Benefiting from a hint from an article titled "Is Harry Potter Making You Poorer?", written by my colleague Dr. John Goodman, president of the Dallas-based National Center for Policy Analysis, I've come up with an explanation and a way to end income inequality in America, possibly around the world. Joanne Rowling was a welfare mother in Edinburgh, Scotland. All that has changed. As the writer of the "Harry Potter" novels, having a net worth of $1 billion, she is the world's wealthiest author. More importantly, she's one of those dastardly 1-percenters condemned by the Occupy Wall Streeters and other leftists.
Thomas Edison invented the incandescent bulb, the phonograph, the DC motor and other items in everyday use and became wealthy by doing so. Thomas Watson founded IBM and became rich through his company's contribution to the computation revolution. Lloyd Conover, while in the employ of Pfizer, created the antibiotic tetracycline. Though Edison, Watson, Conover and Pfizer became wealthy, whatever wealth they received pales in comparison with the extraordinary benefits received by ordinary people. Billions of people benefited from safe and efficient lighting. Billions more were the ultimate beneficiaries of the computer, and untold billions benefited from healthier lives gained from access to tetracycline.
President Barack Obama, in stoking up class warfare, said, "I do think at a certain point you've made enough money." This is lunacy. Andrew Carnegie's steel empire produced the raw materials that built the physical infrastructure of the United States. Bill Gates co-founded Microsoft and produced software products that aided the computer revolution. But Carnegie had amassed quite a fortune long before he built Carnegie Steel Co., and Gates had quite a fortune by 1990. Had they the mind of our president, we would have lost much of their contributions, because they had already "made enough money."
According to CBS News, "the number of people in the U.S. living in poverty in 2010 rose for the fourth year in a row, representing the largest number of Americans in poverty in the 52 years since such estimates have been published by the U.S. Census Bureau." MSNBC said, "The U.S. poverty rate remains among the highest in the developed world." Let's look at a few poverty facts.
Heritage Foundation researchers Dr. Robert Rector and Rachel Sheffield laid out some facts about the poor in their report "Understanding Poverty in the United States: Surprising Facts About America's Poor" (9/13/2011). Eighty percent of poor households have air conditioning. Nearly three-fourths have a car or truck, and 31 percent have two or more. Two-thirds have cable or satellite TV. Half have one or more computers. Forty-two percent own their homes. The average poor American has more living space than the typical non-poor person in Sweden, France or the U.K. Ninety-six percent of poor parents stated that their children were never hungry during the year because they couldn't afford food.
Many Wall Street occupiers are echoing the Communist Party USA's call to "Save the nation! Tax corporations! Tax the rich!" There are other Americans, on both the left and the right — for example, President Barack Obama and House Speaker John Boehner — who call for reductions in corporate taxes. But the University of California, Berkeley's pretend economist Robert Reich disagrees, saying, "The economy needs two whopping corporate tax cuts right now as much as someone with a serious heart condition needs Botox." Let's look at corporate taxes and ask, "Who pays them?"
Virginia has a car tax. Does the car pay the tax? In most political jurisdictions, there's a property tax. Does property pay the tax? You say: "Williams, that's lunacy. Neither a car nor property pays taxes. Only flesh-and-blood people pay taxes!" What about a corporation? As it turns out, a corporation is an artificial creation of the legal system and, as such, a legal fiction. A corporation is not a person and therefore cannot pay taxes. When tax is levied on a corporation, who pays it?
After Moammar Gadhafi's downfall as Libya's tyrannical ruler, politicians and "experts" in the U.S. and elsewhere, including French Foreign Minister Alain Juppe, are saying that his death marked the end of 42 years of tyranny and the beginning of democracy in Libya. Sen. Chris Coons, D-Del., said Gadhafi's death represented an opportunity for Libya to make a peaceful and responsible transition to democracy. House Speaker John Boehner, R-Ohio, said, "Now it is time for Libya's Transitional National Council to show the world that it will respect the rights of all Libyans (and) guide the nation to democracy." German Chancellor Angela Merkel said that "Libya must now quickly make further determined steps in the direction of democracy." It's good to see the removal of a tyrant, but if we're going to be realistic, there's little hope for the emergence of what we in the West call a democracy. Let's look at it.
The Occupy Wall Street demonstrators are demanding "people before profits" — as if profit motivation were the source of mankind's troubles — when it's often the absence of profit motivation that's the true villain.
First, let's get both the definition and magnitude of profits out of the way. Profits represent the residual claim earned by entrepreneurs. They're what are left after other production costs — such as wages, rent and interest — have been paid. Profits are the payment for risk taking, innovation and decision-making. As such, they are a cost of business just as are wages, rent and interest. If those payments are not made, labor, land and capital will not offer their services. Similarly, if profit is not paid, entrepreneurs won't offer theirs. Historically, corporate profits range between 5 and 8 cents of each dollar, and wages range between 50 and 60 cents of each dollar.
President Barack Obama and the Democratic Party have led increasingly successful efforts to pit Americans against one another through the politics of hate and envy. Attacking CEO salaries, the president — last year during his Midwest tour — said, "I do think at a certain point you've made enough money."
Let's look at CEO salaries, but before doing so, let's look at other salary disparities between those at the bottom and those at the top. According to Forbes' Celebrity 100 list for 2010, Oprah Winfrey earned $290 million. Even if her makeup person or cameraman earned $100,000, she earned thousands of times more than that. Is that fair? Among other celebrities earning hundreds or thousands of times more than the people who work with them are Tyler Perry ($130 million), Jerry Bruckheimer ($113 million), Lady Gaga ($90 million) and Howard Stern ($76 million). According to Forbes, the top 10 celebrities, excluding athletes, earned an average salary of a little more than $100 million in 2010.
Years ago it was easy to be a racist. All you had to be was a white person using some of the racial epithets that are routinely used in song and everyday speech by many of today's blacks. Or you had to chant "two, four, six, eight, we don't want to integrate" when a black student showed up for admission to your high school or college. Of course, there was that dressing up in a hooded white gown. In any case, you didn't have to be sophisticated to be a racist.
Today all that has changed. Rep. Charles Rangel, D-N.Y., pointed that out back in 1994 when the Republican-led Congress pushed for tax relief. Rangel denounced Republicans' plan as a form of modern-day racism, saying, "It's not 'spic' or 'nigger' anymore. (Instead,) they say, 'Let's cut taxes.'" That means the simple use of the N-word is not enough to make one a racist. If it were, blacks would be the nation's premier racists. Today it's the call for tax cuts that makes you a racist. That's why the "tea" party, short for "taxed enough already," is nothing more than organized racists. What makes tea partyers even more racist is their constant call for the White House and Congress to return to the confines of the Constitution.
Politicians who are principled enough to point out the fraud of Social Security, referring to it as a lie and Ponzi scheme, are under siege. Acknowledgment of Social Security's problems is not the same as calling for the abandonment of its recipients. Instead, it's a call to take actions now, while there's time to avert a disaster. Let's look at it.
The term was derived from the scheme created during the 1920s by Charles Ponzi, a poor but enterprising Italian immigrant. Here's how it works. You persuade some people to give you their money to invest. After a while, you pay them a nice return, but the return doesn't come from investments. What you pay them with comes from the money of other people whom you've persuaded to "invest" in your scheme. The scheme works so long as you can persuade greater and greater numbers of people to "invest" so that you can pay off earlier "investors." After a while, Ponzi couldn't find enough new investors, and his scheme collapsed. He was convicted of fraud and sent to prison.
What's the common thread between Europe's financial mess, particularly among the PIIGS (Portugal, Ireland, Italy, Greece and Spain), and the financial mess in the U.S.? That question could be more easily answered if we asked instead: What's necessary to cure the financial mess in Europe and the U.S.?
If European governments and the U.S. Congress ceased the practice of giving people what they have not earned, budgets would be more than balanced.
For government to guarantee a person a right to goods and services he has not earned, it must diminish someone else's right to what he has earned, simply because governments have no resources of their very own.
During the recent GOP presidential debate, Texas Gov. Rick Perry said that Social Security is a "monstrous lie" and a "Ponzi scheme." More and more people are coming to see that Social Security is a Ponzi scheme, but is it a lie, as well? Let's look at it.
Here's what the 1936 government pamphlet on Social Security said: "After the first 3 years — that is to say, beginning in 1940 — you will pay, and your employer will pay, 1.5 cents for each dollar you earn, up to $3,000 a year. ... Beginning in 1943, you will pay 2 cents, and so will your employer, for every dollar you earn for the next 3 years. ... And finally, beginning in 1949, twelve years from now, you and your employer will each pay 3 cents on each dollar you earn, up to $3,000 a year." Here's Congress' lying promise: "That is the most you will ever pay."
Too much of anything is just as much a misallocation of resources as it is too little, and that applies to higher education just as it applies to everything else. A recent study from The Center for College Affordability and Productivity titled "From Wall Street to Wal-Mart," by Richard Vedder, Christopher Denhart, Matthew Denhart, Christopher Matgouranis and Jonathan Robe, explains that college education for many is a waste of time and money. More than one-third of currently working college graduates are in jobs that do not require a degree. An essay by Vedder that complements the CCAP study reports that there are "one-third of a million waiters and waitresses with college degrees." The study says Vedder — distinguished professor of economics at Ohio University, an adjunct scholar at the American Enterprise Institute and director of CCAP — "was startled a year ago when the person he hired to cut down a tree had a master's degree in history, the fellow who fixed his furnace was a mathematics graduate, and, more recently, a TSA airport inspector (whose job it was to ensure that we took our shoes off while going through security) was a recent college graduate."
What laws are we morally obligated to obey? Help with the answer can be found in "Economic Liberty and the Constitution," a 66-page pamphlet by Jacob G. Hornberger, founder and president of The Future of Freedom Foundation.
President Barack Obama has called for a luxury tax on corporate jets as a means to generate revenue to fight federal deficits. The president's economic advisers ought to be fired for not telling him that doing so is unwise and counterproductive. They might have already told him so, only to have the president say, "Look, I know you're right, but I'm exploiting the public's envy of the rich!" Let's look at what happened when Obama's predecessor George H.W. Bush signed the Omnibus Budget Reconciliation Act of 1990 and broke his "read my lips" vow not to agree to new taxes.
When Congress imposed a 10 percent luxury tax on yachts, private airplanes and expensive automobiles, Sen. Ted Kennedy and then-Senate Majority Leader George Mitchell crowed publicly about how the rich would finally be paying their fair share of taxes. What actually happened is laid out in a Heartland Institute blog post by Edmund Contoski titled "Economically illiterate Obama, re: Corporate Jets" (7/12/2011).
What does it take to be able to own and operate a taxi and earn $30,000, $40,000 or more a year? You need to purchase a used car and liability insurance. Compared with other businesses, the startup cost to become a taxi owner/operator is modest; that's until you have to come up with money for a license. In May 2010, the price of a license, called a medallion, to own one taxi in New York City sold for $603,000. As referenced in my recent book, "Race and Economics," New York City is not alone. In Chicago, a taxi license costs $56,000, Boston $285,000 and Philadelphia $75,000. It's not rocket science to understand the effect of laws that produce these prices: They discriminate against anyone getting into the taxi business who lacks tens and hundreds of thousands of dollars or bank credit to be able to get a loan.
Here's what President Barack Obama said about our high rate of unemployment in an interview with NBC's Ann Curry: "The other thing that happened, though — and this goes to the point you were just making — is there are some structural issues with our economy, where a lot of businesses have learned to become much more efficient with a lot fewer workers," adding that "you see it when you go to a bank and you use an ATM; you don't go to a bank teller. Or you go to the airport and you're using a kiosk instead of checking in at the gate." The president's statements suggest that he sees labor-saving technological innovation as a contributor to today's high rate of unemployment. That's unmitigated nonsense. Let's see whether technological innovation causes unemployment.
In 1790, farmers were 90 percent, out of a population of nearly 3 million, of the U.S. labor force. By 1900, only about 41 percent of our labor force was employed in agriculture. By 2008, fewer than 3 percent of Americans were employed in agriculture. Through labor-saving technological advances and machinery, our farmers are the world's most productive. As a result, Americans are better off.
Last December, I reported on Harvard University professor Stephan Thernstrom's essay "Minorities in College — Good News, But...," on Minding the Campus, a website sponsored by the New York-based Manhattan Institute. He was commenting on the results of the most recent National Assessment of Educational Progress, saying that the scores "mean that black students aged 17 do not read with any greater facility than whites who are four years younger and still in junior high. ... Exactly the same glaring gaps appear in NAEP's tests of basic mathematics skills." Thernstrom asked, "If we put a randomly-selected group of 100 eighth-graders and another of 100 twelfth-graders in a typical college, would we expect the first group to perform as well as the second?" In other words, is it reasonable to expect a college freshman of any race who has the equivalent of an eighth-grade education to compete successfully with those having a 12th-grade education?
A recent Superman comic book* has the hero saying, "I am renouncing my U.S. citizenship" because "truth, justice, and the American way — it's not enough anymore." Though not addressing Superman's statement, Stanford University professor and Hoover Institution senior fellow William Damon explains how such a vision could emerge today but not yesteryear. The explanation is found in his article "American Amnesia," in Defining Ideas (7/1/2011), based upon his most recent book, "Failing Liberty 101: How We Are Leaving Young Americans Unprepared for Citizenship in a Free Society."
Rep. Charlie Rangel, D-N.Y., referring to his race and the Constitution on John Stossel's recent show "The State Against Blacks," said, "I wasn't even considered three-fifths of a guy." The Rev. Al Sharpton, debating on Sean Hannity's show, said, "Any black, at any age at any stage, was three-fifths of a human." Even eminent historian John Hope Franklin charged the Founders with "degrading the human spirit by equating five black men with three white men." Statements such as those either represent ignorance or are part of the leftist agenda to demean the founding principles of our nation by portraying the nation's Founders as racists. Let's look at the origin of the three-fifths clause.
The late South African economist William Hutt, in his 1964 book, "The Economics of the Colour Bar," said that one of the supreme tragedies of the human condition is that those who have been the victims of injustices and oppression "can often be observed to be inflicting not dissimilar injustices upon other races."
Most of our nation's problems are a direct result of our being immune, hostile or indifferent to several moral questions. Let's start out with the simple and move to the more complex. Or, stated another way, let's begin with questions that generate the least hostility, moving to those that generate the greatest.
If a person benefits from a hamburger, a suit of clothing, an apartment or an education, who should be forced to pay for it? I believe the question has only one moral answer, namely the person who benefits from a good or service should be forced to pay for it, that's if we wish to distinguish ourselves from thieves who only care about enjoying something and who pays is irrelevant.
There are a lot of things, large and small, that irk me. One of them is our tendency to evaluate a presidential candidate based on his intelligence or academic credentials. When Obama threw his hat in the ring, people thought he was articulate and smart and hailed his intellectual credentials. Just recently, when Newt Gingrich announced his candidacy, people hailed his intellectual credentials and smartness as well.
By contrast, the intellectual elite and mainstream media people see Sarah Palin as stupid, a loose cannon and not to be trusted with our nuclear arsenal. There was another presidential candidate who was also held to be stupid and not to be trusted with our nuclear arsenal who ultimately became president — Ronald Reagan. I don't put much stock into whether a political leader is smart or not because, as George Orwell explained, "Some ideas are so stupid that only intellectuals believe them."
The latest Social Security Trustees Report tells us that the program will be insolvent by the year 2037. The combined unfunded liability of Social Security and Medicare has reached nearly $107 trillion in today's dollars. That is about seven times the size of the U.S. economy and 10 times the size of the national debt. Those entitlement programs, along with others, account for nearly 60 percent of federal spending. They are what Congress calls non-discretionary spending. About half of discretionary spending is for national defense. Each year, non-discretionary spending consumes a higher and higher percentage of the federal budget.
William J. McGee, the consumer advocate on the Department of Transportation's Future of Aviation Advisory Committee wrote "Forcing the F.A.A. to Fly Blind" in The New York Times (April 9, 2011), where he laments Congress' cut in the FAA budget, saying, "A $4 billion cut will necessarily reduce the work force further. And it's hard to imagine this will not diminish safety." Mr. McGee suggests there will be shortcuts in aircraft maintenance.
Here are a few facts and then a question. Each Boeing 747 costs $317 million, its 777 goes for $284 million and its 737 sells for $80 million. Airbus' giant 555-plus passenger A380 sells for $375 million. Here's a true or false statement: If it weren't for the FAA, airline company CEOs would not take the necessary measures to ensure that their aircraft took off and landed safely.
The liberal vision of government is easily understood and makes perfect sense if one acknowledges their misunderstanding and implied assumptions about the sources of income. Their vision helps explain the language they use and policies they support, such as income redistribution and calls for the rich to give something back.
Suppose the true source of income was a gigantic pile of money meant to be shared equally amongst Americans. The reason some people have more money than others is because they got to the pile first and greedily took an unfair share. That being the case, justice requires that the rich give something back, and if they won't do so voluntarily, Congress should confiscate their ill-gotten gains and return them to their rightful owners.
As if more proof were needed about the minimum wage's devastating effects, yet another study has reached the same conclusion. Last week, two labor economists, Professors William Even (Miami University of Ohio) and David Macpherson (Trinity University), released a study for the Washington, D.C.-based Employment Policies Institute titled "Unequal Harm: Racial Disparities in the Employment Consequences of Minimum Wage Increases."
During the peak of what has been dubbed the Great Recession, the unemployment rate for young adults (16 to 24 years of age) as a whole rose to above 27 percent. The unemployment rate for black young adults was almost 50 percent, but for young black males, it was 55 percent.
Here's a non-rocket science question: If you expect a reduced harvest of wheat, corn, rice or any other commodity some time in the future, what would be the wise thing to do about your consumption today? I bet that the average person would answer: Consume less now so that more will be available in the future.
But how in the world can people be encouraged to consume less now? Enter the futures market, which consists of a worldwide group of millions upon millions of traders, often called speculators. Speculators, betting on a future shortage, buy up wheat, corn and rice today in the hopes of making money selling it for a higher price when the bad harvest hits. As speculators buy more and more wheat, corn and rice, they drive up today's prices. As today's price gets higher, people consume less, but more importantly, people do the intelligent thing without bureaucratic edicts. The vital role of the futures trader, or speculator, is to allocate goods over different time periods. And, it's not just wheat, corn and rice that must be allocated over time but all commodities including oil.
Smugglers are heroes of sorts. The essence of what a smuggler offers is: "Government tyrants want to either prevent or interfere with peaceable voluntary exchange among individuals. I can reduce the impact of that interference." Let's look at smuggling, keeping in mind that not everything illegal is immoral and not everything legal is moral.
Leading up to our War of Independence, the British, under the Navigation Acts, had levied taxes on a wide range of imports. One of those taxes was on molasses imported from non-British islands. John Hancock, whose flamboyant signature graces our Declaration of Independence, had a thriving business smuggling an estimated 1.5 million gallons of molasses a year. His smuggling practices financed much of the resistance to British authority. In fact, a joke of the time was "Sam Adams writes the letters (to newspapers) and John Hancock pays the postage."
The average American, as parent, student and taxpayer, has little idea of the academic rot at so many of our colleges. Save for a tiny handful of the nation's colleges, what distinguishes one college from another is the magnitude of that rot.
One of the best sources of information about our colleges is the New York City-based Manhattan Institute's quarterly Web magazine, Minding the Campus, edited by John Leo, former columnist for U.S. News & World Report.
I've often said that I wish there were some humane way to get rid of the rich. If you asked why, I'd answer that getting rid of the rich would save us from distraction by leftist hustlers promoting the politics of envy. Not having the rich to fret over might enable us to better focus our energies on what's in the best interest of the 99.99 percent of the rest of us. Let's look at some facts about the rich laid out by Bill Whittle citing statistics on his RealClearPolitics video "Eat the Rich."
This year, Congress will spend $3.7 trillion dollars. That turns out to be about $10 billion per day. Can we prey upon the rich to cough up the money? According to IRS statistics, roughly 2 percent of U.S. households have an income of $250,000 and above. By the way, $250,000 per year hardly qualifies one as being rich. It's not even yacht and Learjet money. All told, households earning $250,000 and above account for 25 percent, or $1.97 trillion, of the nearly $8 trillion of total household income. If Congress imposed a 100 percent tax, taking all earnings above $250,000 per year, it would yield the princely sum of $1.4 trillion. That would keep the government running for 141 days, but there's a problem because there are 224 more days left in the year.