A Geek With Guns

Chronicling the depravities of the State.

Archive for the ‘Economics’ Category

Totally Not Socialism™

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Alexandria Ocasio-Cortez and her pals within the Democratic Party are touting their Green New Deal, which is their vision for a massive wealth redistribution scheme. Of course they’re not calling it a wealth redistribution scheme because that sounds like socialism and if there’s one thing Americans won’t stand for it’s anything that calls itself socialism. But Americans will stand (with their hand over their heart no less) for socialism so long as it’s wrapped up in Totally Not Socialism™ packaging. So to claim that their Green New Deal is Totally Not Socialism™ the advocates of this Green New Deal are calling it an economic stimulus package. One ritual required for wrapping a socialist program in Totally Not Socialism™ packaging is explaining how the programming will be funded by using traditional American methods (because, you see, America has always been anti-socialist so if something was done in the past it obviously can’t be socialist).

Ocasio-Cortez are performing this crucial ritual by pointing out that income tax rates between World War II and Regan’s presidency seldom dipped below 70 percent and even reached as high as 90 percent for the “wealthiest” Americans. So funding this stimulus package doesn’t require socialism, it merely requires going back to America’s (totally not socialist) halcyon days! Needless to say their supporters are lapping up their bullshit and eagerly asking for more because they’re ignorant about the difference between statutory and effective tax rates:

Yet this historical narrative is both simplistic and wrong. It relies upon a confusion between the statutory tax rate (i.e., the number that’s on the statute books) and the effective tax rate (i.e., the percentage of income that people actually pay once exemptions, deductions, and other tax-code incentives are accounted for).

Although statutory rates were extremely high between World War II and the Reagan-era tax cuts, practically nobody actually paid the taxman’s full sticker price on their earnings. Instead, a plethora of intentional tax exemptions, deductions, and legal income shelters ensured that wealthy individuals paid a much lower effective tax rate.

How much lower are we talking about exactly? Let’s take an example from 1963, the last year that top rates exceeded the 90 percent high water mark. A single filer in the $1 million bracket ($8.2 million today) faced a rate of 91 percent for every dollar earned over $200,000. While the statutory rate dropped for earnings below $200,000, it did not drop much. The 72 percent rate’s threshold kicked in at $44,000 (about $360,000 today). A 50 percent rate applied to single-filer earnings above $16,000 (about $130,000 today), with several other rate jumps as you attained higher income thresholds in between.

Finding a person who can obtain power without being corrupted is almost impossible. Finding a person who is willing to tell their benefactor to fuck off is even harder.

Those wealthy Americans that Ocasio-Cortez and her pals are claiming they’re going to soak? It turns out that they’re the ones who pay their biggest campaign contributions, the lobbyists who host their lavish dinners, and the human resource personnel who offer them absurd salaries to become lobbyists after they become bored with politics. So there’s no way that Ocasio-Cortez or almost any other politician is going to fuck them over.

The difference between the statutory and effective income tax rates is the key to how politicians keep their base supporters and benefactors happy. They promise their base supporters that they’ll soak the rich and redistribute the seized money to them. Since their gullible base supporters are ignorant of how taxes actually work for the wealthy, they fall for it hook, line, and sinker. Meanwhile, their benefactors are happy because the same politicians who passed the higher statutory income tax rate also created a large number of tax-incentives that allow anybody who falls into the new higher rate category to avoid paying the published rate.

Written by Christopher Burg

January 8th, 2019 at 10:30 am

This Time Will Be Different

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Albert Einstein is often credited with say, “The definition of insanity is doing the same thing over and over again, but expecting different results.” General Motors (GM) announced that it would be laying off 15 percent of its workforce. While tariffs aren’t entirely to blame for GM’s problems, they did contribute:

When President Trump announced tariffs last summer, Detroit’s Big Three automakers — GM, Ford and Fiat Chrysler — all trimmed their profit forecasts for the rest of the year, citing the rising commodity costs that would lead to hikes in prices and manufacturing costs. GM took a hard stance, warning of the fallout within the auto industry and saying that the tariffs risked “undermining GM’s competitiveness against foreign auto producers by erecting broad brush trade barriers that increase our global costs” in comments filed with the Commerce Department in June.

So tariffs didn’t bring economic prosperity to the automobile market (or any other market) so the solution must be more tariffs:

Donald Trump has renewed threats to impose tariffs on imported cars after General Motors announced job cuts and plant closures.

The US President tweeted that tariffs were “being studied” and that duties could have stopped the GM closures.

Tariffs have done nothing by damage to the economy so the solution is obviously more tariffs! There really should be a constitutional amendment that requires all incoming presidents to read the collected works of Ludwig von Mises and pass a comprehension test to guard against this kind of economic stupidity.

What’s even worse than the fact that the United States has a president that is committing economic seppuku is the fact that his successor will likely leave all of the tariffs in place. For some reasons politicians have an aversion to undoing the bad policies of previous politicians.

Written by Christopher Burg

November 29th, 2018 at 10:30 am

What Part of Free Didn’t You Understand?

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Did you know that a majority of apps targeted at children contain ads:

(Reuters Health) – Those cute little apps your child plays with are most likely flooded with ads – some of which are totally age-inappropriate, researchers have found.

A stunning 95 percent of commonly downloaded apps that are marketed to or played by children age five and under contain at least one type of advertising, according to a new report in the Journal of Developmental & Behavioral Pediatrics. And that goes for the apps labeled as educational, too, researchers say.

That’s just terrible… oh:

The researchers scrutinized 135 of the most downloaded free and paid apps in the “age five and under” category in the Google Play app store. Among them were free apps with 5 to 10 million downloads and paid apps with 50,000 to 100,000 downloads.

Emphasis mine.

To once again quote The Moon is a Harsh Mistress, there ain’t no such thing as a free lunch (TANSTAAFL). If you can download an app without paying upfront, the developer is making money in some other way. Advertisements are the quick and easy go to. In app purchases are the more sophisticated method although more difficult to execute because you need to incentivize users to buy your in app purchases. When your target audience is children, in app purchases are even more difficult because parental controls often prevent children from making purchases directly.

Instead of performing a study with an obvious result such as determining how many free apps display ads (almost all of them), a better study would be to learn why people are so foolish as to believe that they can get something for free.

Written by Christopher Burg

November 1st, 2018 at 10:30 am

Apocalyptic Financial Predictions Aren’t Just for Libertarians Anymore

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Apocalyptic financial predictions are a staple of libertarianism. This isn’t without merit. Governments around the world implement financial policies that can lead to nowhere but ruin. However, the mainstream media has always laughed at these libertarian predictions… until now:

Financial experts noted several ominous economic indicators, including skyrocketing student loans and U.S. household debts, that could predict a crash “worse than the Great Depression,” according to a report in the New York Post.

Goldman Sachs predicted that this year’s U.S. fiscal outlook would be “not good,” and that U.S. household debt had been increasing since the 2008 housing crisis led to American taxpayers bailing out the big banks.

In 2018, experts said, a $247 trillion global debt will be the greatest cause of the next cataclysmic financial crash. Additionally, low wages and the U.S. national debt’s steady rise are expected to drag down the economy.

This is from Newsweek of all sources.

Granted, the only reason the mainstream media is jumping onboard of the SS Financial Meltdown is because Trump is in office. If Hillary had won and implemented the same policies that Trump has, the mainstream media would still be laughing at predictions of financial meltdown. Regardless of their reasoning it’s still funny seeing this kind of story appearing.

Written by Christopher Burg

October 17th, 2018 at 10:30 am

Fiscally Conservative

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If you ask most people what one of the major difference between the Republican and Democratic parties is, they will tell you that the Republican Party tends to be more fiscally conservative. The Republican Party is in power now so a wave of fiscal conservation is upon us, right? Not so much:

The U.S. federal budget deficit rose in fiscal 2018 to the highest level in six years as spending climbed, the Trump administration said Monday.

The deficit jumped to $779 billion, $113 billion or 17 percent higher than the previous fiscal period, according to a statement from Treasury Secretary Steven Mnuchin and Office of Management and Budget Director Mick Mulvaney. It was larger than any year since 2012, when it topped $1 trillion. The budget shortfall rose to 3.9 percent of U.S. gross domestic product.

It turns out that neither party is fiscally conservative. And really, why should they be? They’re not spending their own money. They’re not even primarily spending out money. They’re spending the money that they’re printing. Since they can print an infinite amount of money, there is no motivation for them to spend less… at least until the whole financial system collapses due to an irreconcilable misallocations of resources. But that’s a problem for the next generation, right?

Written by Christopher Burg

October 17th, 2018 at 10:00 am

I Want to Alter the Deal

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The Witcher series of games have been phenomenally successful. In fact their success has overshadowed the books that they were based on. Unfortunately for the author, he made a bad deal and now wants to alter the deal:

“I was stupid enough to sell them rights to the whole bunch,” Sapkowski said at the time. “They offered me a percentage of their profits. I said, ‘No, there will be no profit at all — give me all my money right now! The whole amount.’ It was stupid. I was stupid enough to leave everything in their hands because I didn’t believe in their success. But who could foresee their success? I couldn’t.”

Sapkowski has now made a public demand for six percent of the profits obtained for the lifetime of the franchise, which adds up to more than $16 million for The Witcher 3: Wild Hunt alone.

I especially enjoy how he admits that he was initially offered a percentage of the profits and turned the offer down because he didn’t believe that the project would be successful. So even he’s admitting that his failure to capitalized on his novels was entirely his fault.

Higher risks generally come with greater rewards, which makes sense since there needs to be a justification for taking a risk. Sapkowski played it safe and took the low risk/low reward option. Generally speaking, if you can bear the brunt of losing out on a high risk/high reward situation, take it. Sapkowski had income from his books so he may have been able to bear the brunt of not receiving any money on the series if it flopped. If you ever find yourself in a similar position, give the high risk option some serious thought.

Written by Christopher Burg

October 5th, 2018 at 10:00 am

Creating Jobs

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If you ask an advocate of tariffs what punishing consumers is supposed to accomplish, amongst other things they will claim that tariffs create domestic jobs. That ignorance is based on the belief that foreign companies don’t employ people domestically but since we live in a global economy, a lot of foreign companies hire domestic employees. So tariffs often destroy jobs rather than create them:

Alibaba’s founder and chairman Jack Ma says the Chinese mega e-commerce company no longer has plans to create 1 million jobs in the US, citing the ongoing trade conflict as the reason Alibaba is retracting its promise to Donald Trump. A new round of tariffs between the US and China will make mutual trade more difficult.

Who would have guessed that alienating one of the largest economies on Earth would have consequences?

Written by Christopher Burg

September 20th, 2018 at 10:00 am

Buying Less for More

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The Trump administration has decided to devalue your dollars even more by placing additional tariffs on Chinese goods:

The US is imposing new tariffs on $200bn (£150bn) of Chinese goods as it escalates its trade war with Beijing.

These will apply to almost 6,000 items, marking the biggest round of US tariffs so far.

Handbags, rice and textiles will be included, but some items expected to be targeted such as smart watches and high chairs have been excluded.

The Chinese commerce ministry said it had no choice but to retaliate but is yet to detail what action it will take.

The US taxes will take effect from 24 September, starting at 10% and increasing to 25% from the start of next year unless the two countries agree a deal.

The upside of trade wars is that they don’t start out as shooting wars. The downside of trade wars is that they’re a war on consumers. Every tariff means that consumers are stuck paying more for less. A bag of rice that costs $5.00 can suddenly cost $6.25 for no reason other than where it was produced. A cell phone that costs $500 can suddenly cost $625. What makes tariffs a real gut punch though is that since they’re usually calculated by the price of a good, they increase as inflation causes prices to increase. If that $500 cell pone begins to cost $600 due to inflation, the cost with the tariff tax included will be $750.

The only winner in a trade war is the government because it pockets the tariffs.

Written by Christopher Burg

September 18th, 2018 at 10:00 am

Domestic Tariffs

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Tariffs are in the news after Trump decided that the playing field between the bureaucratically choked United States and the rest of the world needed leveling. But what about domestic tariffs? The states that make up the United States aren’t supposed to implement tariffs against each other but thanks to the Supreme Court they now can:

If an internet retailer in Pasadena, CA sells a good or service to a resident of Washington, D.C., simple logic dictates that the transaction not be sales-taxed in Washington, D.C. It shouldn’t because the business isn’t in Washington. It’s on the other side of the country, and there the business will pay Pasadena taxes. So when judges and politicians talk about the importance of levying sales taxes on outside vendors, what they’re really saying is that they want government to dip its hands into our pockets twice.

Stating the obvious, the internet sales tax isn’t about leveling the tax playing field as much as it’s yet another grab of the economy by politicians. “Grab of the economy” is an apt phrase simply because politicians don’t tax away our dollars to stare lovingly at them; rather they take our dollars for what they can be exchanged for. The more tax dollars that politicians collect, the greater their ability to be size buyers of cars, trucks, land, buildings, and most economy-suffocating of all, human labor. Having decided they’re not collecting enough of what we earn, and plainly averse to competing with other locales when it comes to keeping taxes down, gluttonous local governments naturally love the idea of using internet commerce as another way to take.

About all this, let’s make no mistake about what these tax-thirsty governments are doing. Much like businesses that seek protection from competition, they’re seeking protection from lower-tax cities, states and countries. To be very clear, they’re seeking tariff-protection. Let’s call them domestic protectionists.

The reason the issue of online sales taxes arose is because politicians in tax heavy states were losing out to states with less burdensome taxes. Online retailers can operate anywhere in the world, which means many operate in states with relatively low sales tax. For example, an online retailer could headquarter in Montana, which has no sales tax and sell to somebody living in Minnesota, which has an absurdly high 6.875 percent sales tax. The person in Minnesota will be encouraged to purchase from the online retailer over a local sellers because the local seller will charge an addition 6.875 percent on top of the cost of the good or service. This arrangement upsets the politicians in Minnesota because they lose the opportunity to pocket some of the buyer’s money. If Minnesota can force the retailer in Montana to collect sales tax for it, it wins (and, of course, retailers throughout the country lose because they have to become experts on Minnesota sales tax laws along with the sales tax laws of their own state).

A lot of people believe that arrangement sounds fair (funny enough, they’re often the same people who are currently bitching about federal tariffs). But the alternative, states with high sales taxes having to lower their taxes in order to compete with states with low sales taxes, would be far fairer to consumers, especially poorer consumers to whom an additional 6.875 percent isn’t chump change.

Written by Christopher Burg

July 24th, 2018 at 11:00 am

How Tariffs Work

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People who subscribe to mercantilism tend to favor internal trading over external trading. If external trading is to occur, they prefer that their nation only export goods while the other nations of the world only import goods. But that ideal is difficult to realize because people in one nation are often interested in the goods and services provided by people of other nations and that interest leads to mutual trade. How can a mercantilist thwart this mutual trade? By imposing artificial barriers on international economic activity. While there are many such barriers that can be raised, the most popular barrier today is the tariff. The Mercantilists imagine that implementing tariffs means that its people will develop a preference for domestic products over foreign products while foreigners will still prefer importing the goods of their nation. Nobody likes an unfair deal so in actuality all that happens is that the nation implementing the tariffs is bypassed:

The European Union and Japan have signed one of the world’s biggest free trade deals, covering nearly a third of the world’s GDP and 600 million people.

One of the biggest EU exports to Japan is dairy goods, while cars are one of Japan’s biggest exports.

The move contrasts sharply with actions by the US Trump administration, which has introduced steep import tariffs.

If the United States won’t play fair, then it won’t get to play at all.

The current administration is playing a stupid game. It’s trying to develop domestic economic activity by artificially raising the price of imported goods even though the United States doesn’t have the experience or capacity to manufacture many imported goods on a scale that can satisfy demands. The result of this game is that consumers in the United States will be forced to pay more for their goods while the rest of the world bypasses the United States.

Written by Christopher Burg

July 17th, 2018 at 10:00 am