Money Management Mishaps – Page 17

An Inevitable Outcome

I’ve bitched and complained about taxes time and time again on this site. Outside of my criticisms of taxation being a form of theft I also bring up the practical problem with raising taxes, those who have money will eventually leave when their taxes get high enough. California, the state that taxes so hard it almost qualifies as rape, is learning this lesson:

State Controller John Chaing continues to uphold the California Great Seal Motto of “Eureka”, i.e., ‘I have found it’. But what Chaing is finding as Controller is that California’s economy as measured by tax revenues is still tanking. Compared to last year, State tax collections for February shriveled by $1.2 billion or 22%. The deterioration is more than double the shocking $535 million reported decline for last month. The cumulative fiscal year decline is $6.1 billion or down 11% versus this period in 2011.

[…]

California politicians seem delusional in their continued delusion that high taxes have not savaged the State’s economy. Each month’s disappointment is written off as due to some one-time event.

The State Controller’s office did acknowledge that higher than normal tax refunds for February might have reduced the collection of some personal income taxes. Given that 2012 has an extra day in February for leap year, there might have been one day more of tax refunds sent out. But the Controller’s report shows personal income tax collections fell by $325 million, or 16% versus last year. Furthermore, leap year would have added another day for retail sales and use tax collection, but those revenues also fell during February-by an even larger $813 million, 25% decline from 2011.

The more likely reason tax collections continue falling is that businesses and successful people are leaving California for the better tax rates available in more pro-business states.

The common cry of the collectivist movement is “Tax the rich!” As Bastiat warned us, some people are unable to see the unseen effects of state actions. What happens when you start taxing the “rich” more and more? Eventually they leave. The “rich” have money, a fact made evident by their status as being “rich”, and therefore can afford to move to a new state or country. When they leave they take their tax money with them, money that is sometimes used to fund programs that are supposed to help the downtrodden like food stamps, welfare, and worker’s compensation.

In the long run taxing the “rich” causes more harm to the “poor” than anybody else.

It’s a Good Thing the State Bailed General Motors Out

It’s a good thing the United States government bailout out General Motors otherwise we wouldn’t have the great Chevrolet Volt that nobody wants:

General Motors has temporarily suspended production of its Volt electric car, the company announced Friday.

GM, which is based in Detroit, announced to employees at one of its facilities that it was halting production of the beleaguered electric car for five weeks and temporarily laying off 1,300 employees.

A GM spokesman told The Hill on Friday that production of the Volt would resume April 23.

“We needed to maintain proper inventory and make sure that we continued to meet market demand,” GM spokesman Chris Lee said in a telephone interview.

Maintain property inventory is a friendlier way of saying that inventory isn’t reducing because nobody is buying our shitty electric cars. A basic economic lesson exists in this story, the state can’t simply make a market by dumping funding into a program it approves of. While the state keeps trying to create a market for electric cars nobody is willing to pay the Volt’s asking price, partially because most people aren’t setup to charge an electric car.

This is How the State Treats Its Employees

When people sign up for the United States military they’re promises many things including a pension and lifelong health benefits. What the state giveth, the state taketh away. Unlike private institutions, the state is able to violate any contractual agreements it’s made without consequence and I’m sure this is why active and retried military personnel are getting their health benefits reduced:

The Obama administration’s proposed defense budget calls for military families and retirees to pay sharply more for their healthcare, while leaving unionized civilian defense workers’ benefits untouched. The proposal is causing a major rift within the Pentagon, according to U.S. officials. Several congressional aides suggested the move is designed to increase the enrollment in Obamacare’s state-run insurance exchanges.

So the men and woman in this country’s military have just had their contractual agreement voided as far as I’m concerned and that means they should be allowed to leave the service immediately without paying the early termination fee. Since the state maintains a monopoly on the court system though it is unlikely any military personnel will be able to sue for breech of contract.

Another interesting thing about this is that the health benefits of military personnel are being reduced while said benefits aren’t being touched for unionized government employees. Interesting. It’s almost as if Obama is punishing military personnel for their large support of Ron Paul’s campaign while keeping the unions happy as they’ve been playing ball with the current president. That may just be me being a cynical asshole though.

If Only They Had Funding

I’m not sure Bill Gates realizes the sheer amount of idiocy he just spouted:

Bill Gates told an audience of energy entrepreneurs, scientists and investors at the ARPA-E energy conference on Tuesday that “It’s crazy how little we’re funding energy.” Energy research is underfunded by a factor of two, Gates said, referring to the amount of current U.S. government investment in energy research.

If only there was a source these energy companies could get funding from. What we really need is a multi-billionaire who is also an advocate of investing in energy companies. I wonder where we could find such a person?

Gates has expressed similar sentiments before. He is part of the American Energy Innovation Council, which about two years ago called for a government investment of $16 billion per year into basic research to deliver energy innovation. Since that foundation launched, he has said that he has been stunned that the government hasn’t been able to rise to the occasion.

$16 billion? It’s too bad we don’t know somebody who had an insane sum of money, say $59 billion, that could be invested into this market.

North Korea in Competition with the Federal Reserve

It looks like North Korea is getting into competition with the Federal Reserve:

U.S. negotiators are heading into a second day of what have been dubbed “serious and substantial” talks with North Korean officials. Yet amidst all the discussion of how the U.S. will attempt to work with Kim Jon-un, there has been little (open) speculation as to whether Dear Leader Junior might crank up production of $100 and $50 bills. No, not North Korean 100- or 50-won banknotes, worth about as much as old tissues. I’m talking about fake greenbacks — or, as the U.S. Secret Service has dubbed them, “superdollars.”

No matter how good North Korea gets at counterfeiting United States dollars they’ll never be as good as the Federal Reserve. While North Korea runs off physical $50 and $100 bills the Federal Reserve need only reduce the amount of reserve banks need to lend out nonexistent money. I must say I’ll give more credit to North Korea in this case than the Federal Reserve, at least North Korea has the common decency to actually print up physical notes.

Christie Tells Buffett Where to Shove It

Chris Christie, a man whom a strongly dislike in almost every way imaginable, actually said something I agree with:

Buffett may be known as the “Wizard of Omaha,” but Christie sees no magic in Buffett’s call for tax hikes for the wealthy, reports CBS 2’s Marcia Kramer.

“Cut a check and shut up, that’s what I say, okay?” Christie said Wednesday. “I’m tired of hearing about it. He wants to pay more taxes, pay more.”

I’ve been saying this for a while, if you don’t believe you’re paying enough taxes then write the government a check for more. Of course we could listen to Buffett, crank up the taxes on”rich” people, and we’ll still be in this economic mess. The bottom line is simple, the government is spending too much money. Even if they could raise billions of dollars it’ll be entirely meaningless to the deficit that measures in trillions of dollars. If Buffett actually knew anything about economics he would advice the United States government to reduce their spending dramatically.

Sadly that won’t happen but we’re lucky that an actual economist, one acknowledged by the late but great Murray Rothbard, is running for president this election and has a plan to actually reduce spending.

The Price of Enforcement

If you want to get any medicine that contains pseudoephedrine you’re in for a lot of fun. Because pseudoephedrine is used to manufacture meth and meth has been declared verboten by the state pseudoephedrine has become a controlled substance. In order to pick up even basic cold or allergy medicine you must go to the counter, present ID, get the purchase recorded, and make sure you don’t accidentally buy more than you’re allowed. Bruce Schneier, being a security minded bloke, found an article that talks about the cost of enforcing these controls:

Now, personally, I sincerely doubt that the pharmaceutical industry has reliable estimates of how many of their purchasers actually have colds–or that they would share data indicating that half of their revenues came from meth cooks. But let’s say this is accurate: half of all pseudoephedrine is sold to meth labs. That still wouldn’t mean that manufacturers of cold medicines are making “hundreds of millions of dollars a year” off of the stuff–not in the sense that they end up hundreds of millions of dollars richer. The margins on off-patent medicines are not high, and in retail, 50% or more of the cost of the product is retailer and distributor markup*. Then there’s the costs of manufacturing.

But this is sort of a side issue. What really bothers me is the way that Humphreys–and others who show up in the comments–regard the rather extraordinary cost of making PSE prescription-only as too trivial to mention.

Let’s return to those 15 million cold sufferers. Assume that on average, they want one box a year. That’s going to require a visit to the doctor. At an average copay of $20, their costs alone would be $300 million a year, but of course, the health care system is also paying a substantial amount for the doctor’s visit. The average reimbursement from private insurance is $130; for Medicare, it’s about $60. Medicaid pays less, but that’s why people on Medicaid have such a hard time finding a doctor. So average those two together, and add the copays, and you’ve got at least $1.5 billion in direct costs to obtain a simple decongestant. But that doesn’t include the hassle and possibly lost wages for the doctor’s visits. Nor the possible secondary effects of putting more demands on an already none-too-plentiful supply of primary care physicians.

$1.5 billion of additional costs just to enforce the government’s desire on prohibiting the possession and use of a specific substance. As with any government prohibition the cost is not merely financial but in the reduction of quality of life:

Of course, those wouldn’t be the real costs, because lots of people wouldn’t be able to take the time for a doctor’s visit. So they’d just be more miserable while their colds last. What’s the cost of that–in suffering, in lost productivity?

Many substances made illegal by the federal government have medicinal, or other, uses. Cannabis has been shown to help in the fight against cancer but has been declared illegal so billions of dollars have to be spent in order to research alternative methods of providing the same affects. Between the costs in enforcing the prohibition, finding alternatives, and the cost to consumers tacked on to recover the costs of researching alternatives the government has pissed away money that could have been used for far more productive uses. Instead people are forced to pay additional taxes to fund the war on drugs, which means each person has less money to use in improving their quality of life.

In the case of pseudoephedrine controls people could be forced to simply suffer symptoms that we’ve been able to mitigate for a reasonable price because the additional costs required to enforce these government controls are simply too much for most people to bear (compared to dealing with their cold symptoms). Doctors will also have less time to treat the truly sick as they’ll have their time taken up by those suffering minor ailments that need prescriptions to get medicine that was previously easy to obtain (and thus cheaper).

Let’s stop this constant attack on our quality of life by getting the government out.

The Perfect Storm in Greece

Greece, or more specifically Athens, is suffering from outbursts of rioting that have resulted in wide spread destruction of property:

In Athens, about 150 stores were vandalised and looted in Sunday night’s riot, and about 45 buildings were seriously burnt, many beyond repair, according to the Athens Chamber of Commerce and Industry. It estimated the losses in the ”tens of millions” of dollars.

These riots were started, in part, because of the recently passed austerity measures that will result in the decrease of benefits and pay for government employees:

The austerity measures include:

15,000 public-sector job cuts

liberalisation of labour laws

lowering the minimum wage by 20% from 751 euros a month to 600 euros

The austerity measures were put into place in order to secure a $170 billion bailout from the International Monetary Fund (IMF) as Greece has become insolvent. While all of this has been covered by major media outlets they have failed to explain how this situation arose. When looking back at how Greece found itself in its current situation we find a road paved in collectivism and broken promises.

Let’s begin with collectivism. Roughly 22% of those employed in Greece work for the government in some capacity. As the government employes such a high number of people austerity measures, such as those passed in Greece, that effect public employees have widespread consequences. As government produce no wealth (it exists off of taxation, which is stolen wealth) every person employed by the government is a net loss as far as the economy is concerned. To pay for these employees the government of Greece has imposed an income tax that ranges from nothing all the way up to 40%. In addition to an income tax rate that can range up to 40% there is also a value added tax (VAT) that ranges from 4.5% to 23%.

In addition to paying the vast number of government employees the high tax rate in Greece is also used to fund “free” public education, state provided healthcare, and other collectivist programs.

Greece also has some interesting labor laws [PDF] including mandated maximum 40 hour work weeks (although some exceptions can be made to exceed the 40 hour maximum) and a minimum wage of €751.39 a month (approximately $987.92 a month as of this writing).

The labor laws are most interesting in this case as they compose a list of promises made by the government of Greece. Basically the government of Greece told its people they will enjoy no more than 40 hours a week of work and will make a minimum of $987.92 each month. Now the government is reneging on its promise by slashing minimum wage by 20% (making it roughly $790.34 a month) and removing other guarantees that were made. It is also laying off 15,000 people whom were promised jobs by the government. The bottom line is the people are pissed because promises that were made to them are being broken.

Worse yet these promises were made in exchange for the tax rate the people of Greece had forced upon them. The government basically said they were going to take up to 40% of each person’s income and even more money through the VAT tax to pay for the promises being made. These austerity measures void many of those promises without also reducing the tax rate. Denizens of Greece are getting less for the same price and they’re unhappy about it (rightfully so).

Unfortunately this is an outcome that can’t be avoided when the government is expected to provide services. As governments pay for everything using money stolen through taxation there is no wealth generated nor can the market provide feedback on whether or not the desired services are being provided and if they are being provided efficiently. When people expect governments to provide even more services they often fail to realize that money for those services must come from somewhere and that somewhere is the pockets of the people. Since government have no market feedback that tells them if they’re providing services efficiently the cost for those government provided services is always higher than comparable privately provided services. By having the government provide a service you’re actually costing yourself money.

But the perfect storm comes when the government is unable to continue providing its services. This happens when they not only run out of money, but also run out of people to buy up their ever increasing debet. At that point a decision has to be made; either increase taxes or cut services. When you’re taxing people absurd amounts already increasing taxes even more is not going to be received well. If you don’t increase taxes and are forced to cut services it is not going to be received well. Basically a catch-22 exists and will only lead to hardship and anger and that anger usually manifests itself into protests and sometimes rioting.

What Greece is experiencing is unavoidable when collectivists get their way.

Politics, The Reality Television Show for Suckers

This week on Politics: The Reality Television Show for Suckers, Obama puts forth a new tax plan that he claims will increase government revenue by $1.5 trillion:

US President Barack Obama has proposed to raise taxes on the wealthy in his 2013 budget, prompting an election year spending showdown with Republicans.

The proposal includes $1.5 trillion (£950bn) in new taxes, much from allowing Bush-era tax cuts to expire.

Who will win this entirely pointless debate that completely misses the point that the government is simply spending too much money? Could Obama and the Democrats pull off a tax increase that will fail to raise enough money to effect the deficit in any notable way or will the Republicans shut down the attempted tax increase that is ultimately without consequence? Join us all week on ~~Days of Our Lives~~ Politics as the debate rages on!

While we don’t know who will claim victory, we do know nothing of value will be accomplished!

Just Throw Money at It

Through Uncle I learned that Mayor Bloomberg is putting up some major money and buying an advertisement during the Super Bowl to promote his gun bigotry:

He also announced that he and his Boston counterpart, Mayor Thomas Menino, would appear in an anti-illegal gun commercial during the championship game, joining the race for Super Bowl ad space.

The spot shows the two leaders of Mayors Against Illegal guns in an animated discussion and clad in their team jerseys on a couch in front of a television.

Bowls of chips and popcorn along with a football lie on a glass table before them.

The 30-second spot will run regionally because of restrictions against issue-oriented ads on the national broadcast. The Mayor’s Against Illegal guns, which counts Bloomberg among its private donors, funded the clip.

The biggest problem with anti-gunners is that they only know how to do one thing: throw money at something until it goes away. Members of the Brady Campaign, Violence Policy Center, and Mayors Against Illegal Guns have no facts to backup their cause so they simply hope they can spend enough money to make guns go away. Luckily for use throwing money at something never actually makes it go away.