Category Archives: Business

Moral Bankruptcy

Some thoughts on the mortgage crisis and “cram downs,” from Megan McArdle.

There seems to be a push on by the left to completely destroy crucial Anglosphere institutions, including contract law, without which we would never have built the wealthiest nation in history. How easy or cheap do you think that it will be to get a mortgage when the lenders realize that their contracts can be whimsically rewritten by an unaccountable judge?

A Lost Cause

Jim Powell, on continuing failed attempts to rehabilitate FDR’s Depression record:

Black commits one of the most familiar fallacies by reciting a litany of New Deal projects — libraries, schools, public works, and so forth — as if their funding came out of thin air. But government doesn’t have any money other than what it gets by (a) taxing people now, (b) borrowing money now and taxing people later, or (c) inflating the currency, which is another form of taxation. Every New Deal project on Black’s list meant that less money was spent elsewhere because it was taxed away. New Deal economics basically involved robbing Peter to pay Paul, with added inefficiencies along the way and a net loss for everyone.

Remember, too, that the New Deal was mainly paid for by the middle class and the poor, because the biggest revenue generator for the federal government during the 1930s was an excise tax on cigarettes, beer, chewing gum, and other cheap pleasures enjoyed disproportionately by those two groups. Until 1936, the federal excise tax generated more revenue than the federal personal income tax and the federal corporate income tax combined. Not until 1942 did the personal income tax become the biggest source of federal revenue. You can look it up in Historical Statistics of the United States, Colonial Times to 1970, volume 2, page 1107.

Perhaps Black is suggesting that politicians have a special talent for spending other people’s money in a way that will do more to stimulate the economy than if those people had spent it themselves. That proposition is laughable. All the available evidence verifies the common-sense truth that people are less careful with other people’s money than they are with their own. That’s true even when their intentions are good and their motives are pure — which was rarely the case in the New Deal. FDR’s spending programs stimulated a mad scramble among political bosses for control of the loot and the patronage.

This is an important debate to continue, because mindless and ahistorical worship of the New Deal lies at the heart of the current disastrous policies.

Statists, Meet Petard

Northern Virginia and the other DC suburbs are going to be hit hard by the Obama tax plan. I’m guessing that these are areas that went overwhelmingly for The One, to give him his overall Virginia victory. Here’s a good example of Mencken’s dictum that democracy would give the people what they want, and ensure that they get it good and hard. And this points out the economic mindlessness and absurdity of picking an arbitrary income level to start punishing achievement:

Besides raising tax rates in 2011 on the highest income brackets, this year’s budget would lower the deductions families earning $250,000 can make from their income.

“In my district, we have a high household income, but I would say two things about that,” Himes said. “No. 1, there’s huge diversity in my district. It includes some of the poorest families in the country and some of the wealthiest.

“And second, income has to be held against expenses. We have one of the highest costs of living in the country as well, which is problematic for all sorts of things,” Himes said.

The median sales price for a home in Greenwich, according to the real estate website Trulia, is $735,000, but that’s down significantly. Bloomberg reported in February that home sales in Greenwich, where the nation’s hedge fund industry generally lives, plunged 84 percent in January 2009 compared to a year earlier.

It’s still cheaper to buy a home in Fargo, where the average listing price is $192,436, according to Trulia. It’s also safe to say that wages are a little lower in the Red River Valley.

There is a reason that federalism is a good idea. Like a national “minimum wage,” to the degree that such a thing should exist at all, it’s ridiculous to apply a one-size fits all to the entire country. Both tax rates and wage and price controls should be left to the states, not Washington. But hey, they wanted “change.” Don’t come crying to me.

The Case For Bankruptcy

Mickey Kaus says that it’s time for GM to bow to the inevitable. I agree — bankruptcy wouldn’t make things any worse, and could improve many things (including not having to bail it out with taxpayers’ funds any more). As a member of a GM family, I don’t say that with any cheer, but at some point, reality must be accepted.

[Update in the afternoon]

Here’s one more reason for GM to throw in the towel. The “Cap and Trade” in the budget bill will kill the industry, and Michigan.

Making War On Prosperity

A lot of discussion of the impact of the president’s plan to punish anyone making over a quarter of a million bucks. What is particularly disgusting is all of his lies and rhetoric about the free market providing jobs, and the importance of small business and entrepreneurs. Watch what he does, not what he says.

[Update in the evening]

Carl Pham in comments suggests a variation on Martin Niemuller’s famous quote: “First they came for those making $250,000, and I said nothing, because I didn’t make that much…”

[Update a little while later]

If you work less to avoid taxes, are you a tax dodger?

I think it’s worse (or will be worse) than that. You’re an enemy of the state.

[Update a few minutes later]

Planned impoverishment?

It’s certainly a theory that fits the facts.

[Update at 7 PM Eastern]

Going John Galt.