the obvious, starting with the question: What human motivation leads to the most wonderful things getting done?
This next one is sure to upset those who spout off constantly about economics without having a clue.
Disappearing manufacturing jobs
How do we reconcile lower manufacturing employment with rising manufacturing output? In his April 3, 2006, BusinessWeek article, "The Case of the Missing Jobs," Huether says, "Since 2001, with the aid of computers, telecommunications advances, and ever more efficient plant operations, U.S. manufacturing productivity, or the amount of goods or services a worker produces in an hour, has soared a dizzying 24 percent. That's 72 percent faster than the average productivity advance during America's four most recent recession-recovery cycles dating back to the 1970s. In short: We're making more stuff with fewer people." That means rapid economic growth doesn't translate into the kind of manufacturing job creation of earlier periods...
Economist Joseph Schumpeter referred to this process witnessed in market economies as "creative destruction," where technology and innovation destroy some jobs while creating others. While the process works hardships on some, any attempt to impede the process will make all of us worse off.
Imagine for a moment that technology hadn't destroyed most of the jobs of those 41 percent of Americans working in agriculture in 1900. Where in the world would we have gotten the manpower to make all those goods produced now that weren't even imagined in 1900? Jobs destroyed through the market forces of creative destruction make us all better off, and that applies also to job destruction that comes from peaceable, voluntary exchange with people in different cities, states and countries.
I find it hard to believe we still have morons out there agitating for a higher minimum wage.
Oh, yeah, I forgot. It's about politics, not reality.
The U.S. Department of Labor reports: "According to Current Population Survey estimates for 2004, some 73.9 million American workers were paid at hourly rates, representing 59.8 percent of all wage and salary workers. Of those paid by the hour, 520,000 were reported as earning exactly $5.15."
Workers earning the minimum wage or less tend to be young, single workers between the ages of 16 and 25. Only about two percent of workers over 25 years of age earn minimum wages.
According to the U.S. Bureau of Labor Statistics: Sixty-three percent of minimum wage workers receive raises within one year of employment, and only 15 percent still earn the minimum wage after three years. Furthermore, only 5.3 percent of minimum wage earners are from households below the official poverty line; forty percent of minimum wage earners live in households with incomes $60,000 and higher; and, over 82 percent of minimum wage earners do not have dependents.
The U.S. Department of Labor also reports that the "proportion of hourly-paid workers earning the prevailing Federal minimum wage or less has trended downward since 1979."
Another issue that's not often taken into consideration is there's a difference between what a worker takes home in pay and his total compensation. Employers must pay for legally required worker benefits that include Social Security, Medicare, unemployment insurance, workers' compensation, health and disability insurance benefits, and whatever paid leave benefits they offer, such as vacations, holidays and sick leave. It's tempting to think of higher minimum wages as an anti-poverty weapon, but such an idea doesn't even pass the smell test. After all, if higher minimum wages could cure poverty, we could easily end worldwide poverty simply by telling poor nations to legislate higher minimum wages.
Poor people are not poor because of low wages. For the most part, they're poor because of low productivity, and wages are connected to productivity. The effect of minimum wages is that of causing unemployment among low-skilled workers. If an employer must pay $5.15 an hour, plus mandated fringes that might bring the employment cost of a worker to $7 an hour, does it pay him to hire a person who is so unfortunate as to have skills that permit him to produce only $4 worth of value per hour? Most employers would view hiring such a person as a losing economic proposition.
Two important surveys of academic economists were reported in two issues of the American Economic Review, May 1979 and May 1992. In one survey, 90 percent, and in the other 80 percent, of economists agreed that increasing the minimum wage causes unemployment among youth and low-skilled workers.
Is there a federal deficit?
Let's push back the frontiers of ignorance about the federal deficit. To simplify things, I'll use round numbers that are fairly close to the actual numbers.
The nation's 2005 gross domestic product (GDP), what the American people produced, totaled $13 trillion. The federal government consumed $2.4 trillion, but it only received $2 trillion in tax revenues, leaving us with what's said to be a $.4 trillion budget deficit.
By the way, it's sheer constitutional ignorance to say that President Bush spends or lowers taxes. Article I, Sections 7 and 8, of the U.S. Constitution gives Congress authority to spend and tax. The president only has veto power that Congress can override.
Getting back to deficits, my question to you is this: Is there truly a deficit? The short answer is yes, but only in an accounting sense -- not in any meaningful economic sense. Let's look at it. If Congress spends $2.4 trillion but only takes in $2 trillion in taxes, who makes up that $.4 trillion shortfall that we call the budget deficit? Neither the Tooth Fairy, Santa nor the Easter Bunny makes up the difference between what's spent in 2005 and what's taxed in 2005.
Some might be tempted to answer that it's future generations who will pay. That's untrue. If the federal government consumes $2.4 trillion of what Americans produced in 2005, it must find ways to force us to spend $2.4 trillion less privately in 2005. In other words, the federal government can't spend today what's going to be produced in the future.
One method to force us to spend less privately is through taxation, but that's not the only way. Another way is to enter the bond market. Government borrowing drives the interest rate to a level that it otherwise wouldn't be without government borrowing. That higher interest puts the squeeze on private investment in homes and businesses, thereby forcing us to spend less privately.
Another way to force us to spend less privately is to inflate the currency. Theoretically, Congress can consume what we produce without enacting a single tax law; they could simply print money. The rising prices, which would curtail our real spending, would act as a tax. Of course, an important side effect of doing so would be economic havoc.
Some Americans have called for a balanced budget amendment to the Constitution as a method to rein in a prolific Congress. A balanced budget is no panacea. For example, suppose Congress spent $6 trillion and taxed us $6 trillion. We'd have a balanced budget, but we'd be far freer with today's unbalanced budget. The fact of business is that the true measure of the impact of government on our lives is not the taxes we pay but the level of spending.
The founders of our nation would be horrified by today's level of American servitude to their government. From 1787 to the Roaring '20s, federal government spending, as a percentage of GDP, never exceeded 4 percent, except in wartime, compared to today's 20 percent.
The average taxpayer, depending on the state in which he lives, works from Jan. 1 to May 3 to pay federal, state and local taxes. That means someone else decides how four months' worth of the fruits of the average taxpayer's labor will be spent. The taxpayer is forcibly used to serve the purposes of others -- whether it's farm or business handouts, food stamps or other government programs where the earnings of one American are taken and given to another.
This situation differs only in degree, but not in kind, from slavery. After all, a working description of slavery is the process where one person is forcibly used to serve the purposes of another. The difference is a slave has no rights to what he produces each year, instead of just four months.
No comments:
Post a Comment