Economics of Taxes

One aspect of universal healthcare that few people want to talk about is the cost. How will the government pay for this coverage? That is something that should be central to any public discourse in universal healthcare(UHC). The government is already spending more then tax revenues provide for. On top of that people want to pile on what would be the costliest entitlement program in the history of the United States. Obama is one of the biggest proponents of UHC. He says that he will pay for it by rolling back the tax cuts that President Bush put in place for the wealthiest classes. He also says that he will increase taxes on capital gains, dividends and estate taxes famously called death taxes. Since these ideas seem to be very popular as a means of providing UHC I thought that it would be a good idea to get out there some reasoning as to why this is economically bad advise.



One of the most basic tools for measuring economic growth is called GDP. This is the Gross Domestic Product. It is the sum of all income earned in the US. It is also the sum of all output in the US. Either way it gives us a hard number for how much business is going on. Anyone who has taken a basic macroeconomics class should remember that there is a formula used to figure the GDP. It is GDP=C+I+G+(X-M) where C=consumption, I=investment, G=government spending and X-M=exports - imports. There are 2 key factors that need to be looked at when discussing taxes. Consumption is the money that we as a populace and also firms spend on stuff. Food, materials, cars and all that jazz. When taxes are added to the equation then C=Income(1-tax rate). This is important. If taxes are 0 then C=Income(1-0) which equals Income. If taxes are 50% then C=Income (1-.5) which means that consumption is half of income. So the more taxes increase the less consumers have to spend. It is important to note that consumption is around 70% if GDP. When consumption goes down then less money is spent by consumers. This lowers profits for firms trying to sell to these consumers. As profits go down firms lower production and often start reducing employment. This leads to lower or even negative growth in GDP. This is not just the crackpot ideas of some neocons. This economics 101. If you look at many of the European economies with these higher taxes you will also see that they have higher unemployment and lower GDP growth. Interestingly, if you look back in history you will usually see that tax cuts eventually lead to higher GDP which will usually lead to higher tax revenue for the government. So if the government wants more money then they should boost domestic growth as much as possible by returning as much money as they can to consumers and then allowing the following economic growth to increase their revenues. There is a tipping point in this idea of tax cuts equals increased revenues. However, we have not reached that point yet. That should be our goal.

A conservative idea on health care.

I know that it has been a long time since my last posting. I have been very busy and I have had trouble finding the time or energy to do this. The other day I was having a discussion with a friend about healthcare and I felt it was time to dust off my keyboard. He was very liberal on the idea and of course I am very conservative. We had some interesting discussions on the topic but there was one thing that kept coming up from his arguements. Since I am very much a pro market person and since profits drive the markets then I am only thinking about the money and ignoring the moral problem. It then occured to me that the conservative point of view on healthcare is often protrayed as being selfish, greedy and a kind of survival of the richest. I think that there is a gross misunderstanding on conservatives on this issue. So felt that I should speak out about this.

I think that the first thing that I should say about that I am very religious. As such I very much beleive in mercy, sacrifice and charity. That being said I also think that charity is something that should only be given to those that need it. Most conservatives are monotheistic. Meaning that they beleive in God. As such they also beleive in charity. With that being said I think that I can safely say that it is a strong conservative belief that there should be a safety net as far as healthcare goes, for those that find themselves in a position where they cannot afford to pay for it. I think that there is nothing wrong with the government providing this safety net. It is a worthy use of our tax dollars. Unfortunately, the idea that some cannot afford any coverage has given rise to the idea that the government should provide healthcare for everyone. This is where I disagree with liberal views. The idea that some need help is a poor excuse for the government to step in and take control of the entire market. There are a lot of people that are happy with there coverage even if it has gotten more expensive and they would be deprived of that coverage in favor of a one size fits all attempt by the government to cover everyone.



Why would it be wrong for the government to provide for free something that everyone wants or needs you ask. There are many reasons. The first one that I want to go over today is the one that is most compelling for me. I do not want to be taken care of. I am not an invalid. I have a good job. I do not need or want the governments help in taking care of myself or my family. The American Spirit is one of freedom and independence. Not just independence from foreign governments but independence from our own government. The more power we give to the government to take care of us the more dependent we become and I beleive the weaker we become as a people. That is my primary gut reaction to universal healthcare. I will concede some things to the governments control; military and national defense, public works for local governments, things like that. My health and the health of my family is something that I want to have full control over though.



At a later time I will go over other more economical reasons why I think that unversal healthcare is wrong for us. At this time I just wanted to get across the idea that conservatives do beleive in helping those that need it. We have no problem with government help at that point. However, if you can take care of it yourself you should.

Real republicans

All I hear about in the news concerning the Republicans is that the country is tired of them and so they are starting to turn to the Dems. Yet it doesn't seem to me that we have had any real Republicans in control of congress. I am one of the many dissatisfied Republicans that I am always hearing about. However, there is no way that I am going to vote for a Dem. What I want to see are some hard core conservative Republicans that will fight hard for what we believe is right. I don't want to hear any more talk of being a centrist or of "working" with the other side. If the Dems accuse the Republicans of being partisan then they are finally doing their job. A real conservative Republican will fight hard to stop the abuse of the taxes that are being taken from us and squandered on pork projects. Real Republicans will fight to have taxes reduced so that the government is not a burden on the people. When congress is trying to figure out how to increase their revenue then I know that they are not working in my best interest. It is the job of the government to try to fix the budget so as not to increase the deficit. It is not my job to pay for the petty, and I mean petty in the worst way possible, pork projects that have nothing to do with me or even the nation as a whole. The day a congressional candidate gets up and says that he/she will bring back less federal tax dollars for my town is the day he/she gets my vote. I call out to all Republican candidates. Please stand up and fight for what true Republicans beleive and not what the Dems agree to let use have. We are not beggars asking for a piece of crust. We need to be warriors willing to fight and destroy all who stand in our way. If you are not willing to fight then stick the binky back in your mouth and sit down because you are not man/woman enough for me. This kind of person will have a rough time of it. The Dems in DC are ruthless. So is the media for that matter. Anyone who stands up to fight the establishment in DC will be targeted. They will be scandalized and belittled. They will be made to be horrible villians in some Marvel comic book. I think that is a good thing. We need to do away with the idea of being civil with the liberals. Besides, if they hate you then you know you are doing something right. So I say to all Republican politicians, "Man/woman up!" If they would just stand up for us then I think there would be a lot fewer dissatisfied Republicans.

What do you think?

I don't know if you know who John Stossel is. He co hosts 20/20 and he writes a lot of opinion articles that can be found on line. In many ways he is my hero in the media because he is one of the few people who actually seems to know what he is talking about. He understands how other reporters misuse economic and statistical information to create a story out of thin air. An example would be the "record high" gas prices this last year. Most of the media was talking about how prices have never been this high. Well they were wrong and Stossel was the only one to point out that after you adjust for inflation the gas prices were not as high as the were in the late 70's early 80's. Well I read another article of his that makes me think about the right to vote. He refers to a book"The Myth of the Rational Voter: Why Democracies Choose Bad Policies" by economist Bryan Caplan at George Mason University. In his book Caplan talks about voters who vote according to irrational biases. Now I am always telling my wife that nothing is irrational to the person who is doing it. However, Caplan does have a good point. Too many people think and vote with there emotions and not with an understanding of how economics really works. An example would be the idea that we have to protect American jobs by making it illegal for US companies to outsource. That sounds nice and compassionate. However, if you look at how the economy works all that does is make it harder for US companies to compete with foreign companies and if you don't allow foreign companies to sell in the US then prices will go up. People will buy less, companies will make less and people will lose there jobs. The question I have is what can we do to lessen the impact of economically ignorant voters. Caplan had some ideas but even he admits that they will never come to pass. The only thing I can think of is to educate people but the media usually only shows the liberal aspect of economics and that is the side that feels good but can end up being disastrous. See the Soviet Union as an example. So what can we do?

That didn't work so well.

Well so much for my daily updates on my weekly topic. I think it has been 2 weeks since I did that original post and I am just now writing another one. So I am now just going to write whenever and whatever I feel like. Like my cool bike wreck. For those of you who don't know we sold our 2nd car last December so that I could buy a bike. I figured it would be cheaper in gas money if I rode my bike to school my last semester. Just to clarify I am talking about a bicycle, not a motorcycle. My wife does not think that a motorcycle is safe enough for commuting. Since my Father-in-law likes mountain biking I got a Trek mountain bike. Well about 10 days ago he wanted to take me on a new trail that he found. I thought this would be fun. It was beautiful. The trail is longer and more interesting that the one at Cedar Hills where we use to go. Well I was chugging along really enjoying the trail when I came to a bridge. The bridge was about 30" wide which is usually not a big deal. Well, as I was getting to the end of the bridge I had gotten too close to the edge. When I tried to pull away I lost my balance a little and my front tire went right off the side of the bridge. Since it had been raining a lot my front tire fell right into the mud where it stuck. The rest of me went right over my handle bars. Have you ever seen someone fall in the movies and they just roll and come right up. Well that is exactly what I did. I managed a perfect movie roll and stand. It was only marred by a few bushes that I had to roll over. Fortunately there was no cactus on that part of the trail. A tree would have been bad too now that I think about it. I probably would have broken a few ribs if there had been a tree there. Anyway, it was really cool. I don't know why my wife makes a big deal about mike biking. It is not like it was dangerous. I mean I didn't have any scars like some of the other people who were there. It's all cool.

Proud Husband

Have you ever had your spouse do something that just makes your buttons pop out with pride? Today my wife posted on her blog a bit talking about the silliness of the environmental movement. I don't want you to think that I had that much to do with it. My wife has always agreed with me on this subject. However, I have read a lot of articles in my days and she writes better then a lot of columnist that I have seen. Her article really pinpointed the hypocrisy of the environmentalist. I especially enjoyed the bit about eating beef to save the planet. Being a steak lover I will be more than willing to help out in that aspect.

I have been reading all week about the poor results of Al Gores little rock concert for the environment. It does not surprise me that much that the turnout was that low. The environmentalists like to say that the majority of the population agrees with the idea of global warming. While that may be true in a general way I think that the majority of the population also believes that it is either not a big deal or that there is little that we can do about it. That is why the government needs federal groups like the EPA and the courts to advance environmental ideas. Congress can't pass any real legislation because the results would have a negative impact on their constituents. No one in congress is going to do something that will get them voted out of office. Environmentalists are working hard to convince everyone that they are in immediate danger and that we drastically need to change our lifestyle. I disagree. So this week I am declaring save the earth week. Not save the earth from pollution or greedy corporations. Save the earth from disinformation and fear mongering. Each day I will post something I think is being ignored or distorted. I hope you enjoy. If you don't I am sorry. Either way I would enjoy reading any comments from either side of the issue.

No I am not Asian. My wife started calling me eggroll when we first got married because she thinks I have so many good qualities all rolled up into one person. Thats me with the sharp eyes shining with intelligence. You know, the guy in the black shirt. I am not sure what to do with this blog yet. I figured that since my wife had one I should too. Only time will tell if this was a good idea. Welcome to the insanity that is my mind.