What I’m not saying is that all government spending is bad. It’s not – far, far from it, but there is no free lunch, as a former colleague of mine used to say. There is no public tooth fairy. Father Christmas does not work on the Treasury staff this year. You can never bail someone out of trouble without putting someone else into trouble.
The minimum wage is the black teenage unemployment act. It is the guaranteed way of holding the poor, the minorities and the disenfranchised out of the mainstream is if you price their original services too high.
Sound money is the sine qua non of a prosperous society.
You know, without China there is no Wal-Mart and without Wal-Mart there is no middle class and lower class prosperity in the United States.
Which would you rather have, capital lined up on your borders, trying to get into your country or trying to get out of your country? We are the capital magnet of this planet and we are the savior for not only people, for not only freedom, but also for capital.
The trade deficit is the capital surplus and don’t ever think of having a capital surplus as being a bad thing for our country.
And just remember, every dollar we spend on outsourcing is spent on U.S. goods or invested back in the U.S. market. That’s accounting.
When you look at the world, everyone in the world who cares about his or her family wants to have a major portion of their assets in the United States because we are the growth country and the freedom loving country.
I mean, everyone agrees with stress tests for banks. I mean that’s clear. But banks should do that on their own. And they should worry about their own capital functioning. That’s what they should do. It shouldn’t be a government function.
With the shrinking of the US economy, and it’s shrinking very rapidly, you not only have more money, but you also have fewer goods. That’s a classic double-whammy on inflation.
What we’re talking about is the price of goods, all goods, in terms of money. That has nothing to do with unemployment, except for the fact that you get fewer goods. And when you have more money and fewer goods, the amount of dollars per good goes up. It goes up because there are fewer goods and it goes up because there is more money.
People can change the volume, the location and the composition of their income, and they can do so in response to changes in government policies.
People can also change the timing of when they earn and receive their income in response to government policies.
It has always amazed me how tax cuts don’t work until they take effect. Mr. Obama’s experience with deferred tax rate increases will be the reverse. The economy will collapse in 2011.
Let me just try to give you sort of the intuitive one here on the stimulus funds. If you have a two-person economy – let’s imagine we have two farms, and that’s the whole world, just two farms. If one of those farmers gets unemployment benefits, who do you think pays for him? Am I going way over your heads today?
Government spending is taxation. When you look at this, I’ve never heard of a poor person spending himself into prosperity; let alone I’ve never heard of a poor person taxing himself into prosperity.
The income effects in an economy always sum to zero.
The truth of the matter of is that stimulus money not only doesn’t stimulate; it actually reduces output.
We are having the single worst recovery the U.S. has had since the Great Depression. I don’t care how you measure it. The East Coast knows it. The West Coast knows it. North, South, old, young, everyone knows it’s the worst recovery since the Great Depression.
And you can’t have a prosperous economy when the government is way overspending, raising tax rates, printing too much money, over regulating and restricting free trade. It just can’t be done.
I think the inflation prospects for the U.S. over the next five or six, seven years, are quite serious. You cannot have a bumper crop in apples without the value or the price of each apple falling. The Fed has had the largest increase in the monetary base in the history of the U.S., from colonial times to the present, times ten.
And let the Fed sell bonds to bring bank reserves back down to required reserve levels, so we have restraint on bank lending and bank issuances of liability.
Ask me whether inflation represents longer-term problem. I think there’s a potential there for excess reserves to create problems.
I feel very uncomfortable with respect to looking at inflation.
I’ve been truly blessed. I’ve been a fly on the wall of history. I’ve been just so many lucky places just by chance and serendipity, and obviously a huge portion of that serendipity had to do with my relationship with the real president, Ronald Reagan.
My godfather was a man named Justin Dart. Some of you may remember Justin Dart. My younger son’s name is Justin, named after Justin Dart. I was executor of his estate, and he was my godfather. I first really got time to spend with Ronald Reagan with Justin Dart personally, one-on-one.
The United States is a nation located in the global economy, and we get enormous, enormous benefits from dealing with foreigners.
Over the past 100 years, there have been three major periods of tax-rate cuts in the U.S.: the Harding-Coolidge cuts of the mid-1920s; the Kennedy cuts of the mid-1960s; and the Reagan cuts of the early 1980s. Each of these periods of tax cuts was remarkably successful as measured by virtually any public policy metric.
In 1994, Estonia became the first European country to adopt a flat tax, and its 26 percent flat tax dramatically energized what had been a faltering economy. Before adopting the flat tax, the Estonian economy was literally shrinking. In the eight years after 1994, Estonia experienced real economic growth – averaging 5.2 percent per year.
The Laffer Curve illustrates the basic idea that changes in tax rates have two effects on tax revenues: the arithmetic effect and the economic effect.
The story of how the Laffer Curve got its name begins with a 1978 article by Jude Wanniski in ‘The Public Interest’ entitled, ‘Taxes, Revenues, and the Laffer Curve.’
I used the so-called Laffer Curve all the time in my classes and with anyone else who would listen to me to illustrate the trade-off between tax rates and tax revenues.
The Laffer Curve, by the way, was not invented by me.
Because tax cuts create an incentive to increase output, employment, and production, they also help balance the budget by reducing means-tested government expenditures. A faster-growing economy means lower unemployment and higher incomes, resulting in reduced unemployment benefits and other social welfare programs.
Obama is a fine, very impressive person. He really is. Unfortunately, everything that he is doing in economics is exactly wrong. He is a crappy president.
In 2010 the U.S. will have a payroll tax rate increase, an estate tax increase, and income tax increases. There’s also a tax increase coming in 2010 on carried interest. This rate will rise from its current level of 15 percent to 35 percent, and then it will rise again in 2011.
California is the highest-tax state in the nation and has been for a long time. It has the highest-paid teachers in the nation, by far – $400 a month more than New Jersey – and yet California is the third lowest state on test scores for fourth and eighth grade English and math in the nation, and has been at the low level for a long, long time.
The states that have large in-migrations of Hispanics are Florida, Texas and California. And Florida and Texas are way above average in educational achievement, while California’s the lowest, just about.
The linkage between tax rates and public services is, if not non-existent, negative.
Sometimes, tax rate increases create the very problems that the spending is intended to cure. In other words, the tax rate increases reduce economic growth; they shrink the pie; they cause more poverty, more despair, more unemployment, which are all things government is trying to alleviate with spending.
What you do by having an income tax rate reduction across the board, you really provide great incentives for people to work, produce, and increase output. So I would support a carbon tax in replacement for a progressive income tax.
I’m worried about economic growth in the United States. And the creation of jobs, output, and employment. And if you tax people who work, you’re going to get less people working. And what the carbon tax would do is remove the tax from people who work and put it on a product in the ground.
A carbon tax by itself would make driving more expensive, that’s very true. But in exchange for that, there are going to be more jobs, more output, more employment, and more products available. So really, as long as you’re going to collect the revenues you’re going to collect, you’re going to have to trade off one tax for the other.
When you look at the government, when the government collects a buck, it’s not free. They have to spend resources, the IRS, audits, all this sort of crap, to collect the dollar. I’m not assuming any Laffer curve effect here at all. There are just transactions costs of collecting that money.
Raising taxes is not a frivolous venture that you do on the editorial page of ‘The New Republic,’ for god sakes. It’s something that you really have to think about and go through carefully.
Taxes are not trivial – they’re a huge portion of this overall economy. And that’s why I focused on them.
Tax rates aren’t everything with regard to incentives to work. I would probably work at a 100% tax rate next to a nude modeling studio. I’m joking, but you know what I’m saying. There’s a lot more to it than just tax rates. It’s economics that I do; I don’t do nude modeling studio economics. People do respond to taxes.