The Neoliberal System: A brief breakdown for understanding.

This is a sort of chaser to my open letter to Trump Supporters. I wanted to go into detail about what the neoliberal system is, and what it means. I didn’t give a ton of detail, only dedicated a few sentences to a thing that is complex and multifaceted. There is a famous quote by Chinese strategist Sun Tzu which perfectly describes why I think it’s necessary to do this blog post:

“If you know the enemy and know yourself, you need not fear the result of a hundred battles. If you know yourself but not the enemy, for every victory gained you will also suffer a defeat. If you know neither the enemy nor yourself, you will succumb in every battle.”

Sun Tzu on the Art of War

I think that the neoliberal system as I call it, encompasses more than just government. For years, my thinking was government is the enemy along with communists. But in the past year or two, I’ve had this realization that enemies are around every corner, in every facet of society. Strictly speaking, enemies aren’t just those that directly oppose your views, but also those that ally with those who oppose you. So you might be wondering how expansive is the neoliberal system? How many industries and organizations makes it up? Well the list is infinitly growing. But to generalized and in part create a sort of road map, it can be broken down to a few main categories:

– Military Industries
– Corporations fortune 500 (outside of one’s listed below, think Coke Cola, Walmart)
– Media companies (includes social media)
– Telecommunications companies
– Financial business includes banks, stock market
– Energy firms
– Lobbies (lobbyists hold large power in DC)

*Not comprehensive, every conceivable industry or service is in play

This comprises mostly everyone involved but it does leave out a few independently wealth and influential shadow figures who use their wealth to influence actors with the system. Recently Bill Gates comes to mind but there are others who are less well known. Of the biggest contributors are the government which I didn’t put on the list because I’ve already indicated them as enemy #1. You can think of government as the glue that holds all the pieces in place. I think it will be more productive to go over the list and incorporate government’s role in that entity’s place in the neoliberal system. I definitely want to start with the most obvious place that government and other entities come together for the system. It’s actually my forte, the defense industry.

The defense industry has existed in America since before the revolution. It’s organization was strongly influenced by government actions. Although government influence isn’t truly visible until the civil war. Abraham Lincoln and his secretary of war utilized the rifle and firearm industry to mass produce rifles for the union army. They handed out contracts to companies like Colt and Remington. Now fast forward to the Cold War, Dwight D. Eisenhower gives his farewell address. In his address he warns us about the dangers of what he termed the “military industrial complex”. It’s a holtly debated history question about what Eisenhower meant. But fortunately secondary scholarship has figured it out. (Military Industrial Complex by Paul A.C Koistnen) The military industrial complex is the relationship between the government and private military based companies. Now let’s bring it forward to 1995. Dick Cheney is Secretary of Defense under President Clinton. Dick Cheney revolutionized the way that defense contracts were handed out to contractors. He eliminated most of restrictions which led to even less accountability.

During the cold war, the accountability on DoD contracts was already bad. The contractors such as Lockheed Martin and Raytheon took advantage by going far over budget. The DoD never held them responsible for overruns. Cheney made worst by giving his own company, Halliburton a big defense contract for the war on terror. Cheney also held a position at Halliburton even after he was elected Vice President. So you can imagine the collusion between private companies producing military material and government contracts. I don’t want to write all I know about the military to government revolving door. I think the point I want to make is clear that government contracts are feeding these military contractors and giving the economy a false sense of success.

Let’s take a break from the military industrial complex and look at another entity that’s less obvious. Recently the media has been called out by various pundits and politicians. But the real problem with media is that it’s comprises about 6 corporations. The media is highly monopolized thanks in part to government regulations. Not to mention that most of media is controlled by one partisan side. The FCC is the main regulator, if you remember when net neutrality was repealed a few years ago, the media obvious went on the offensive because opening up the internet to innovation because it hurts their monopoly. Government also fell in line with (I think it was) Nancy Pelosi said millions would die if net neutrality was repealed. This rhetoric is meant to protect the establishment.

In the past few years but especially since the election there has been mass censorship on social media. Social media is also part of the technocrats in silicon Valley. Social media companies also receive taxpayers money for spying and information collection. In this one brief sentence, I’d point out that private companies receiving government funds voids any private privileges they had.

The media’s role in the neoliberal system is that of spin doctor and censorship arm. Since most democratic led countries make outright censorship illegal, they pass it off to “private” corporations. I think it’s obvious but the military industrial complex role is both defense but more often its offense. Typically following narrative set by media. The oligarchs pulling strings are very careful with these operations. But once you are aware of it, the cracks become obvious.

The next few players are background ones. Lobbyists and the financial industry. For the sake of word count, and for the sake of similarity, we’re lumping these together. Lobbyists are not often talked about by media, politicians or anyone. But anyone that knows government, knows lobbying runs the world. In the early days up until nearly the turn of the 20th century, there was a rule in place about lobbying. Actually lobbying got its name because Lobbyists weren’t allowed to meet the president in the white house or capitol building. Instead Lobbyists would meet in hotel lobbys. Lobbying is big business and it’s how corporations influence government decisions on regulations, laws and oversight. I guess you could say it’s a tool of the corporate entity.

The financial industry has a reputation for being shady. Nothing says more than the 2008 bubble burst. It’s too simple to say that banks are evil, although they most certainly are. Here’s the thing, the revolving door of bank employees to SEC board positions is how the term revolving door was coined. (Pun absolutely intended) Now knowing this, it’s easy to overlook government’s role because it goes further than former bankers making regulations. The federal reserve, a corrupt institution, a central bank, supposedly separate from government control, has the ability to control banks and currency. The federal reserve saw the 2008 crisis at least 6 years prior to it happening. Nobody said anything. They let it happen. It’s a disgusting institution which as the great Ron Paul says we should “End the Fed”.

The banking industry finances the wars, makes sure that money is always available for it. The banks also make sure to keep regular people from having too much freedom. They use interest rates and inflation to devalue the fiat currency. They make sure there is plenty of public debt to keep American dollars valuable to other countries. Its all orchestrated on the behest of government. The president appoints the head of the federal reserve. So of course, politics seeps in and ruins whatever shred of independence the Fed was supposed to have from government. By now you are probably seeing a pattern, in the neoliberal system it’s government that provides the security and protection for otherwise private industries. In this way, the industries become a extending wing of government.

There are 3 industries left, Energy, Telecommunications and large corporations that are fortune 500. I’m combining these because they are secondary players. In the case of Telecommunications and energy both benefit from government monopoly. The government also has unlimited access to phone records and IP addresses. It follows the same pattern of government maintaining control through private companies.

Now the last entity covers a huge swath of industries including some already mentioned. The large, multinational corporations that often dominate the stock market and get big tax breaks from government. Their role is more subtle. The role is cultural compliance. Often times these companies will use their brand to support government based initiatives. Best examples I have are voting campaigns and covid restrictions. All large corporations benefit from the neoliberal system because it’s economic driven, it’s not free market. It’s corporatism. When we’re speaking about a corporatist economy, lobbyists are a prominent player. I also want to point out that government and business are allies. They are inextricably connected. Corporatism wouldn’t be possible without government monopoly.

I hope you’re following what I mean by the neoliberal system. This next part will conclude this post. In the context of my open letter, I blame the neoliberal system for rigging the election. The logic is that the neoliberal system needs a president to fit its mold. By in large, the system confines any president’s agenda because nearly every industry is already co-opted by political partisan influence. The military industrial complex has one of the strongest Lobbies. They have politicians on payroll just as every other industry does.

Now sometimes a president goes against the agenda. Trump seems to have upset the system especially the military industrial complex with his withdrawal of troops from war zones. The neoliberal system demands compliance by every actor in the system. If you act against it, the neoliberal system will push you out and make sure you aren’t credible or in jail. The media has the ability to demonize anyone. There is really no escape however, one can live outside the system. Yes it’s possible. I mentioned it in my open letter how agorism, bitcoin and 3D printed guns can fight the system.

To conclude, the neoliberal system is all private large corporations utilizing the monopoly of power that government holds over everyone else. The system as I describe it, operates with the military industrial complex at its heart. But it wouldn’t be effective without the other industries especially the media, technology sector, and the financial industry. Lobbying plays the important role of middle man, brokering deals to ensure the neoliberal system continues successfully. The point of writing this blog post to help rejected Trump supporters understand why they should join the liberty movement as allies. But I’d also like to extend an olive branch to anyone who will take it. We don’t need to agree on anything but the fact that system must end now.

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Open Letter to Trump Supporters

This blog post has its beginnings on the day of the election. The storylines stemming from mail in vote fraud to Trump’s big court fight to Biden’s victory and Trump’s defeat, culminating in a second impeachment and Biden inauguration. These headlines plus the bitter partisan divide that occurred in 2016 mixed with open conflict in both parties, has created a unique opportunity. The opportunity to make significant changes in how conservatives, more specifically Trump supporters handle their political actions. This is an open letter, an olive branch from an outsider, a former republican myself, an apolitical anarchist.

If you happen to scroll through my blog you won’t find me cheering or jeering Trump. I do criticize him just as I do any politician. Here’s the rub: I’m fully against any government run by anybody in any conceivable way. However, I’m not asking you to abandon Trump or your loyalty to him. There is a short game and long game in this struggle against the neoliberal system we currently live in. The short game is where I want to ally with Trump supporters. The long game will be different for each of us. My long game is to live peacefully without government. I’m not asking Trump supporters to back me on this. What I am asking is that Trump supporters take me on as an ally in the short game which is to tear down this neoliberal system. You may ask me: cool dude but why the fuck do I wanna do this?

Listen closely, the neoliberal system has engineered the government, the congress, the war machine, the media and the presidency to do its bidding. The underlying currents and operators are the corporations who use government monopoly to manipulate the market. In addition to the Military Industrial Complex which influences all levels of society to make war and rack up maximum profits. Trump was an outsider. Trump was molded and fenced in just like every other president. It wasn’t his fault.

The neoliberal system chose to push Trump out of office. It’s clear that his gigantic mouth got him in hot water. Unfortunately, this means the neoliberal system rigged the election. This should piss you off as a Trump supporter. The system betrayed you. One of the thing’s that my anarchist beliefs have in common with your anger is that we both want significant changes to occur. We can work together to make it happen. With a combined 100 million strong coalition of libertarians, anarchists and Trump supporters, we have an irrefutable force for change. We must tear down the fabric of the neoliberal system. In its place, we can separate and set up our own way of life. Trump can be president again. Anarchists can live peacefully away from government. It’s a win-win.

If you are down to join the cause, then we can start planning our road to victory. We can take down this system by attacking its core. We have to embrace alternative currencies. Embrace agorism. We have to build networks of 3D printed guns and bullets. We have build a society that values voluntary interactions. Family values used to be an important conservative value. Let’s make it great again. Once we establish a network and support system, we start to push back on the system by not participating in it. 100 million or even 70 million people refusing to vote or pay taxes could potentially send a strong enough message that we aren’t fucking with this. This isn’t a revolution. It’s an evolution. So, my point is that I’m asking if you want the ability to set up your children’s future in a more stable environment with less conflict. All I merely asking is cooperation. At the end, you get Trump in a powerful position. I get to be left alone. Nobody goes home sorry.

If you are a Trump supporter who read this whole thing, thank you for listening. I hope you will consider it. Just think about how Biden and Harris will try to demonize your beliefs and raise you taxes. The left has already banned Trump from any social media. Their coming for you next. They want to silence the opposition. Don’t let them. Join the liberty movement to fight for your voice and freedom. Nobody can save you but yourself.

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Government by Subscription? Pragmatic Solution for “Libertarianism”

I’ve come across a number of random ideas some bad and some brilliant. Ever since I heard Thaddaeus Russell in “Monopoly on Violence” a pro-anarchy documentary, talk about Government by subscription. I’ve been intrigued. Its about six months since I first watched that documentary. I think I’m finally ready to explore my thoughts on it, in writing. Russell describes Government by subscription as this idea that you could opt-in or opt–out of any government. He always states a long held belief that government must be tied to some contingent of land or area. In his vision of government by subscription the ties to land would be done away with, instead you would have a choice of any government without geographic restriction. There is also the implication that you would have a choice to opt-out completely. To be fair, I will state immediately that my preference would be to live under no government. Don’t let that make you think this is a bad idea. Let me explain further:

Question: There’s always a gap between ending the current system of government and how it will function if individual rights comes to the forefront of society? Many libertarians and anarchists struggle to answer very specific questions about how society will deal with a potential power vacuum. I don’t think that the power vacuum will be as dramatic as some critics try to claim. We have to remember that overthrowing government would be voluntary and cultural. So if you don’t want to associate with or take responsibility for your own self ownership, there are options.

Well to be fair, there is just one other option and that’s to continue to live under a government. But I think it would have to change slightly especially given that anyone could choose self ownership in any territory.. Throughout history, government by in large has been connected to territory, a specific territory. What’s even more weird is that in height of the British empire, the Kings and Queens during those times, ruled from London, England. It work semi-fine if you consider the slowness of communication at the time. The historical implications to me seem to tell us that governments can operate without being near their subjects. But there are other problems such picking to live unmolested by government but still getting molested.

Government’s bullying individuals who choose to live freely could be problem but I think the attitude of the cultural and social factors will be play into this more than anything. Lately, I’ve hearing from other libertarians both big name and unknown that we need to try to change the cultural mindset. We have to use tactics from the left to get the cultural behind us. “Libertarians” are more than often the most book smart people you’ll encounter. But I think socially, we tend to ignore the importance of being relevant in the culture. Many critics of “libertarians” throw the same generalized criticism of utopian on the whole philosophy. Often times, and in my own past, we are unapologetic about what we think should happen within a proper “Libertarian” society. All I am suggesting here is that if “Libertarians” especially big name, influential ones, adopt a more pragmatic solution like government by subscription, we might gain more credence.

I think by giving what many “minarchists” and Rand Paul type conservatives their basic government services model that could grab a bunch of dejected former Trump supporters. Remember one of Trump’s many slogans was “drain the swamp”. Of course, he did nothing of the sort but I think in 2016, many conservatives saw that government was far overreaching its bounds and need to be trimmed back. All of this is to say this idea of government by subscription might be a way to centralize power especially among moderate normies in both left and right camps. It might even persuade some fringe groups to jump in. The reason is because there is really no “rules” except the idea that each individual has a right to self ownership. In that vain, each person can choose to participate in government.

For those of you who would choose to live under a government and are worried this is some anarchist con, you don’t have to worry. I would imagine that if you choose to live under a government, you would pay taxes, get a “vote” if your system of government does that, and receive benefits. For you minarchists out there, it might be low taxes with police and fire protection. I think there would be one slight change in how services are delivered. I would imagine that each government would send money to all the necessary local services to serve its citizen or citizens in that particular area. Similar to what the government does now except it might have to be more honest with that tax money. (otherwise some citizens are getting left high and dry) As for us pesky anarchists, we would just pay out of pocket when we need police or fire protection, and etc etc.

To conclude I just want to mention that government by subscription really allows everyone to choose along ideological lines under which system of tyranny they’d like to experience. It gets rid of the geographical restrictions. We have to remember that most war occurs over territory. Plus with the likely diaspora of citizens across the world, a government might have trouble finding an enemy. But most importantly, it allows for the greatest degree of individual freedom and it doesn’t leave a power vacuum. It doesn’t give anyone a reason to fight with anyone else. It will force politics become a mostly local thing. It will force governments to be fiscally responsibility or risk losing their citizens. You might be still asking how do we bring this about? Well, start on social media. Start pitching the idea. Let’s get this cultural revolution started.

Let’s make government optional. Let me know what you think about it?

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Part 2: Monetary policy and Trump’s Tariff debacle

Before you start reading this post you should go to part 1 if you aren’t familiar with supply/demand curve and “dead weight loss”. 

In the first part of this post, I will be discussing Trump’s tariff debacle. It is a little misleading but enacting tariffs can only end in a debacle. In today’s world, we have globalization and free trade around the world. The world is much too interconnected to put protectionists policies in place is like moving backwards. I want to re-highlight these points even though I mentioned them in my other tariffs post here.  In the second part of this post, I will go over one or maybe two common monetary policies utilized by the Federal Reserve (Central Bank). The policies will be in relation to tariffs because they have to do with the actual money supply. I won’t go too far into detail, lets get right to Trump.

Globalization and Free Trade are the New Norm:

If you haven’t read the tariff post linked above then here is a brief recap about globalization and free trade. Globalization is spread of goods, people and cultures all over the world. In today’s world, if you look at how the internet let’s people access information instantly, and how you can literally go anywhere by plane, boat or car. This is globalization. The exchanging of information with people from all over world, it has us more interconnected than anytime in human history!

This connection has lead multiple free trade agreements. There are many more pending. My point is that Trump cannot possibly ignore this. Trump’s problem is, as I see it, he is thinking like the US is his business. So in order to get his business (USA) ahead he wants to cut off the competitors by pricing them out. However, there is a YUGE problem! The problem is that consumer markets are now worldwide. The USA has a population of only 320 million out of 7 billion people in the world! Clearly, the US is lucrative market but its not the only one!

Protectionism: Moving the Economy backwards:

This is painfully simple to explain. The US used to be a protectionist economy from its birth in 1776 to about 1913. The federal government collect the majority of its income from tariffs on imports and exports. In 1913, the federal income tax  started raking in more than tariffs. It has ever since. After the world wars, the world started to rapidly globalize. The US lead the way. Now the US is in a tedious position with countries like China chopping at the bit to take first place. The point is that if the US wants to go back to pre-1913, before we were considered the world’s number one economy then we should enact tariffs. Speaking of China, that brings me to my next point.

Trump will eventually lose the trade war with China:

Recently I was able to acquire membership to the Wall Street Journal. (I got connections, kidding) I came across an article that caught my eye. Let me preface it with this: Trump has already approved 50 billion dollars worth of tariffs on Chinese goods. Now Trump is threatening to raise it to 100 billion dollars worth. The Chinese have responded that they will fight back if he does it. Here is the link to the article, its called Trump Weighs Tariffs on $100 Billion More of Chinese Goods by Bob Davis. (I believe they allow a few free reads if you haven’t gotten a subscription) Davis goes into detail about the possible effects of the tariffs. He also writes about Trump’s possible plans to protect industries like agriculture. I would encourage everyone to read since it gives a decent background on the situation.

My point here is that Trump cannot win against China. The Chinese hold a ton of our debt. In other words, they buy American dollar backed government bonds. (China also cheats on its exchange rate by basing it off these debt bonds) China holds leverage because of the holding of American debt and they import more to us than we export to them. Trump will lose because China doesn’t need US goods. The US is more dependent on China. Now you can how monetary policy plays a role in the contexts of tariffs and the economy.

Exchange Rate

One of the most important aspects that any government can control is the exchange rate. The exchange rate or currency exchange rate is the value of one currency in relation to another. For example: 1 US dollar is equal to .81 Euro. Currency exchanges can done in every currency. One of the ways that the exchange rate help with Trump’s trade war is through making our money more valuable or less valuable. Unfortunately, its a great tactic because it can backfire. In a circumstance, where Trump decides to have the US Treasury take money out of the money supply or circulation. A common used is called deflation. Which refers to increase of purchasing power of money.  This usually helps everyone because less money is worth more. However, in regard to China, it would probably strengthen the Chinese position.

make the dollar worth less, it would help devalue the debt held by the Chinese. Trump would simply tell the US Treasury to print more money. However, the drawback is that it would cost more to pay back debt. It would also decrease the buying power affecting nearly everyone except the super rich. Its also called Inflation which is my next topic.

Inflation

Inflation is often seen as a bad word. Its often used to describe the fall of prices and purchasing power. There is some controversy about how its calculating using CPI or Consumer Price Index, which is explained here. Now the important thing about inflation is that it can have serious consequences.  One consequence I mentioned was decreased purchasing power. Purchasing power is very important especially everyday people like me and you. Many of my anti-minimum wage arguments on center on this exact principle. Having money be worth less means that you have work harder to make more to buy less. For example, inflation might bring your regular grocery bill from 100 dollars  a week to 150 dollars a week even if the prices of food remain about the same. The reason is because each dollar may lose 10 cents in value. (The math is a little complex)

What does inflation mean for Trump’s trade war? There is good and bad news. The good news is that Trump could try to deflate the value of the Chinese held US debt. The consequences would be as mentioned above. This method would disallow the Chinese to sell off the debt without losing value. The bad news is that even if the Chinese are forced to keep it, America would have a harder time paying it back. Trump also has to be careful not to print too much money.  The problems that arise can be dangerous for the domestic economy. Money circulation works in a supply and demand curve. If the value of money is too high or too valuable than one can print more bills to help lower it. This is rarely a problem, except when considering exchange rates, imports and exports. If the value of money is too low than one could take money of the supply to help increase its value. So really its a supply/ value curve.

To conclude: Trump’s Trade War is not easily winnable. He obviously has some tools to work with. I also read recently that he is rethinking the Transpacific Trade partnership or TPP. I think its interesting because if the countries currently in the agreement allow Trump re-join and set the rules for trade than it will the US control over trade especially in regard to China. The TPP is a trade agreement that actually just regulates trade in certain industries. Trump withdrew because of global warming clauses and “unfair” regulations.

I can write more on TPP soon because I find it interesting. Also a Syrian Bombing post is coming soon.

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Lesson on Economics: Protectionist vs. Free Trade

I know. I know. I know what your probably saying to yourself. “Not another economics lesson, you nerd!” “Haven’t you already covered everything economics?” Thank you, I am a nerd and also yes I’m thorough in my coverage of topics. I promise I’ll try to not to drone on for 2000 words this time. I need to explain something that President Trump has recently brought up as a potential policy. I don’t think people really understand how import and export tariffs work.

On the surface, in simplest terms a tariff doesn’t sound like a bad thing. A tariff is a tax on a imported or exported good. A tariff can increase of the price of a foreign good to make the domestic goods more “competitive”. Now I put that quotes because the reality is quite different. I think most people would say that there seems to be nothing wrong that. History would even agree that tariffs are a commonly used tool by governments to help guide trading between nations. Here is the problem.

Tariffs are antiquated. The US government used tariffs from its inception thanks to Alexander Hamilton’s brilliant mind to about 1913. After 1913 and in the 105 years since tariffs have fallen out of favor as economic tool. This isn’t to say that no country uses them but the US government only takes about 1-2 percent of its income from tariffs today. Before 1913, the tariff brought in nearly 90 percent of the governments income at its peak.

Economists agree that tariffs hurt an economy. I’ll get to why after I explain that globalization and free trade have changed the world economy. Globalization is the free movement of people, cultural and products. The world is more accessible than ever, with cheap flights to almost anywhere in the world. The internet has an untold wealth of information that was never available til about 25 years ago. We live in a world where everyone is connected. There are multiple free trade agreements between countries that allow a flow of goods and services between them. Free Trade encourages competition in the market. It allows every participant country’s economy to benefit.

Meanwhile, Protectionist economies or countries that use tariffs extensively are actually hinder. The simple explanation through some graphs and pictures. 

This graph is basically a supply and demand curve with some with other lines. (Charts reads likes this: As supply goes up, Demand goes down OR As demand goes up, supply goes down). The bold line is the price of goods before the tariff on imports, its label WS. The line above that labeled WS+ Tariff is price of imports after the tariff.  The implication is obvious: A tariff will increase price of an imported good. Here is another chart to show the impact of this:

This particular chart shows the “Dead weight” or loss of value. This chart reads like this: As quantity goes up, the price goes down.  You can see the supplier has to pay the tariff and therefore it increase the cost to the customer. The loss of value is where the maker increases the price of their product to cover the cost of the tariff. The money is lost because the supplier has to either stick with that supplier or go to another one which obvious wasn’t cheaper before the tariff.

Here’s an example:

Before Tariff:

Company A: Product cost: 25 dollars

Foreign Supplier 1: Material cost: 5 dollars

Domestic Supplier 2 Material cost: 13 dollars

After Tariff:

Company A: Product cost: $25+ $10 tariff = $35

Foreign Supplier 1: Material Cost: $5 + $10 tariff = 15 dollars

Domestic Supplier 2: Material Cost: 13 dollars (No added Tariff)

You can see the dead weight  or loss value. The tariff raises the price of the foreign competitor’s material cost artificially. The extra 10 dollars that it cost to buy from that foreign supplier is lost. This is because the domestic supplier’s cost is 13 dollars compared to the foreign supplier’s 5 dollars before tax. The loss of value is 8 dollars. Therefore the Company A has to raise it prices because its cost have increased.

I’ll put a picture in the preview that help explain even more. (Credit to marketbusinessnews.com)

My conclusion is basically that protectionist policies don’t benefit an economy in the long run. The government is once again interfering in the market where it doesn’t need to be. As usual, the best solution to fix the problem with tariffs is to not have any. We have to take the government out of the market that includes all varies regulations that just raise prices and don’t involve health and safety.

President Trump should tread carefully because the long term implications will be worse than the short term benefits. I think that because of globalization, free trade is the new way to do business. Although the US has historically been a protectionist country, the future is going the exact opposite way. The world economy has undergone globalization and free trade is the new normal.

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Relevant articles on Tariffs,  Historical Tariffs, Economics Part 1, Part 2, Part 3

Tragedy of the Commons: Problem with Collective Policies

Have you ever heard of Tragedy of the Commons? Sound familiar? Tragedy of commons is typically associated with fishing. If fisherman go out to a popular fishing spot and catch fish at a rate that is more than fish reproduce, then that would be a tragedy of commons. Garrett Hardin came up with theory originally and applied it to biology or nature. There are many examples, but the basic principle is that demand overwhelms supply.  Just in case you fell asleep in Economics 101 or you happen to be Bernie Sanders then here is a little reminder of how supply and demand work:

I want to talk about tragedy of the commons in the terms of political policies and platforms. It’s a topic that is hotly contested among Libertarians and conservatives. On the other hand, Liberals tend to completely ignore it. Its this ignorance of the tragedy of commons that might explain why collectivist policies that liberals tend to advocate are just really bad. Liberals and even Conservatives both tend to argue for MORE government regulation in the face of a tragedy of the commons issue. (I’ll try to keep it relatively brief, one or two examples, I have a lot to say)

Let’s take on healthcare for example, is a tragedy of the commons. Liberals advocate for a universal healthcare system. This system would in theory depend on the taxpayer (theft) money to help cover the costs of healthcare. However, this policy would extremely expensive due to the increased costs to private health providers. Also the service given by providers would be slower due to a heavy volume and probably less staff. Healthcare is a complex issue but a tragedy of commons exists in both the taxation for it and the availability of quick medical care by providers. For example, in Canada, they have universal healthcare and experience longer wait times, sometimes for very important life saving procedures. In some cases they come to the US for faster care.

In short, universal healthcare is a collectivist policy pushed by liberals that creates many tragedy of the commons. Unfortunately the conservatives are not much better backing single payer with a government agency running the show. Less tragedy of the commons here, but still not the best option. The solution for a tragedy of the commons is deregulation in most cases, concerning government policies. In nature, like the fishing spot, the solution would be to have fisherman stop fishing in that particular spot until there were sufficient fish. I want to clarify what I mean by collectivist. Collectivist is a term usually meaning something is done in or by a group.

My second example is one of the hottest issues because of a vote coming up, Net Neutrality. Naturally my position is repeal because Net Neutrality isn’t consumer protections, its just dealing with bandwidth and if companies can block or censor stuff. From what I’ve read the new rules after repeal will be that the companies will have to report whatever they throttle, block, censor to the FCC who will make it public. I also see no problem with Netflix and Amazon and Hulu having to pay more for bandwidth. They use a lot of it, its only fair. Naturally that will be passed to the customer. However, the good news of repeal is that companies will offer different packages specifically geared toward streaming services. Unlike now, where you get all one price and it might be good or bad.

The tragedy of the commons in Net Neutrality stems from the issue of bandwidth. There is only so much bandwidth that these companies can generate without losing money. Its interesting because if you look at bandwidth in a vacuum, it really highlights the problem. Watch: Let’s say Comcast and Verizon both offer 300 mbps of bandwidth under current Net Neutrality for an average price of 150 dollars. (Making up random numbers here). Let’s repeal those rules and see how prices and amount of bandwidth change. Under Net Neutrality, both companies would have similar prices and the max amount of bandwidth would be at 300, but of course you can pay less to get less. The problem with this is that the companies aren’t really competing. There’s very little variation because the going rate for bandwidth is 150 dollars for 300 mpbs. Everyone can gets to use that bandwidth to watch Netflix and play fortnite as much as they want. The companies might be struggling to keep all this bandwidth up with only 150 dollars per customer because their own business costs are going up.

If we repeal Net Neutrality, now Comcast charges $100 for 200 mpbs,  $200 for 300 mpbs and lets say $300 for 400 mpbs. Unheard of right? Well, Verizon charges $75 for 150 mpbs, $150 for 250 mpbs, $275 for 300 mpbs, $350 for 420 mpbs. Now you can see the competition as each company tries attract more customers. They may even offer a lower bandwidth but you get extreme streaming capabilities for an extra 100 bucks. Either way, the competition will naturally drive down prices. When supply goes up, demand goes down. In order to create demand you need to supply, but you also need to create an interest in your product and attractiveness or marketing.

The solution to the tragedy of the commons for nearly every aspect of Net Neutrality is deregulation. Let the consumers decide which companies will succeed and fail. Another positive aspect of net neutrality being repealed is that it will allow startups and other smaller companies to get into the market of internet.

I believe that through my two examples I have shown why some collectivists policies are broken due to the tragedy of the commons. I believe that the solution to tragedy of the commons is deregulation which means getting government out of our lives. This solution is the basis for the whole libertarian philosophy. If society is a tragedy of the commons then as libertarians we are for the deregulation and privatization of pretty much everything. Everything is harder in a large group. Its similar to when you ask your friends where they want to eat. Everyone has different opinion. Or when you ask your friends when they want to go out. Everyone is busy and has no time. Collectivism requires group-think and group decision making. Its not the most effective. Tragedy of the commons also tends to tread on the rights of the individual.

The rights of individual are the most important aspect in a free society. As Thomas Jefferson once wrote:

“We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness”

Thanks for reading!

Please Tweet me @gpslife12 or like my facebook page at Garrett’s Life Experience’s

Hiatus Break: NFL Protests and Tax Reform

I have previous written about the original NFL protest by Colin Kaepernick. This post basically tells Kaepernick to put his money where his mouth is. He did exactly that. Now the protest has spread around the league. President Trump has tweeted, spoke and commented on the protest on multiple occasions. In apparent backlash, NFL ratings are down pretty significantly. The owners and players are seemingly at odds. (I’ll get into this more) I won’t just be talking about the NFL protest in this post. I also want to touch on tax reform which is currently the hot issue in Congress. I hold an extreme belief about taxes. I mean extreme by that its a position that isn’t possible in today’s circumstances. However, it doesn’t mean its not achievable eventually through some means. I will lay out my own set of tax reforms in the second part of this post.

I have been an NFL fan my whole life. Quite literally since I was in second grade I remember watching the Jets. I remember wearing Jets jerseys (I still have them). I absolutely love football. Although I never played in an organized manner. If I was athletically gifted I would be a Quarterback in the NFL. Generally I’m one of those people who doesn’t care to mix politics with anything but politics. So when Kaepernick started his protest I wasn’t that happy. Its not that I don’t care about the issues he is protesting or that I dislike him. Its just I watch football to watch football. I don’t care about the political leanings of the players or owners or coaches. Aside from that, they all get paid handsomely (Players) or are extremely wealthy to begin with (owners).

The problem with the protest now is that its gotten way out of control. At first it wasn’t too crazy. The craziest comes from a unlikely source in President Trump. Now Trump himself isn’t shy about creating controversy or saying incredibly inflammatory things. However, the President of the United States typically doesn’t pour gas on a fire like he did with the NFL protests. I basically have two issues here and the main issue is Trump’s position on this. Trump wants the owners and NFL to force the players to stand for the anthem. I think that many conservative thinking people probably agree. They think its disrespectful to the flag and the military. Which I don’t fully disagree.

However, the constitution has a bill of rights. In that bill of rights there is a first amendment. The first amendment is the freedom of speech. Over the years the Supreme Court has ruled that speech isn’t just talking, it can also cover symbolic speech and others. In this regard I have disagree with Trump, he or the government can’t make a law forcing them to stand. Its the players right to protest and there is nothing that Trump or the government can do. However, the NFL could do something like fire the players. But they won’t do that. Let me tell you why they won’t: Backlash would very bad for the NFL probably twice or three times as bad it is now. However, the NFL could force players to stand, its not a violation of first amendment rights. The reason is because the players represent the NFL as brand and the NFL has right to protect its brand from being unnecessarily tarnished especially by its own employees. The NFL also has a collective bargaining agreement which apparently does state that players must stand. If its true, then its over because the players agreed to that agreement and therefore would have to follow it or be fired.

In my opinion, I think that players should stand because of the ratings and money. I mean they are only affecting their own livelihood. If the owners still feeling the pinch then so will they. In the end, its better if they stand and try to protest in a different way or become an activist and use all those millions to do something about the problem. I don’t think anyone can deny that police oppression is real. However, I think the solution lies within criminal justice reform. I won’t get into this because I’m not an expert and I didn’t do any research yet. However, look out for future posts.

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Tax reform is one of my favorite topics to discuss. Its because they are a lot of solutions to a problem that seems to never go away. I think one thing that is always missing from the tax reform debate is spending reform. You might say that’s a totally different reform! But actually taxes are based projected government spending.  For example: the government spends approximately 600 to 700 billion dollars on the military each year. In order to cover that they need to raise that in taxes.

Generally the federal government’s budget is anywhere from 2 to 4 trillion dollars. It is supposed to be a certain percent of GDP or gross domestic product. (I have a post dedicated to this subject of GDP) So my ideal tax reform in a perfect world would zero taxes. You may have heard taxation is theft. If you haven’t then its pretty plain what that means. Yes the government is stealing from us. This is a very extreme way to view taxation but its not as crazy as you think.

Originally the US government didn’t really collect taxes. In fact, the US government taxed products and used tariffs up until about 1913. So our government was able to run entirely without any income tax. Income tax is now the largest category of revenue of the US government. Its also the worst way to fund the government. Income tax really sucks. There will never a true, fair way to split up the weight of paying it. Its awful. However, there is no way the government could survive with 20 trillion dollars of debt and absolutely no tax income. That insane.

My proposal is essentially this get rid of the current tax format. Install a universal basic income (See this post). Then install a flat tax starting around 15 percent. No more brackets. No more loopholes. My plan does a lot of things but the two main things is that it cuts spending and will eventually lower taxes! So with basic income it would cut out most of social welfare programs and replace it with a government check to everyone over 18 and not a criminal. This saves approximately 200 million dollars a year. Each year for about 10 years you fix or pay off the debt. Plus the 15 percent over ten years would generate enough income to really pay off the debt and run the country. After ten years you lower the tax rate to 10 percent for another 10 to 15 years. Essentially the goal is to make the government so lean that it won’t need tax money. Its definitely possible over time.

This a simplified version which I think is good start. The details and actual numbers would have to be worked out by someone in a math oriented field. I can only hope that this tax plan eventually happens. Its not a popular one because usually conservative politicians advocate flat taxes. Basic income isn’t too popular either because it sounds a little crazy. But I feel like the two very different approaches really balance each other out. Also you can’t possibly say a flat tax isn’t fair. Its fair by nature. Also it still ensures that the poor pay less and the rich pay more. Which is why I don’t understand why people don’t like it. I guess they would rather get fleeced by the current system.

Thank you for reading! Have a awesome day!

 

 

 

Tariffs: America’s Oldest Tax Plan Revisited

In history class, I distinctly remember talking about tariffs. It’s usually something you learn about first especially in American history. The American revolutionaries were unhappy with the tariffs being put on their exports by the British. This is what the revolution started over to a degree. You might not remember what a tariff or tariffs are. The definition of tariff is: tax or duty to be paid on particular class of imports and exports. In other words, a tariff is a tax on imported or exported goods. Every country typically imports and exports goods and services. The goods that are typically exported are those in surplus in that country. The goods that are imported are those which are either cheaper or not in supply in that country. Tariffs have been long a part of the American economy. Tariffs have even long been a part of the government.

In the post, I’m going to first review why tariffs were such an integral part of our nation’s history. Then I want to discuss how we went from a tariff based revenue system to the current system of income tax. After that I want to put forward an idea that seems to have been lost in time. The tariff in the United States was after the revolution used to fund the government. Almost as the sole source of income. Alexander Hamilton had designed the whole system. He set up and got funding for a series of lighthouses and inspection clerks up and down the Atlantic coast. There clerks were to inspect all incoming and outgoing goods. They also had to determine the tariff on each item. They were called Customs Officers. Hamilton became the Secretary of the Treasury and further install his government revenue engine on the back of the Tariff act of 1789. The act is simply explained in its first section:

“Whereas it is necessary for that support of government, for the discharge of the debts of the United States, and the encouragement and protection of manufactures, that duties be laid on goods, wares and merchandise:” — Section 1; Tariff Act of 1789

The tariff is essentially an indirect tax on goods coming and going out of the country. Hamilton saw the huge war debt from the revolution and knew that the US government had no source of income. There was no income tax or anything like that. (Wouldn’t come til 1912, I’ll explain later) So Hamilton being the genius he was, decided to convince President Washington to take out a loan and install the customs system (Tariff Act). He argued in one of many papers that America need to build credit. If you have a credit card or student loans like me then you know that building credit is paying off your debt. Hamilton’s system allowed the US government build credit, in fact one of the best credit ratings in the world for many years. Not everyone was on board with the plan. People like Thomas Jefferson and James Madison. However, they couldn’t stop Hamilton’s plan because war debt was owed to France and other creditors. The US didn’t have many options at that time.

So tariffs were the main source of income from 1789 to about 1911. The US government added liquor taxes, postage taxes, corporate taxes, tobacco taxes and the Panama canal as other sources of revenue. In 1912, tariffs made up about 20 percent of the income of the government. In 1913, the government passed a law that changed the source of US government forever. The law called the Revenue Act of 1913 or the Underwood Act was passed to impose an income tax and lower tariff rates from 40 to 25 percent. This marked the end of tariffs making up a significant portion of US government income. This act was possible by the newly passed 16th amendment. (For another post, the 16th allows for income tax under the direct taxation requirements in the constitution, which was previously ruled unconstitutional by the Supreme Court) Since 1913, our tariff income has only been about 1 percent of revenue. This figure is according to this website here, it also breaks down the tariff income based on type of good. All in all, 2013 saw about 30 billion dollars of income. This is compared to 311 million in 1912. In 2016 dollars, that tariff income would be about 7 billion. Obviously, since the early 1900s the conditions of the economy and our government budget has exploded.

You might be asking yourself but isn’t 7 billion dollars in 2016 or 2017 (Happy New Year) like chump change for the US government whose budget is around 2 or 3 trillion dollars. My answer would be yes. However, if you look at these numbers in terms of percentage and scale then you can imagine a viable tariff system for 2017. Remember tariffs made up 20 percent of the 1912 budget. Now tariffs make up 1.7 percent approximately in 2013. So lets say for argument that our budget under President Trump is 3 trillion. Trump decides in order to cut taxes he needs to increase revenues. (In some alternate logical world) So Trump orders an increase on tariffs. His cabinet comes up with about 600 billion in tariffs or about 20 percent of the budget. I think that 600 billion dollars is a pretty nice chunk of change. Imagine what that could pay for? Social Security? War? Food Stamps? But what would those tariffs look like?

Obviously to understand the role of tariffs, you need have an understanding of the global economy. I think its obvious that the world is complex. A significant part of an economy is trade. The trade between two countries or more is essential because it allows scarce resources to be spread. It also widens the markets for such goods. Its been in the news a lot lately about all the trade agreements. These agreements in a basic way remove the barriers and allow trade to flow freely. One of those barriers can be tariffs. There are two types of tariffs. Import tariffs are a tax on goods that imported from other countries. Import tariffs are often seen as protective to a country economy. This was the primary tariff beginning in 1789 because it (artificially) protected the US economy. Export tariffs are a tax on goods being exported to other countries. Export tariffs are typically seen as way to limit the exports of a certain good. For example, if oil became very scarce then the US might want to put a high export tariff to help curb the sale of oil abroad and keep here in the US.  (An export tariff would increase the price of oil outside the US)

I believe that introducing a new tax plan including tariffs might be beneficial to the US. I think you have to carefully consider what to put tariffs on and what kind of tariffs. But its definitely a source revenue that is not used as it once was. Now we rely on income tax so heavily, its crushing many Americans. Its a liberal fallacy to think that you can tax your way out of poverty. Its an irony. Taxes create more poverty than eliminate. I think I need to do another post on the subject of trade because this post is merely just one part of it. I need to do some further research before I offer any specifics on what a tariff revenue might look like. So I will leave this post as to be continued, my next post will try to figure out how to successfully incorporate tariffs into a free trade world.

Thanks for reading!

 

On the Basis of Democracy: John Locke, Part 2.

Welcome to Part 2 of on the Basis of Democracy with John Locke. If you missed Part 1, you should read that first. The purpose of this blog post is to simply figured out the origins of Democracy and how it works within our American democracy. In Part 1, I went over some of the ideas of democracy from Aristotle. Political theory is a pretty easy theory to follow because each political philosopher usually builds off philosopher’s of time past. Therefore, the more ancient political scholarship you understand, the more modern/current political thoughts you can understand. In Part 2, we will be discussing John Locke and his ideas on democracy.

Who is John Locke? He is an english born political philosopher. Born in the early 1600s. He was influenced by Aristotle. Locke has a deep range of writings. He is often considered to be one of the fathers of the enlightenment. Similar to part 1, I won’t give a full biography but go to straight to Locke’s ideas about democracy. Starting from his first writing and going forward, Locke’s main premise is the consent of the governed. In his first writing called “Fundamental Constitutions of Carolina”.  In this piece, Locke and his mentor, wrote a constitution meant for the Providence of Carolina in England. It was never adopted. However, the ideas that he mentioned became the basis of political philosophy going forward.

The most influential of Locke’s writings came in his Two Treatises of Government. Instead of trying to paraphrase his great words, I will just show you. Then I will explain how the founding fathers use Locke’s ideas especially in the Declaration of Independence. Here is just a few excerpts of Locke’s Two Treatises of Government:

Sect. 95. MEN being, as has been said, by nature, all free, equal, and independent, no one can be put out of this estate, and subjected to the political power of another, without his own consent. The only way whereby any one divests himself of his natural liberty, and puts on the bonds of civil society, is by agreeing with other men to join and unite into a community for their comfortable, safe, and peaceable living one amongst another, in a secure enjoyment of their properties, and a greater security against any, that are not of it. This any number of men may do, because it injures not the freedom of the rest; they are left as they were in the liberty of the state of nature. When any number of men have so consented to make one community or government, they are thereby presently incorporated, and make one body politic, wherein the majority have a right to act and conclude the rest.

Sect. 96. For when any number of men have, by the consent of every individual, made a community, they have thereby made that community one body, with a power to act as one body, which is only by the will and determination of the majority: for that which acts any community, being only the consent of the individuals of it, and it being necessary to that which is one body to move one way; it is necessary the body should move that way whither the greater force carries it, which is the consent of the majority: or else it is impossible it should act or continue one body, one community, which the consent of every individual that united into it, agreed that it should; and so every one is bound by that consent to be concluded by the majority. And therefore we see, that in assemblies, impowered to act by positive laws, where no number is set by that positive law which impowers them, the act of the majority passes for the act of the whole, and of course determines, as having, by the law of nature and reason, the power of the whole.

If you want to read more of Locke: Click here.

Locke’s main point is that the governed hold the power of the government. Locke believes that a government cannot operate without the consent of the government. This is a basis of democracy. The reason why Locke believes that the consent of the governed is so important is because of the freedom or liberty that it offers. If the government is ruled by the people it can prevent tyrants and better rule the people. Locke is also coming from a monarchy in England and in a time when the dark ages we’re not that far off. In the dark ages, it was a small oligarchy who wealthy that ruled over the poor and working class who had no say. Locke’s ideas are perhaps best expressed in Thomas Jefferson’s document.

Thomas Jefferson was a philosopher in his own right. Jefferson also understood that Locke’s philosophy fit perfectly with the American cause for revolution. If you didn’t pay attention in history class then you want to know to that one of the rallying cries was “no taxation no representation”. The American people were clamoring for representation in the British parliament. The unilateral rule of the British Monarchy over the American colony was directly what John Locke was trying to get at. In the Declaration of Independence, Thomas Jefferson took a page for Locke and wrote this:

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness. — That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed, — That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness.

Thomas Jefferson essentially took Locke’s words and used it as a justification for the revolution of the American people. Locke’s vision for democracy did not just end with Jefferson but kept going. Locke’s idea that the consent of governed is needed in democracy still holds true today. Unfortunately, in today’s America we have gotten lazy. We seem to have ignored the fact that our democracy is supposed represent the people. Many people blame our representatives. We should look at the majority of governed who don’t vote. I think in a very indirect way, Locke is also advocating for participation in government. I feel that political participation has gone down as politics has become more polarizing.

We can blame Trump. We can blame Hillary. We blame our politicans. However, I think that democracy in the words of Locke lies with “the consent of the governed.” I think to wrap up this series, I want to just conclude a few major considerations for the basis of democracy. One basis that Aristotle outlined is the authority over aduits. In other words, Aristotle thought that the people should hold purse strings and keep the government accountable. Aristotle gave us a second basis that is the foundation of our judicial system. The right to a fair trial with a jury of your peers. Locke gives us the basis of the consent of the governed. The theory that democracy should always be run by the people and for the people. The majority of people should have the power to control the government. This means everyone must vote. Everyone must participate. These are the three main bases of democracy as written by Aristotle and John Locke.

This will be end of this series for now. I may continue it with different philosophers at another time. Below you will find my sources especially for the quoted stuff. Thank you for reading!

Citations:

https://www.johnlocke.org/about-john-locke/who-is-john-locke/

http://www.gutenberg.org/files/7370/7370-h/7370-h.htm

http://www.ushistory.org/declaration/document/

 

 

 

Economic Series Part 3: What is Gross Domestic Product?

Welcome to the third part of my economic series. This final part will explain what GDP is and why it is so often used as politicians go to economic figure of success or failure. Gross Domestic Product or GDP as I will call it by the acronym, is an economic indicator. It measures a very specific part of the economy in any given country. If you have not read parts ONE and TWO of this economic series I strongly suggest that you do. My first two parts of the series describe the arguments for and against minimum wage in part one. In part two, I  go over the basics of government budget and taxation. It’s important to recognize that economics is a very complex subject and many topics involved having an understanding of other topics. In this case, I think that GDP is definitely the most advanced of all the topics that I have covered thus far. In order to properly discuss GDP and the politics that usually surround it, I feel its necessary to explain how it come to be and what it involves.

The book that has inspired me to write on this topic and my primary source of information is called GDP: A Brief but Affectionate History by Diane Coyle. Coyle’s book gives a full rundown of everything GDP. I would strongly recommend it because this post won’t even cover 1/4 of what she does in this book. Coyle gives a simple word breakdown of GDP. Gross meaning not deducted as opposed to net (Her example was like net weight of a cereal box, it’s only the weight of the cereal without the packaging) Product meaning stuff made, and Domestic is simply at home.(Page 7) GDP is much more complex than the three simple words that make up its name. The history and founding of GDP begins at the start of World War II. However, the idea goes back throughout the ages.

One of the many controversies over GDP that still exist today was first explored by one of the greatest economic scholars to ever write. Adam Smith wrote the Wealth of Nations. In his book, he went over some relevant facts of GDP. His point to paraphrase is this: The manufacturer that produces something with their labor creates value and adds it to the economy. The person who employs many menial servants grows poor while the person who employs many manufacturers grows rich. The point here being that Smith sees the production of goods as adding value to an economy. He sees the services of a servant or a service in general adds nothing. GDP has often not included services because it’s too hard to measure the true output of a teacher. Also the word “Product” in GDP lends itself to the production of goods not services. (Page 10)

GDP’s history comes out of collection of statistical data and economists. Colin Clark calculated the expenditures and national income of the United Kingdom. Clark based his work on a publication by Alfred Marshall who wrote Principals of Economics before the Great Depression. Franklin Roosevelt encourage more research and work on the national income and expenditures during the Great Depression. This led to Simon Kuznets to work with the National Bureau of Economic Research, which earned him a nobel prize. One of things that Kuznets brought up is an important facet of GDP. Kuznets thought that he was working to measure welfare rather than just output. GDP is often used to measure the welfare of any given country. However, because like I said previously, GDP is typically measured by the output of an economic. The problem of welfare and GDP is one of modern criticisms of GDP. Coyle dedicates two chapters to the subject of GDP and welfare. (Page 12-14)

I want to focus more on the particulars of GDP and how it’s calculated. Coyle covers this topic quite well. I want to save welfare and GDP for another post because it’s too much for this post. Coyle goes over the three different ways to measure and calculate GDP. She gives a two charts. One chart shows how these calculations are done. Since I don’t have the chart, I will just describe each way. The first way is a Value Added production. Value Added production adds up the Gross Output. The gross output is the all the sales made in an economy. The gross output excludes the inventory because it’s counted by the next category of intermediate inputs. Which stuff like staffing, inventory, and other things that businesses pay money for to make their business work. Finally you get to a number that tells you how much value added each industry in an economy.

The second way to calculate GDP is through Income (by type) approach. This approach uses a set of different incomes and expenditures to make final figure of Total Domestic Incomes earned. There are rental income, profits and proprietors’ income, Taxes on production and imports, Less: Subsidies, Interest and miscellaneous payments, and depreciation. These are the categories of the Income (by type) approach. The third way to calculate GDP is through Final Demand (or Expenditures) approach. This approach uses the sum of these categories to make up the final sales of domestic product to purchasers. The categories are the consumption of final goods and services by households; Investment in plant, equipment, and software; Government expenditures on good and services; and net exports of goods and services (export-import). No matter how you calculate GDP, the measurement always is trying measure how much an economy produces and what kind of income the country who benefits from it makes. (Page 25-26)

The most popular and most used method in modern times is the Expenditures approach. Coyle also goes over the equation along with an awesome chart. The equation simply is GDP= C+I+G+(X-M). The letters stand for Consumer Spending plus Investment plus government spending plus exports less imports. (Trade deficit/surplus). Coyle also tries to show some problems with the GDP equation which is mostly that GDP is not so simple. The categories have multiple sub-categories. There is a lot of gray area. The numbers can be shaky. However, in the end GDP is the most reliable measurement of economy. Coyle mentions other indicators which can help round out the welfare aspect and government impact. The awesome chart I was referring is a two circles. On the left side there is the word “Individuals” and on the right side there is “Business”. The top of the circles, have two words. On the bottom circle it says Expenditures, and on the top circle it says Goods and Services. In the lower two circles, the top one says Income and the bottom says Labor. (page 26-27)

The story is that Individuals and Businesses interact in two different ways. The circles represent the different ways. The bigger circle with Labor and Goods and Services basically shows that Individuals supply the labor for business. The Business supplies the good and services. This is basic economics, it shows a supply/demand for labor and good and services.  The smaller circle with Expenditures and Income show that Businesses supply the Individual with income and the Individual supplies the business with Expenditures. The vice-versa is also true. Businesses make income on the Individual’s expenditures. This is a simple economics lesson that can help you understand GDP. (Page 27)

GDP is an important facet of economic measurement of any given country. As Coyle notes in later chapters which this post won’t cover, that GDP is not accurate in second and third world countries because of faulty accounting and statistics. She also covers a great deal of debate over whether welfare should be measured by GDP or not. These are more complex questions than I really want to go. I think the point of this post is to say that GDP is important to understand. GDP is not a true measure of welfare. It’s the statistical measure of economic input and output. As an example, GDP measures the number of phones that Apple sells after the release of the Iphone 7. It doesn’t take into account the welfare of the people who buy those phones. GDP is also a political tool especially when it comes to arguing over the economy.

Moving away from Coyle’s book in some ways, I want to briefly discuss why politicians like to use GDP. I think that much of the political controversy surrounding the use of GDP comes from the myths of GDP. Many people don’t realize the history of GDP. The misunderstanding of what GDP represents. Many politicans including present candidates for President seem to think that GDP shows how well the economy doing or more often how bad it’s doing. However, the reality is that GDP can fluctuate just based on how you calculate it. One increase or decrease in any given category there could be a 1-2 percent fluctuation. Another important myth to dispel is that government spending actually helps GDP. The debate that surrounds government spending and its effect on the economy is prevalent.

This is where I want to end this post and this series for now. My last words is that government spending doesn’t necessary make for the best economic move. The problem with government spending is that the government is NOT a business. Government makes their money from taxpayers. Its mandatory, you can’t just not pay taxes. It also makes a problem with counting the statistics for GDP. The government doesn’t have a real income with the exception taxes. This means that when the government tries to invest in anything it only represents an expenditure. If you recall the chart, the point of an economy is a cycle of labor into good and services that make income provided by expenditures. One example, that I know the best is that of the spending on the military. Military spending has often been one of the biggest items on US government budget. The national debt is nearly 20 trillion dollars. Some scholars have estimated that 16 trillion of that was spent during the cold war on military research and wars. The way that the DOD (Department of Defense) and the government have gone about spending this money is the problem. The military contracts assigned to military contractors during these years were given without little scrutiny. Many of the biggest contractors were able to contracts with no competition. The contracts included very little accountability or responsiblity especially in regards to money spent.

The point being is that GDP has actually suffered since the Cold War. This mainly due to stagnant economy. I mentioned that GDP doesn’t measure services which now is the most prominent feature of our economy. The reckless spending and bad fiscal policy by the government has given us some unfortunate consequences. GDP will always be controversial because of its complexity. I believe that its important to understand how GDP works. If you understand economics and GDP then you can understand that fallacy that politicians try to push on us. For me, this topic is fairly new but I wanted to try to introduce a little bit of the controversy and facts of economics and GDP.

Thanks you for reading! Have a great day!

 

Citation:

Coyle, Diane. GDP: A Brief but Affectionate History. Prinction University Press, 2014. 

 

Economic Series Part 2: Government Budget: Taxation and Spending

The most dreaded time of year is when everyone must file their taxes. Taxes are certain like death. Taxes are a necessary evil. To many people it seems that our taxes do very little for our own interests. Taxes are supposed to help the people who pay them but rather they seem to help special interests or people who don’t pay them. The responsible party of handing our taxes is the government. The IRS is the collector, Congress is the spender. I believe that this Economic Series Part 2 is probably one of the more important topics. This part will be a sort of contextual background for the last part of this series on GDP. (Gross Domestic Product) I think its very important to understand how the government balances or fails to balance the budget. The topic I choose is quite broad. However, I want to focus on why taxes are collected and how they are spent. I also want to point out how the national debt is growing and what we might do to stop it.

My own view on government taxation and spending is very much libertarian. I believe the government should spend as little as possible. This way our taxes are not the burden they have become. Government spending tends to go to ineffective programs and usually becomes wasteful. I think the best way to understand the federal government budget is by understanding some of the history behind. The creation of our federal budget and tax system was mostly implemented by one man. Alexander Hamilton is the responsible person for most our budget system.  If you remember from history class there was a lot of rebellion and distrust among the citizens of our new country. Many of Hamilton’s critics thought he wanted to become a pawn of the British or king of America through a tight relationship with England. Luckily for us, Hamilton’s set up turned out to be brilliant, and was kept in place until now.

One of the first ways that Hamilton helped set up the federal budget was by creating an import and customs service. It was necessary because when Hamilton became the secretary of treasury, the US had a war debt due to the revolution. In order to pay this war debt off, Hamilton created what is now the Coast Guard. He also set up customs and import agents along the ports. These agents were to collect the duties on the imports to America. The duties or tariffs were basically a tax on imported goods. This was the main source of income for the federal government after the Revolution. Another piece of the system that Hamilton created was the banking system. Hamilton realized that the US need a national bank. In part because of the debt and in part because of the wide range of currencies that existed among the former colonies. The Bank of America (similar to the one we have now) was created. Congress wrote a charter for it and it opened up by selling shares. These shares is how the bank made its money. The controversy came when it lead a lot money speculating among men who wanted to risk an investment in the bank.

The Bank of America also set up a line of credit for the federal government. This is was necessary because in order to pay back the war debt the US would need to take out a loan. Hence this created what we call credit. Hamilton’s system was much criticized by Republicans like Thomas Jefferson and Aaron Burr. One of Hamilton’s primary supporters was actually George Washington. With increasing responsibility due to the growing population and turmoil in France, the US needed to increase its revenue. Hamilton proposed and got a whiskey tax passed. This whiskey tax would put a small tax on whiskey and liquor. This lead to the Whiskey Rebellion in western Pennsylvania. Hamilton himself lead a rather big militia to help quell this protest.

Hamilton’s role in the banking, budget and tax collection in the US is monumental. It is often forgotten that he nearly created the whole system by himself. An impressive feat. It wasn’t until the 16th amendment that make income tax a thing in the US. This was passed in 1913 long after Hamilton’s death. Woodrow Wilson brought us into the modern era of taxes with the 16th amendment and the Federal Reserve Act. The Federal Reverse Act created the Fed as its usually called. The Federal Reserve Act basically moderates the US dollar according to the economic conditions. It also prints and controls the US dollar. Unfortunately, the Federal Reserve is mostly privatized. You may have heard the phrase “Audit the Fed” from politicians like Rand and Ron Paul. The problem is essentially, the Fed is undermining the US dollar and devaluing it. The Fed has its own agenda and nobody except the Fed knows what that agenda is. (Another post, another day)

Now in 2016, after over 200 years running our government, we find ourselves in 19 trillion-dollar debt. What could have gone wrong since Hamilton? The answer is hard to pinpoint. However, my working theory is that after War World 2, during the cold war, we started to spend more and more on defense. Defense spending became out of control and the Department of Defense was not held accountable. The DoD was allowed to “cook the books” on their budget numbers. Some estimates that I’ve seen put our spending during the Cold War at 16 trillion dollars. I would encourage you to check the national debt clock that shows our debt in real-time. It breaks down the debt into categories. The national debt being so high is due to overzealous spending and lack of accountability in the government.

As for a breakdown in spending and what we spend our tax money on. I found a nice infographic that shows how we spend our federal budget. It focuses on how the debt is effected by certain factors like raising and lowering taxes. You should definitely check it out right now. It’s from the Congressional Budget Office, a government agency. I think that paying taxes is obviously important however, I believe that some of our tax dollars are wasted. One of things that needs to happen is for the federal government to cut spending. Unfortunately, we don’t hold our government accountable for the money that it spends. A good analogy is like when you take your parents credit card and go on shopping spree. Your parents may give you the credit card with a reasonable expectation of what you will be spending it on.  Instead though, you spend it without any kind regard for how much or on what. Imagine if your parents never held you accountable for spending all their money. They would probably go bankrupt in most cases because without restrictions, then what’s the point of spending less?

This is how the federal government and taxpayer relationship basically works. The federal government is you as teenager with a parent’s credit card. The taxpayers are the parents. As taxpayers we are pretty irresponsible parents. We don’t hold our government accountable for their actions in spending money. The tragedy is that the US is in big trouble because of reckless government spending. The 19 trillion-dollar deficit is almost an insurmountable sum of money. Rather than discussing who is to blame for the problem, I think its more productive to discuss how to remedy it. The blame can be distributed to many people and government agencies. The blame can be put on US foreign policy too. However, there is a relatively easy and pain-free way to help cut the deficit and still keep our standard of living intact without raising taxes sky-high.

There are two primary solutions that I feel would work to greatly reduce our debt. One of those is a simple cut in unecesary government programs and spending. One of our biggest expenses is the military budget as you can see below:

So just imagine if we pulled back most of military troops from abroad and cut most of the unecessary research and development budet. I would only cut about half of the military budget. At nearly 634 billion dollars, let’s cut it down to 300 billion. The 300 billion left for the military would go towards the salaries of personnel mostly and all the war material necessary. In the case of an attack on us or our allies, then obviously the money could be restored. So where would that 334 billion that I cut off go to?

Take a look at the pie chart again. 60 precent of our budget is spend on healthcare and social security. Social Security, by the way is going bankrupt. So let’s put 334 billion into both of those. Approximately 150 billion to each service. In addtion, lets cut off the foreign aid to other countries and add another 30 billion to the pot. So imagine over eight years during just one president for two terms, with approximately 165 billion dollars going to sinking welfare programs. So in 8 years, the US would put nearly 2.6 trillion dollars into those welfare programs. You could even take a step further, take about 2 billion or 3 billion out of the 364 billion and put that into higher education. You could pay off the loans of all students each year. Just think about all this, this is just cutting the military budget by half. Which by the way, is nearly 10 times as big as the next country’s military budget.

My other option, which I have written about before and have over time, really have come to like is Basic Income. You should definitely read my post on Basic Income. I will explain in short, that Basic Income is basically a replacement for welfare. You cut all social programs including medicare and medicaid. Cut minimum wage. Cut everything related to social security.  Instead you give everyone over the age of 18 a check from the government for a certain amount each month. Now just imagine if we did as I describe in my basic income post and we cut the military budget. I truly believe that the effect of both of these actions could lower taxes and help eliminate the deficit.

The taxation and government budget problems are ones of responsibility and accountability. This in part comes from the lack of education how the taxes and spending work within the government. I hope that my brief explanation can help clear up some of the confusion and misunderstanding about how taxes and government budgets work. I mentioned that this series post prefaces my next topic of Gross Domestic Product. Its important to note that GDP is calculated without the input and outputs of the government. The government spending money on military war material and other research does not count towards GDP. This is a very significant fact in that it strongly affects the GDP numbers. As you will find out in my next post that GDP only measures the input of labor and the output of production by the private sector.

I would encourage you to research more outside of my post. Its a very interesting topic. Thank you for reading! Have a great day!

 

Introduction to Economics: A Historic Review of Modern Political Economic Argument.

Welcome to my very first series post on Economics. Don’t be scared by the long title and big words. Essentially the words: ‘Historic Review’ and ‘Modern Political Economic Argument’ are fancy ways of saying that I will be using historical findings and writings to preview how we look at various economic policies that are used in today’s politics. The word ‘Argument’ has a double meaning because it means I will also being arguing that certain economic policies are less effective than others. This particular post is just an introduction. It won’t be too long, but knowing me that could be a complete lie. In this introduction, I will briefly go over the topics which will conveniently become a post of this series. Each topic will have a dedicated post. I intend to make this a three-part series. However, I cannot rule out expanding if necessary, especially since sometimes it takes a lot of words to explain complex subjects. That being said, I’m going to try to keep it as simple as I can. Albert Einstein was once quoted as saying that any fool can make something more complex but it takes real genius to make it simple.

As I mentioned in my last post that I have been reading up and have an increasing in economics. In this blog, I have often discussed economics due to ignorance of certain politicians and in general. I take great umbrage at people who ignore the facts of economics and still repeat the same lies. However, politic disagreements aside, I truly just want to educate and show people that economics is not just made up out of thin air. It has a deep and rich historical basis. There are a broad number of scholars who made economics what it is today. Much of the Economic policies that you hear about come from the writings of these scholars. There is also the economic measures and policies that many people just don’t understand because it’s not typically taught in school (Highschool many of these subjects I will touch are probably not covered, and in college it would be an elective unless you major in economics)  and it’s just not deemed important.

The three subjects that I want to discuss and argue about are as follows:

Minimum Wage

Gross Domestic Product (GDP)

Taxation/ Government Budgets

In no particular order, I will proceed to write at least three blog posts about each of these. In each case, I will cover some history about the topic. I will draw on many different sources available either online or in book form. After I use history to help explain what the topic is and how its evolved over time then I will go into the ‘argument’ part. As example, I might take minimum wage. I might try to argue that minimum wage should not be raised. I will lay out arguments both for and against. In the end, I want you to decide how it should be. The point of this series is to educate people on how economics works and how has worked in the past. Granted, I don’t know everything. I’m sure I will miss some things. However, that’s where you come in and fill in the blanks. A healthy democracy involves a citizenry that is educated and asks questions.

Let me just introduce each of the three topics. The first one probably needs no introduction if you follow politics or read this blog. Minimum wage is the floor wage or base wage that is set by the federal, state or local governments. It’s a little fuzzy because the legality and assigned power is not specifically mentioned in the constitution. I may go deeper into this issue, my initial thought would be to say the federal government is overreaching by trying raise the minimum wage because its power that should belong to the states and local government. Let’s face it, the state and local government probably knows what best for its people. I digress. Minimum wage is a hotly debated issue that comes up almost every election cycle.

Gross Domestic Product or its better known acronym GDP is the measure of output and input of any given country. Now in my posts, I will just refer to Gross Domestic Product as GDP. GDP is a very complex and challenging economic indicator. I recently read a book about it. It has history that is very interesting and very controversial. GDP is by no means a perfect measure of economy. Its often used by politicans to justify certain policies. GDP can be misleading because its calculated by a bunch of different statistics that are pieced together. Sometimes and in many cases, the statistics of poorer or less well off countries are skewed or incomplete. This will probably be the last post of series because of its complexity and because my knowledge is somewhat limited.

Taxation/ Governemnt Budgets is a very broad subject and to narrow it down, I mainly just want to disucss how taxes fix into the government’s budget. On the other side of the coin, I want to talk about the fiscal responsibility of the government. Today more than any other time in our history, the government seems to have a dangerous spending problem. The problem is not that our citizens don’t pay their taxes but rather the government out spends the amount of taxes collected. There is a wealth (pun intended, literally) of scholarhsip on taxes. They say there are two things certain in this life, Death and Taxes. In this post, I will almost definitely argue for the fiscal accountability of the government. You will see that fiscal accountability would actually lead to lower taxes. I think everyone can agree with lower taxes?

If  you have any suggestions for other topics, drop me a line. I’m willing to write about almost anything. I think these topics will bring some good questions and maybe answers about certain economic policies. I also think it will be good to explore some lesser known economic topics like GDP. In addition to educating you, I am also learning myself. In my life, I’ve taken two economic classes. Once I took a half year course in highschool. To be honest I did not learn anything. Then in college, I took a course in economics. I believe it was Marco-Economics. I learned the basics like supply and demand. I learned about the importance of scarcity. Now after college, I have been reading up on economics and trying understand how it works. Its definitely a topic that everyone should at least a little bit about it.

In the coming days you should expect the first post of this series. Thanks for reading! Have a great day!

Meddling in the Middle East: Aid Trouble

Before I go into my headline topic on the middle east, I want to just take moment to say that I called the stock market crash and rebound after the Brexit vote last week. After nearly three days of down stocks, the market has returned almost all the losses. Once again I want to reiterate that the long-term economic and political results won’t be seen for at least 3 to 5 years. Now let me switch gears into a very controversial topic that relates to terrorism and the middle east. Today I want to discuss the absurdly of the US foreign policy toward Israel. I also want touch on tragic airport bombing in Istanbul, Turkey that was supposedly planned by ISIS. My main focus of this post is to make the point that Israel should be able to accept being an US ally without needing over 50 billion dollars for military aid.

First up, I want to mourn for the victims of the airport bombing in Istanbul, Turkey. It was a horrible and savage attack. The death toll has reach nearly 50 people with over 200 people injured. I think that its very necessary to use caution especially when traveling abroad. You never know when ISIS will strike. The US response was about as usual as it could be. There isn’t much choice but to strengthen the airport security. It’s very unfortunate for the Turkish people for whom terrorist attacks have been increasing in the past year. You can find part of the reason in the civil war in Syria which continues to raise havoc in the region. Turkey also has some domestic terrorist which are just as bad. Turkey actually relies on tourism for a good part of their economy. Hopefully the Turkish government can take the necessary steps to deter and stop more attacks. They can also thank Hillary Clinton’s foreign policy. Unfortunately President Obama and Hillary Clinton conceived a foreign policy that led to the creation of ISIS because of power void. This absence of power is thanks to George W. Bush, however, without a stable government in the area it was pretty much impossible to stop the formation of a terror group.

On the topic of stable governments in the middle east, there is at least one US ally that is not named Saudi Arabia or Jordan. That US ally is also one of the world’s nuclear powers. The small nation of Israel, location centrally in the middle east. A key ally in helping maintain a balance of power in the thick of US hatred. Recently, there was news about the agreements that happen each year between the US and Israel. This time around it seems that President Obama is standing up against Israel. The article highlights the main facts surrounding the Israeli-American defense agreement that sends 50 billion dollars a year of taxpayer to help fund the Israeli military. It also says that Obama wants to cut out his part of the agreement. The agreement also deals with civilian aid and economic aide. For once, I think President Obama is making the right move with Israel and here’s why.

First, no other country gets such special treatment like the Israeli’s do. Not the UK, not France, not anybody. Israel is the only country in the world that gets to spend its US aid on military weapons. Now granted, this policy was formed after World War 2 because of the holocaust and the need to protect the Jewish population. However, its has been a signficant amount of time since then, about 70 years. President Obama correct asserts that Israel should start paying for their own military. Second, it is not fair to the American taxpayers (that’s me and you) to have pay for defense that typically never benefits them. The reason why it never benefits US citizens is because just look at the middle east! It’s a fucking mess. I don’t think Israel has done much to help the situation.

The third problem is that America can no longer afford to keep shoveling 50 billion a year to Israel. We have enough debt as it is. We have a huge military and trust me its enough to defend Israel if its necessary. You might say “Oh but what about Iran, don’t they want to wipe Israel off the map?” Yes, that’s true. However, I think Israel will be fine since they have nuclear weapons and Iran just signed an agreement to not have them. The deterrence factor should come into play here. My problem with this is just about the money. I think the Israeli’s have always been a great ally and never tried to play us or trick us. However, many nations are America’s ally for benefits and many of them do it without 3 billion a year in military.

I am so proud of President Obama. His foreign policy has been characterized as soft and lacking. I think this is a bold move that Israel definitely won’t like but what are they going to do? Obama is so right to play hardball. Obama should absolutely stick up for American taxpayers. I honestly just don’t give shit about how good of ally and let me explain it in simpler terms. For example, let’s say you have two different friends. Both friends you’ve known for 15 years. Both friends provide you the same support and kinship that you love about them. The difference is that one friend only hits you up when they need money. The other friend is always down to pay for their own shit. Israel is like the friend that only hits you up for money. It’s not a very good way to be a friend. If you are only in it for the money!

I don’t want to sound anti-Semitic or anything, but I really think it’s an unnecessary amount of money. America is going through its own economic crisis. This crisis has been brought on in part by the spending of the military industrial complex. Trust me, 16 trillion dollars of our national debt is not just from bailouts and social programs. 16 trillion dollars is the estimation by a great scholar by the name of Paul A.C Koistnen. He is a tremendous scholar whom I gotten advice from. He is an expert on the military industrial complex with about 10 books in publication. I recommend that you read up on him. His estimate of 16 trillion dollars is the amount that the military industrial complex has cost the US since the end of World War 2. That is nearly 76 percent of the national debt. So I just want to end by congratulating President Obama on his good move and I hope that he continues to push to get rid of the 3 billion subsidization.

Thank you for reading!

 

Basic Income–A replacement to Socalism?

I was browsing around fivethirtyeight.com, one my favorite websites right now. I came across an article discussing the idea of basic income. The article itself details the journey of a man who devoted his career to studying such a measure. I would definitely recommend that you read the original article, right NOW. Now before I explain what basic income is and why it may be a viable replacement to socialism, I want to say that there is no replacement for free market capitalism. No matter how you look at it, free market capitalism is the most successful type of economy. Also if you read this blog on any sort of regular basis you will often find me ripping and shooting holes through socialists ideas and policies. The only thing I have against socialism is that it just does NOT work. You may think after I explain that I’m proposing an socialist policy, but I’m not. I am merely suggesting a completely re-thought social welfare policy that could actually eliminate some of the problems that socialism presents.

Basic Income as explain by this article on fivethirtyeight is an no-strings attached, government funded check to each citizen of certain amount per month or annually. Now in the article they don’t get into many specifics on who actually receives this basic income check. They only say that whether your rich or poor, you get a check. Sounds really crazy right? Why the hell do people like Donald Trump need a free check from our government? Won’t it deter people from working? At first, I had come up with many questions like these. But then I started to think about it in a more realistic way. Now, if the government was cut a check each month for each citizen then we would obviously have to cut some other sources of spending. Naturally, when you think of a free check from the government you think: Welfare. So what counts as welfare?

So as defined by the article, welfare includes old age, health, family, disability, housing and a few random others like food stamps, government funded services. Let’s say the US government would cut all welfare which according to this chart made with data from OECD (To read more click on it). The chart is shown below:

So as you can see the US spends about 700 billion dollars on welfare related expenses per month per capita. This is all taxpayer funded money. So now the questions that I need to answer are who receives this check and how much should it be? The article does offer some light on how much. A proposed Swiss Basic Income law had the amount set around 1700 dollars a month. As you can see that the Swiss spend a similar 650 billion or so on welfare also. So let’s say the US will set it at 2000 dollars per month. And based on US census data from 2014, I have estimated that there 244 million people above the age of 18. I feel like once your 18 you should entitled to basic income. If your under then you’re probably not responsible enough, it should reasonably match with the voting age.

So here is my estimation by somewhat rough numbers:

Basic Income: $2000

Population over 18: 244 million

Monthly cost of Basic Income: $488,000,000,000 billion

Monthly cost of welfare: 700 Billion

Savings by Government:$212,000,000,000 Billion dollars.

I believe that my numbers although rough can easily justify a basic income as a cost cutting and effective way to reduce welfare costs. Now I could be wrong about any number of things in my calculations. However, let’s just take with a grain of salt and say that this is how it would be. Let’s be honest that the government has too much power over us through welfare. The government programs are usually poorly managed and very costly. Also who knows the best way to help you if your in poverty? The government? Or YOU! I think that people honestly know what they need to survive. Now many skeptics including myself will still call bullshit on this whole thing. This: Won’t this just deter people from working?

Honestly, I can say that it might deter some. But those same people are the ones who don’t work now and are on welfare. So in reality that problem can’t be fixed by an basic income. However, I think the war on poverty thus far has failed. Lyndon B. Johnson started it in the mid 1960s and we have been trying to fight it ever since. Unfortunately, the government is pretty ineffective at providing the poor help. So what makes me think that this measure could work? I think that this measure could work because it provides people the freedom to do what they will do. Let me give you two different situations that would probably occur across the country.

First situation: John Doe is a mid-level manager of a fortune 500 company. He makes a decent salary of about 90,000 dollars a year. When a basic income proposal is passed, his income increases to 114,000. John decides that instead of buying a fancy new car or going on a shopping spree with his wife, that he will invest the money and save some for retirement.

Second Situation: Paul Smith is a construction worker who has been in and out of work. He makes enough to get by, about 45,000 dollars a year. When a basic income proposal is passed his income increases to 69,000 dollars a year. Paul decides that instead of saving that extra he would rather go to the bar and party. He also decides that a fancy new car is in order.

Obviously, people of all incomes will do different things with their basic income. I don’t think its necessary wrong to go out and spend all your basic income on cars and drinks at the bar. I think its fiscally irresponsible and maybe immature. However, it still stimulating the economy. I believe the greatest asset of a basic income is that it allows people the freedom to do whatever they want. It allows you the freedom to quit a job you don’t like without losing all your income. Let’s face it 24,000 dollars isn’t a lot but its better than nothing. It may increase productivity because people would spend time searching or improving themselves for the jobs they want to do. Just imagine as a parent, if you that extra 24 thousand you can afford to pay for your kids college education. Of course, many will argue “it doesn’t close the wealth gap”. You are right, but the point is not to close that gap. The closure of the wealth gap is not really possible, sorry to break it to you.

My conclusion is that basic income may be a better alternative to socialism. Basic income is almost definitely better than our current welfare system. If you think our current system is unfair, then here you go, there is nothing more fair then everybody getting a piece. Now is basic income a realistic political idea in America? That I can’t tell you. However, I can tell you that basic income is a form of a welfare that could replace the costly and expensive welfare system currently in place without restraining our economy. I am also sure that if income is weighed right by inflation and standard of living, then it could save us billions in welfare each month, trillions a year. Our national debt isn’t getting any smaller.

I know I didn’t talk about how taxes would be effected. I would assume it would come with a small flat tax or more likely be added to your income tax. I think because of freeloaders you would have to tax it, otherwise you have many taxpayers disappearing off the tax roll.

Thank you for reading! Let me know what you think!

Economic Intelligence: Politicans Lack it

Its occurred to me on multiple occasions that politicians seem to lack any sort of intelligence in regards to economics. My last post was a heated detest of Trump’s printing money comments. I scathingly scold him for being so stupid about messing with our currency and debt. Trump’s comment literally make me think that candidates running for President think that money grows on trees. In some magical way their tax plans and spending outlays will work out in some kind of utopian dream. Let’s be honest though, its not just Trump, its Bernie Sanders, Hillary Clinton, even recently dropped out Ted Cruz and John Kaisch. I think for me, the biggest weight of decision on who to vote for is through economic policy.

As I usually do, I want to pose a question then slowly answer using historical and modern references. This time instead of posing any real question I just want to review a little historical background on who made our economy because its the subject this great biography on Alexander Hamilton. Then I want to review why the policies of both democrats and republicans alike are misguided. I may also dive into the problems with our economic system. The best starting point on a such a broad topic is to actually narrow it. More specifically, I want to discuss the taxation throughout American history. Then I want to get into the federal budget and debt.

On the subject of taxation, there is famous saying from the Revolutionary War that was a common rallying cry for independence from Great Britain. You may even remember this saying from middle school history: No Taxation without Representation!  The British heavily taxed the colonies to pay for their ever-growing debt. The monarch, King George III had many foreign wars and colonies to protect. As a result, high taxes were levied on the American colonies. The problem was that colonists had no representation in the British constitutional monarchy. When the colonist tried to gain influence and resisted the taxes, the British responded with even harsher taxes. In a simplified version, this lead to the Revolution and ended with the American colonist winning the war.

After the war, the issues of taxes came up again. The main proponent of America’s future financial stability was Alexander Hamilton, first secretary of Treasury. Hamilton wrote and pushed through many of today’s financial laws in government. Hamilton was able to establish excellent credit through the payment of debts. He was able to consolidate state debt and federal debt because each state held its own debt before the constitution was created. In order to make sure that the federal power came before the state’s power, Hamilton pushed for the consolidation. Hamilton also created bonds to help pay for the war debt. The main form of income in the early 1790s was import duties. Hamilton revamped the customs, invented the coast guard and cut down on the smuggling. (Smuggling was popular during the Revolution against the British.)

As the United States grew bigger its need for government revenue increased. Obviously this meant an tax on actual citizens. While Hamilton was still alive there was no such support for an income or land tax. Part of the reason that many rich landowners were against it, the same ones that were also in government. It was not until the Civil War that an actual income tax was passed.  The government also tried varies taxes on goods like alcohols. This only resulted in rebellions. These measures were never popular. Of course as we progress to the early 20th century we can see that taxes increase by each decade. One of main sources of income by the federal government was through bonds especially during the World Wars. If you don’t know how bonds work then its basically a government backed loan. You pay 100 dollars for a bond slip. In a certain period of time your able to cash it in with an interest rate.

In modern times, by this I mean post WW2, taxes are generally considered to be fairly certain like death. Taxes have always fluctuated, such as during the 1950s into the late 1960s with the Vietnam War saw taxes go high. Then in the 1980s, Ronald Reagan cut taxes and the trend of lower taxes continue up until about the early 2000s. Of course, our tax code is very complicated due to politicians messing with it. Many former presidential  candidates wanted to scrap this tax code. I feel like I’m beating a dead horse because I have talked about tax plans numerous times. To save my word count, I will just generally say that all three current candidates tax plans are either very wrong or very misguided or both. (scroll through my blog to find their tax plans)

Alexander Hamilton did a ton of good for America’s financial system. He also held the opinion that being in debt was a good thing. I honestly think that if he knew that we have accumulated 20 trillion dollars in debt, he would roll in his grave. America has always been in and out of debt through our history. You can typically identify times of debt with wars. I have also noticed that following a war, the debt will vanish due to economic dominance. The best example is probably World War 2. The post-war period saw America as the world’s number one creditor and business leader. This is mainly due to the fact that most of Europe and Asia had been destroyed. I believe that and many economists believe that our debt is way too big. It will nearly impossible to pay it off. Not to mention that people like Donald Trump and Bernie Sanders want to wreck havoc with insane policies like printing money and spending as much as 10 trillion!

***

So your probably wondering where exactly I’m going with all this history and modern references. (to the bank, of course!) First, I think that Economic Intelligence is more than just an understanding of economics. Economic Intelligence is knowing when your policy is working or not working. Its knowing that printing money will surly ruin us, DONALD TRUMP! Economic Intelligence is being smart about money, its being similar to Alexander Hamilton. I’m not saying that Hamilton is the end all–be all, but his wisdom on economics has endured over 200 years. The fact is that I could take any of the three clowns running for president and poke holes in their economic and tax plans. The problem is that really don’t understand how economics works. Repentantly, they haven’t been paying attention because the last 75 years have shown that their methods won’t work.

For example, Hillary and Bernie plans to raise minimum wage and use a democratic socialism platform has been tried before by countries of similar or larger size. Let’s take Russia for example under the Bolsheviks, Lenin, Stalin. All these communism leaders installed a socialist economic system or state run economy. The Russians faced problems of shortages, starvation and to add insult to injury, genocide. In a similar fashion to what Sanders wants to do, Stalin also wanted to take down the rich people. Guess what happened, he certain took them out by killing them. State run economies just don’t work. You need capitalism because the market should decide. I think economically speaking, I would rather have some poor and disadvantaged over having many poor and disadvantaged.

Unfortunately, economics dictates that re-distribution through unnatural means leads to more distress and poor. In addition, the biggest and most irritating issue that of spending and debt. I would love to understand how printing money won’t lead to disaster. Also how will spending MONEY decrease our debt that was created by SPENDING money? In conclusion, I want to underline the point that economic intelligence is necessary in a good presidential candidate. History has shown us both good and bad ways to make an nation economically viable. We need to choose carefully otherwise face consequences not unlike economic unintelligent nations before us.

Thanks for reading! Sorry it was so long!