Saturday, May 29, 2010

Two Sowell Quotes

I wanted to share some Sowell quotes. If you haven't bought the book yet (see prior post), you really should because it is a treasure trove of education and thought provoking chapters.

In the special issues final chapter, on page 526:

Nowhere is the weighing of some values against other values obscured more often by rhetoric than when discussing government policies. Taxing away what other people have earned, in order to finance one's own moral adventures via social programs, is often depicted as a humanitarian endeavor, while allowing others the same freedom and dignity as oneself, so that they can make their own choices with their earnings, is considered to be pandering to "greed." Greed for power is no less dangerous than greed for money, and has historically shed far more blood in the process.

On page 527:

People who deplore greed often show a disdain for wealth. Although a disdain for wealth may be admired, only those who already have a certain amount of wealth can afford to disdain any further pursuit of it. The hungry do not disdain food nor the homeless disdain shelter. Wealth means options and who would want fewer options? More important, from the standpoint of society as a whole, wealth is the only thing that can prevent poverty. Yet many people who claim to be concerned about poverty show remarkably little interest in how wealth is generated or which policies make it harder or easier to create more wealth.


You know, sometimes I just feel like a sled dog. It's me and a bunch of other hard-working Americans pulling the weight of this country while the ones in the sled get to enjoy the ride.

I have dedicated nearly a decade investing nearly all of my time into a successful life path. I did the right things - I studied hard and took on student loan debt to earn three difficult university degrees that would guarantee me success. And I found it, but high taxes that I face remove much of the return. Before taxes, I earn a pretty respectable salary. But after taxes are factored in, more than half my income is stolen from me (including taxes at all levels).

In the meantime, plenty of freeloaders who didn't have to work as hard as me have about the same before and after salary/wage because they barely pay any (if at all) taxes (see prior posts). My salary drops pretty close to theirs because of this fact. They didn't bust their ass in school, they don't have student loan debt and they were able to work the entire time making payments on a sports car, while I was hitting the books working a part time gig to pay my rent, food, and a few classes. And they get to keep most of their money. Now how is that fair?

Supposedly, because of my salary, "I can afford to pay more in taxes." Bullshit, I can't even afford a new car. My high tax burden just makes it harder for me to pay down my student loans, half of which are pegged at 6.8%; a good return for the bank. I had expected things to dramatically improve financially after I had finished school and started a career, but really all that changed is that my employer started paying the government more and bypassing me in the transaction as if I didn't exist. It's almost a sham.

See my problem isn't with paying taxes. Taxes are a necessity for a functioning government. But as they stand today, they are too high, inefficient and not equitable. Much of it just goes to waste.

Amendment to Health Care Bill

So, apparently the new amendment for the health care bill is to provide free public housing for HIV/AIDs patients. H. Con. Res. 137 passed in the House on May 24, and is pending in the Senate. HIV spreads through behavioral choices (i.e. intravenous drug use, unprotected sex) Can someone explain to me how giving free housing paid for by tax payers is really going to slow the spread of the disease?

The bill text says,

Whereas homeless and unstably housed persons are 2 to 6 times more likely to use hard drugs, share needles...

They aren't using hard drugs because they are homeless, they are homeless because they are using hard drugs. Does Congress think that these people are going to get some free housing and all of a sudden make better life choices and stop using hard drugs? (And for those who started using hard drugs after becoming homeless, then obviously they are making poor life choices by wasting their resources that could have been spent on housing or food) Many of these people have shown that drugs are more important than having housing because they chose to buy drugs instead of paying rent.
Even still, the logic of this bill doesn't make sense. If homelessness is the symptom, why not provide free housing to all homeless, or all intravenous drug users (for the record, I am not advocating this; just illustrating a point)?

Wednesday, May 26, 2010

Two Articles of Interest

So there are two interesting articles noteworthy of mention in this week's BusinessWeek (May 24 - 30th).

The first is that France figured out that that high taxes on restaurants is bad for business because bankruptcies in the industry began to soar (p.16). So, the government decided to drop the VAT tax from 19.6% (!!) to 5.5%. So, what happened? The industry added jobs even though the general economy was losing them, and restaurant salaries are up an average of 5 percent. Obama, take note.

The second article of interest is that there are nearly 40 million people on food stamps in the US (p.33). That is not a typo: 40 million people! Are you telling me that over 10% of the population of this country cannot handle their own affairs and feed themselves? This tells me that the requirements to get such handouts is WAY TOO LIBERAL! People always downplay the significance of welfare/food stamps costs, but with a number that high, they should probably think twice. Reuters reports that it will cost nearly $60 billion this year for just the food stamps. Don't make the fallacy of thinking the number is not so bad by comparing it to the Obama deficit (fallacy of anchoring) - $60 billion is huge!

Also, in that article the author mentioned that many states can keep their welfare numbers artificially low by providing a three month lump sum instead of the usual monthly stipend. The states are not required to report them as being recipients if the lump sum is doled out.

A colleague of mine made an excellent suggestion today: anyone receiving government handouts should have to undergo a mandatory drug screening.

Sunday, May 23, 2010

High Earners, Not Rich Yet (HENRY)

On Fortune Magazine: This is truly a good article about people who earn high incomes but are essentially middle class due to their location and their huge tax burden. Also, a shorter newer article on Yahoo about the same. It also raises a good point that probably most Americans think that these high earners are riding around on charters jets and have Bently's lined up in their garages, which is not the case.
Obama's plan is to punish those who have worked hard to be successful. Also note how most of these people are small business owners, i.e. people who have created jobs for others. Yeah, great plan Obama; Obviously he never took an economics class.

Wednesday, May 19, 2010

Government Bureaucracy

So, reading in BusinessWeek today (May 17 - 23, pp.30), there is mention of Illonois having more government organizations (8,469) than licensed beauty salons and barber shops (6,485), funeral directors and embalmers (2,752), or dental hygienists (7,455). When you put those numbers in perspective, it really gets you thinking: What in the hell are all these government organizations for? This is the problem with government in America. IT KEEPS GROWING! Tax dollars keep getting swept out the door for paper pushers who are hired only for the sake of being hired!
The health-care bill created 111 new federal bureaucracies! I guess we can see the common factor between Illinois and the health-care bill, eh? But seriously, think about who has to deal with all these bureaucrats. How much time will be wasted and how much money will be lost to overpaid 'fat-jackass bureaucrats?' The average pay for a federal employee is $75,419. Are they really worth this much? This is yet another reason why no new taxes must be approved! The problem must be contained, because if more taxes are approved, more bureaucracy will thrive. It's like a cancer.

Updated - June 5, 2010:

Monday, May 17, 2010

Washington D.C. and Guns

Previously, the U.S. Supreme court struck down a ban on handguns in Washinton D.C. Well, today an article in the Wall Street Journal surfaced showcasing the new de facto near ban on handguns that has replaced the struck down law. Essentially, Washington D.C. wants to make the process of buying and owning a gun so onerous, that few people will want to do it. Didn't America attempt to disenfranchise some groups from voting with similar measures in the past?

So, some comments about the article:

Mr. Barnes' son was shot while the gun-ban was in effect, so obviously the gun ban doesn't prevent people from getting killed with guns.
"There's no denying the fact that we have a helluva lot of illegal guns on the streets," he said, but the solution isn't to "arm everyone."

So apparently the solution is to disarm only law abiding citizens? When a state outlaws guns, the only people with guns are criminals. It makes it a little unfair doesn't it?
Arizona apparently subscribes to the constitution a little more so than the nation's capital, ironically, and "last month, Arizona Gov. Jan Brewer signed a law permitting residents 21 years and older to carry concealed weapons without permits." I'd like to see how this plays out over the next few years. This could be a great social science experiment.

Further about Washington D.C.:
"In 2009, the first full year the law was in effect, homicides in the city dropped to 143 from 186 in 2008. The 2009 total was the lowest since 1966."
So what? Was this statistically significant? Was there a trend in declining gun violence over time? How about neighboring cities nearby without the gun ban, did they find similar numbers? Sometimes we are provided an answer to the wrong question.

Sunday, May 16, 2010

Six Reasons Why the Capital Gains Tax Should Be Abolished

Watch the video

New Pre-Paid Cellphone Plan

I have been a customer of Net10, a prepaid cell phone company that offers 10 cents a minute all the time, for nearly 5 years. I am not fond of contracts, don't need a fancy phone, don't need to use many minutes each month, and don't want to spend an extra $40 a month for the luxury of sending radio waves into my head. So, for this entire time, other pre-paid cell phone companies have been in existence with various calling rate plans, but if anyone did any research at all, they would find out that Net10 offered the best deal.

Now, Sprint is offering a new contender called Common Cents Mobile. They offer 7 cents a minute and per text message (Net10 offers 5 cents a text message), and they round minutes down! Who the hell else does that? They also offer some packages for those heavy texters ($20 a month for unlimited)

20% of all cell phone subscribers are now pre-paid users. Its about time we began to see some healthy competition. Free markets baby!

Wednesday, May 5, 2010

Greece's Excuse

Greece is the paragon of fiscal irresponsibility. They ran up debt that they couldn't afford and lied about it to the Euro Union and now it is time to pay the piper. With the requirement to fix the problem, taxes have been increased and entitlements cut. Now citizens are rioting in the streets and people have been killed. What a bunch of idiots. Gee, that's a constructive fix to the problem. Their country is about to default on its debt which will cause huge global ramifications and the only thing they are worried about is their handouts. I can see America following this same route in the not so distant future as more debt is run up and more taxes are pushed onto high earners to pay for it.

And just like in American, there is class warfare and they want the 'rich' to bail them out. During the protesting, they were chanting, "No more illusions, war against the rich." Why do so many people think that the 'rich' are the cause of their problems? How does entering a valued profession (i.e. it must be in high demand if it pays so highly) and then being responsible and saving a lot of that money for the future cause other people problems? The answer is simply that the 'rich' are scape goats (hey, scape goating worked for the Nazis). Those in a less fortunate position are jealous and are more numerous and therefore attempt to pass social policies that take more away from well off people to give to themselves. It's pure selfishness. But then again, those who want something for nothing are generally selfish people.

Sunday, May 2, 2010

Cheating in 2000 Olympics

So it took 10 years to figure out that the Chinese had cheated in the 2000 Olympics. I wrote an article a couple of years ago about the suspicions of Chinese gymnast cheating in the 2008 Olympics. So will we find out that they had cheated in 2018? It seems like a long wait.

Price Controls On ObamaCare

From WSJ, About those lower insurance costs we promised . . . .

The SEC hard at work

Doesn't it seem like that the SEC is two steps behind sometimes? Maybe it's because it's another inefficient government organization. Or maybe it's because some of the staffers they have there are serious porn addicts.

Saturday, May 1, 2010

Scape Goats

So previously, Greece was attacking everybody's favorite villains, Wall Street banks, for causing their debt problems. This is a very false assumption.

How do credit default swaps cause instability in Greece? Take a horse race analogy for example:
When you go to a horse track, you research the horses, you've seen how it has performed in the past, but more importantly, you compare relative performance. This horse may be good, but another horse may be better. However, when you place your bet on the third lane, your bet does not alter the performance of the horse in that lane! This is the same concept of credit default swaps.

From the book, Getting Started in Hedge Funds:
If these men and women were so powerful that they could control currencies and markets, wouldn’t they do so all the time so that they could always make money? No matter how much or how little money one has, no one likes to lose it. If the funds could truly control currencies or manipulate the markets, these massive losses would not have occurred.... The Economist magazine believes the reason hedge funds [and Wall Street Banks] catch flak for all of the world’s financial crises is ignorance.

Still not convinced? Read Swaps Not Responsible for Crisis, Greece Is and CDS not cause of Greek debt woe. In this second article there is mention of AIG causing a problem with CDS contracts, but the difference is that they took the other side of the trade with other firms, as insurance policies (first person). CDS contracts on Greece debt are third-party deals. CDS spreads on Greece debt are just contract prices that firms must pay to enter into default protection and simply reflect how risky Greece bonds have become.

Proportionate to Earnings

People treat wealth as a matter of fact, as if it is just a state of nature; you are born either a cat or a dog. They refer to the 'wealthy' as some privileged class as if those people took no action on their part to earn that status (I am not referring to the wealthy who were born wealthy, but those who get regarded as wealthy through the tax code - those earning high salaries). Consequently, the populist masses who are not in the same situation, despise these people. They want for them to pay higher taxes and complain that even the high progressive tax system of the US is not enough. It is obvious these populists want the 'elite' to earn the same salaries as them, even though it is likely their education, experience, position, and hard work to get there is the cause of this discrepancy in earnings.

America, once regarded as the land of opportunity, meant that if you wanted to have a better life, own a nice home, go on more vacations and have more toys, you could work to attain it. The system is not entirely defunct, but the treatment towards people who make it is viewed negatively and punished through the tax code. Those who have not achieved this elite status take comfort in their friends who are in the same situation and readily complain of those wealthy people who are taking advantage of them or have it so easy, how ever they justify such conclusions. If any of them defect and make it to a higher status, their old friends can no longer sympathize with them and secretly despise their new found status. It's like the old saying goes, misery loves company.

Populists complain that paying X amount of dollars for a product or tax is a higher percentage of their income and it is not fair that a 'wealthy' person pays the same amount and it is such a smaller percentage of their income. But obviously, isn't that the whole point of working hard to become 'wealthy'...? So that the relative cost of products or taxes is not as taxing on one's finances? These populists want to undermine the whole point of striving to earn more so that one can afford more. Otherwise, why bother getting a better paying career if the relative burden of things is going to stay the same?

Take downtown parking for example. I am not aware of a downtown city where it is not expensive to have the wonderful privilege of leaving one's car on the street. Populists will complain that it is unfair to them because only well off people can afford it. But there is only a limited number of spaces, and they have to be rationed somehow! The capitalist system is very efficient for problems like this, and the cities benefit greatly from those high parking fees. I would suspect their solution would be some sort of price discrimination, like everything else going back to the previous paragraph, but so far they have not offered a solution to the problem where costs would not be raised overall. As an aside, why encourage more auto use if there is already an over saturation? When some people cannot afford something, it encourages a cheaper option like mass transit.

For populists, the new American ideology is not about attaining a higher status, but about depressing the status of others.