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What It Means to Be American

Posted by Tony Listi on April 20, 2008

In discussing the issue of illegal immigration with a liberal friend of mine, a very interesting and important question was posed to me: what is your definition of “American”?

True conservatives recognize that America is more an idea, a creed, than anything else. For practical purposes, America is also a place, a distinct area of territory. But even those who live within its physical boundaries as legally recognized citizens may be less American, in a sense, than those outside its borders who share the American creed. America is more than a place or a government certification of citizenship.

Thus, subscribing to a specific set of beliefs is what makes an American at the deepest level. What are these beliefs? They are embodied in the Declaration of Independence and the Constitution, as originally intended and interpreted by the Founding Fathers who framed these documents (and their Christian roots). And because conservatism, by definition, seeks to preserve the principles of America’s founding, the American creed is the conservative creed.

One of the most important of these beliefs is the rule of law (yes, even immigration laws). Two other important beliefs are the right to the fruits of one’s labor and to minimal taxation used only for public interests that cannot be satisfied any other way (both of which go together). Therefore, certain government run services and wealth redistribution, which illegal immigrants often take advantage of, are not American in a very profound sense. Another important tenet of the American credo is suspicion of government and government interference. The corollary and logical outgrowth of this is a belief in very limited government. And the logical implication of that is a belief in freedom, including the free market.

Therefore, those immigrants, legal and illegal, who do not accept this creed are a threat to America. This is why the English language must be preserved, assimilation must be a top priority, and multiculturalism should be opposed.

Of course, the implications of my definition of “American,” automatically implies that liberals are in some sense un-American because they do not hold to this creed as it has been written and passed down through the generations. They are opposed to limited government, the free market, etc. And they have already hurt America because of the semi-welfare state that they have created over the past century or so. Therefore, one might say that liberals’ un-American activities (creating the welfare state and insisting on multiculturalism) are really at the heart of what is wrong with the situation of illegal immigration. If government were more limited, illegal immigrants would not be able strain and/or drain public treasuries. If government were more limited, then government employees would be less able to socially engineer the country away from its roots.

Posted in American Culture, American History, Economics, Government and Politics, Illegal Immigration, Intellectual History, Liberalism, Political Philosophy, The Constitution, Written by Me | Tagged: , , , , , , , , , , , , , , , , , | 4 Comments »

“What causes poverty?” is the Wrong Question!

Posted by Tony Listi on April 10, 2008

Watch http://www.isi.org/lectures/lectures.aspx?SBy=search&SSub=title&SFor=poverty

“What causes poverty?” is the wrong question! The real, more useful question we should be asking ourselves is “What causes wealth?” If half the world lives on less than $2 a day, we should naturally ask “What happened to the other half?” From these better questions, we can seek solutions rather than people to blame.

The question “What causes poverty?” seems to imply that wealth is the status quo and poverty is somehow a deviation from that norm. But even a cursory look at history shows this to be a ridiculous premise. History is not the story of how some people become poor but how some people escaped from poverty, the real human norm, and thus became wealthy. I think this a crucial difference of paradigm between the liberal/socialist/communist/Marxist perspective and the conservative/libertarian perspective.

So what causes wealth? Capitalism; free, competitive, and international markets. But that is not all and maybe not even the most important element. Capitalism cannot exist without certain supporting institutions (governmental, financial, social, religious, etc.) and cultural norms that have developed in the West.

Posted in Africa, American Culture, Economics, Foreign Aid, Free Trade, Government and Politics, Liberalism, Moral Philosophy, Political Philosophy, Poverty, Socialism, Written by Me | Tagged: , , , , , , , , , | Leave a Comment »

The Government-Created Subprime Mortgage Meltdown

Posted by Tony Listi on April 6, 2008

Just like the government caused the Great Depression. When will people learn that government interference causes the greatest economic instability and dislocations??

http://www.lewrockwell.com/dilorenzo/dilorenzo125.html

By Thomas J. DiLorenzo

September 6, 2007

The thousands of mortgage defaults and foreclosures in the “subprime” housing market (i.e., mortgage holders with poor credit ratings) is the direct result of thirty years of government policy that has forced banks to make bad loans to un-creditworthy borrowers. The policy in question is the 1977 Community Reinvestment Act (CRA), which compels banks to make loans to low-income borrowers and in what the supporters of the Act call “communities of color” that they might not otherwise make based on purely economic criteria.

The original lobbyists for the CRA were the hardcore leftists who supported the Carter administration and were often rewarded for their support with government grants and programs like the CRA that they benefited from. These included various “neighborhood organizations,” as they like to call themselves, such as “ACORN” (Association of Community Organizations for Reform Now). These organizations claim that over $1 trillion in CRA loans have been made, although no one seems to know the magnitude with much certainty. A U.S. Senate Banking Committee staffer told me about ten years ago that at least $100 billion in such loans had been made in the first twenty years of the Act.

So-called “community groups” like ACORN benefit themselves from the CRA through a process that sounds like legalized extortion. The CRA is enforced by four federal government bureaucracies: the Fed, the Comptroller of the Currency, the Office of Thrift Supervision, and the Federal Deposit Insurance Corporation. The law is set up so that any bank merger, branch expansion, or new branch creation can be postponed or prohibited by any of these four bureaucracies if a CRA “protest” is issued by a “community group.” This can cost banks great sums of money, and the “community groups” understand this perfectly well. It is their leverage. They use this leverage to get the banks to give them millions of dollars as well as promising to make a certain amount of bad loans in their communities.

A man named Bruce Marks became quite notorious during the last decade for pressuring banks to earmark literally billions of dollars to his organization, the “Neighborhood Assistance Corporation of America.” He once boasted to the New York Times that he had “won” loan commitments totaling $3.8 billion from Bank of America, First Union Corporation, and the Fleet Financial Group. And that is just one “community group” operating in one city – Boston.

Banks have been placed in a Catch 22 situation by the CRA: If they comply, they know they will have to suffer from more loan defaults. If they don’t comply, they face financial penalties and, worse yet, their business plans for mergers, branch expansions, etc. can be blocked by CRA protesters, which can cost a large corporation like Bank of America billions of dollars. Like most businesses, they have largely buckled under and have surrendered to their bureaucratic masters.

Consequently, banks in every community in America have been forced to hold a portfolio of bad loans, euphemistically referred to as “subprime” loans. In order to compensate themselves for the added risk of extending these loans, many lenders have increased the lending fees associated with mortgage loans. This is simply an indirect way of doing what banks always do – and what they must do to remain solvent: charging effectively higher rates of interest on riskier loans.

But this is discriminatory!, complained the “community organizations.” Thus, if one browses the ACORN web site, one can read of their boasts of having “predatory lending laws” passed in numerous states which outlaw such fees, prohibiting banks from protecting themselves from the added risk involved in making forced loans to “subprime” borrowers.

These are price control laws, and price controls always cause shortages. Normally, banks would respond to such laws by extending fewer riskier loans. But in this case the banks are forced to continue making the marginal loans by their bureaucratic masters at the Fed and the other three federal bureaucracies mentioned above. So-called predatory lending laws therefore force the banks to “eat” the losses. This is undoubtedly a contributing factor to the bankruptcy of dozens of mortgage lenders over the past year.

Then of course there is the issue of the Fed’s monetary policy having created the housing bubble, characterized by a spectacular escalation of real estate values in every American city over the past decade or so. This created a further problem for the financial institutions that are victimized by the CRA. They are forced to make a certain amount of bad loans, but because of the Fed-created explosion in housing prices, many thousands of subprime borrowers no longer qualified, by a long stretch, for conventional mortgages based on their incomes.

The only way these borrowers could qualify for their mortgage loans (even ignoring their bad credit ratings) was to take out adjustable rate mortgages, some of which had astonishingly low first-year rates in the 3 percent range, and sometimes lower. This is what has largely fueled the subprime mortgage meltdown – the inability of thousands of subprime borrowers to afford their mortgages now that their rates have adjusted upward. Thus, the combination of the Fed’s enforcement of the CRA (with the help of political pressure groups like ACORN) and its post 9/11 monetary policy in general are the reasons for the bursting real estate bubble and the “subprime” mortgage meltdown.

Don’t expect to read about this in the “mainstream media,” however, which generally views groups like ACORN as heroic champions of the poor, laws like the CRA as anti-discrimination laws, and places all of the blame for the subprime mortgage meltdown on greedy capitalists, especially mortgage brokers. Encouraged by such reporting, the odious Senator Charles Schumer of New York has promised federal legislation that will reign in these miscreants, while the Bush administration is proposing an indirect bank bailout by having the Federal Housing Administration cover many of the bad “subprime” loans. This will create what economists call a “moral hazard” by encouraging even more bad loans to be extended in the future. Every banker in America will be glad to extend loans (at high rates of interest) to the most uncreditworthy borrowers if he thinks there is no possibility of default with the FHA effectively guaranteeing the loan.

Thomas J. DiLorenzo [send him mail] professor of economics at Loyola College in Maryland and the author of The Real Lincoln: A New Look at Abraham Lincoln, His Agenda, and an Unnecessary War, (Three Rivers Press/Random House). His latest book is Lincoln Unmasked: What You’re Not Supposed To Know about Dishonest Abe (Crown Forum/Random House).

Copyright © 2007 LewRockwell.com

Posted in American History, Economics, Government and Politics | Tagged: , , , , , , , , , , | 2 Comments »

How Catholicism Created Capitalism

Posted by Tony Listi on March 31, 2008

http://www.acton.org/publications/randl/rl_article_344.php

How Christianity Created Capitalism

By Michael Novak

Capitalism, it is usually assumed, flowered around the same time as the Enlightenment–the eighteenth century–and, like the Enlightenment, entailed a diminution of organized religion. In fact, the Catholic Church of the Middle Ages was the main locus for the first flowerings of capitalism. Max Weber located the origin of capitalism in modern Protestant cities, but today’s historians find capitalism much earlier than that in rural areas, where monasteries, especially those of the Cistercians, began to rationalize economic life.

It was the church more than any other agency, writes historian Randall Collins, that put in place what Weber called the preconditions of capitalism: the rule of law and a bureaucracy for resolving disputes rationally; a specialized and mobile labor force; the institutional permanence that allows for transgenerational investment and sustained intellectual and physical efforts, together with the accumulation of long-term capital; and a zest for discovery, enterprise, wealth creation, and new undertakings.

The Protestant Ethic without Protestantism

The people of the high Middle Ages (1100—1300) were agog with wonder at great mechanical clocks, new forms of gears for windmills and water mills, improvements in wagons and carts, shoulder harnesses for beasts of burden, the ocean-going ship rudder, eyeglasses and magnifying glasses, iron smelting and ironwork, stone cutting, and new architectural principles. So many new types of machines were invented and put to use by 1300 that historian Jean Gimpel wrote a book in 1976 called The Industrial Revolution of the Middle Ages.

Without the growth of capitalism, however, such technological discoveries would have been idle novelties. They would seldom have been put in the hands of ordinary human beings through swift and easy exchange. They would not have been studied and rapidly copied and improved by eager competitors. All this was made possible by freedom for enterprise, markets, and competition–and that, in turn, was provided by the Catholic Church.

The church owned nearly a third of all the land of Europe. To administer those vast holdings, it established a continent-wide system of canon law that tied together multiple jurisdictions of empire, nation, barony, bishopric, religious order, chartered city, guild, confraternity, merchants, entrepreneurs, traders, et cetera. It also provided local and regional administrative bureaucracies of arbitrators, jurists, negotiators, and judges, along with an international language, “canon law Latin.”

Even the new emphasis on clerical celibacy played an important capitalist role. Its clean separation between office and person in the church broke the traditional tie between family and property that had been fostered by feudalism and its carefully plotted marriages. It also provided Europe with an extraordinarily highly motivated, literate, specialized, and mobile labor force.

The Cistercians, who eschewed the aristocratic and sedentary ways of the Benedictines and, consequently, broke farther away from feudalism, became famous as entrepreneurs. They mastered rational cost accounting, plowed all profits back into new ventures, and moved capital around from one venue to another, cutting losses where necessary, and pursuing new opportunities when feasible. They dominated iron production in central France and wool production (for export) in England. They were cheerful and energetic. “They had,” Collins writes, “the Protestant ethic without Protestantism.”

Being few in number, the Cistercians needed labor-saving devices. They were a great spur to technological development. Their monasteries “were the most economically effective units that had ever existed in Europe, and perhaps in the world, before that time,” Gimpel writes.

Thus, the high medieval church provided the conditions for F. A. Hayek’s famous “spontaneous order” of the market to emerge. This cannot happen in lawless and chaotic times; in order to function, capitalism requires rules that allow for predictable economic activity. Under such rules, if France needs wool, prosperity can accrue to the English sheepherder who first increases his flock, systematizes his fleecers and combers, and improves the efficiency of his shipments.

In his 1991 Encyclical Letter Centesimus Annus, Pope John Paul II points out that the main cause of the wealth of nations is knowledge, science, know-how, discovery–in today’s jargon, “human capital.” Literacy and study were the main engines of such medieval monasteries; human capital, moral and intellectual, was their primary economic advantage.

The pope also praises the modern corporation for developing within itself a model of relating the gifts of the individual to the common tasks of the firm. This ideal, too, we owe to the high medieval religious orders, not only the Benedictines and the Cistercians, but the Dominicans and Franciscans of the early thirteenth century.

Jump-Starting a Millennium of Progress

The new code of canon law at the time took care to enshrine as a legal principle that such communities, like cathedral chapters and monasteries before them, could act as legal individuals. As Collins points out, Pope Innocent IV thereby won the sobriquet “father of the modern learning of corporations.” In defending the rights of the new Franciscan and the Dominican communities against the secular clergy and lay professors at the University of Paris, Thomas Aquinas wrote one of the first defenses of the role of free associations in “civil society” and the inherent right of people to form corporations.

The Catholic Church’s role helped jump-start a millennium of impressive economic progress. In ad 1000, there were barely two hundred million people in the world, most of whom were living in desperate poverty, under various tyrannies, and subject to the unchecked ravages of disease and much civic disorder. Economic development has made possible the sustenance now of more than six billion people–at a vastly higher level than one thousand years ago, and with an average lifespan almost three times as long.

No other part of the world outside Europe (and its overseas offspring) has achieved so powerful and so sustained an economic performance, raised up so many of the poor into the middle class, inspired so many inventions, discoveries, and improvements for the easing of daily life, and brought so great a diminution of age-old plagues, diseases, and ailments.

The economic historian David Landes, who describes himself as an unbeliever, points out that the main factors in this great economic achievement of Western civilization are mainly religious:

• the joy in discovery that arises from each individual being an imago Dei called to be a creator;

• the religious value attached to hard and good manual work;

• the theological separation of the Creator from the creature, such that nature is subordinated to man, not surrounded with taboos;

• the Jewish and Christian sense of linear, not cyclical, time and, therefore, of progress; and

• respect for the market.

Capitalism Infused with Caritas

As the world enters the third millennium, we may hope that the church, after some generations of loss of nerve, rediscovers its old confidence in the economic order. Few things would help more in raising up all the world’s poor out of poverty. The church could lead the way in setting forth a religious and moral vision worthy of a global world, in which all live under a universally recognizable rule of law, and every individual’s gifts are nourished for the good of all.

I believe this is what the pope has in mind when he speaks of a “civilization of love.” Capitalism must infused by that humble gift of love called caritas, described by Dante as “the Love that moves the Sun and all the stars.” This is the love that holds families, associations, and nations together. The current tendency of many to base the spirit of capitalism on sheer materialism is a certain road to economic decline. Honesty, trust, teamwork, and respect for the law are gifts of the spirit. They cannot be bought.

Posted in Catholicism, Catholicism vs. Protestantism, Christianity and Politics, Economics, Government and Politics, Intellectual History, Political Philosophy, Politics and Religion, Religion and Theology | Tagged: , , , , , , , , , , , , , , , , , , | Leave a Comment »

Industrial Revolution Was Good for Common Worker

Posted by Tony Listi on March 31, 2008

http://www.econlib.org/Library/Enc/IndustrialRevolutionandtheStandardofLiving.html

Industrial Revolution and the Standard of Living
By Clark Nardinelli

Between 1760 and 1860, technological progress, education, and an increasing capital stock transformed England into the workshop of the world. The industrial revolution, as the transformation came to be called, caused a sustained rise in real income per person in England and, as its effects spread, the rest of the Western world. Historians agree that the industrial revolution was one of the most important events in history, marking the rapid transition to the modern age, but they disagree vehemently about various aspects of the event. Of all the disagreements, the oldest one is over how the industrial revolution affected ordinary people, usually called the working classes. One group, the pessimists, argues that the living standards of ordinary people fell. Another group, the optimists, believes that living standards rose.

The debate over living standards is important because it represents a place where the critics and defenders of capitalism meet head-on. It is no coincidence that the debate heated up during the Cold War. The pessimists wanted to show that the English industrial revolution, which took place within a capitalist economy, necessarily made working people worse off. Optimists defended capitalism by showing that the industrial revolution made everyone better off.

This disagreement over the standard of living is confined almost entirely to academicians. Most other people, if they think about it at all, consider it well established that the industrial revolution was a disaster for the working classes. Indeed, the ghastly images of Dickens’s Coketown or Blake’s “dark, satanic mills” dominate popular perceptions of what life was like during the early years of English industrialization. Economic historians, however, have gone beyond popular perceptions to try to find out what really happened to ordinary people.

First, we must consider what “standard of living” means. Economic historians would like it to mean happiness. But the impossibility of measuring happiness forces them to equate the standard of living with real income. Real income is money income adjusted for the cost of living and for the effects of things such as health, unemployment, pollution, the condition of women and children, urban crowding, and amount of leisure time.

Because a rise in real income was precisely what made England’s transformation “revolutionary,” it would seem that, by definition, the industrial revolution led to a rise in the standard of living. According to the estimates of economist N. F. R. Crafts, British income per person (in 1970 U.S. dollars) rose from $333 in 1700 to $399 in 1760, to $427 in 1800, to $498 in 1830, and then jumped to $804 in 1860. (For many centuries before the industrial revolution, in contrast, periods of falling income offset periods of rising income.) Both sides in the debate accept Crafts’s estimates. But if the distribution of income became more unequal and if pollution, unemployment, and crowding increased, the real incomes of ordinary people could have fallen despite the rise in average income.

If significant economic growth is sustained over a century or so, the only way the poor become worse off is if inequality increases dramatically. Crafts’s estimates indicate that real income per person doubled between 1760 and 1860. Therefore, the share of income going to the lowest 65 percent of the population would have had to fall by half for them to be worse off after all that growth. It didn’t. In 1760 the lowest 65 percent received about 29 percent of total income in Britain; in 1860 they got about 25 percent. So the lowest 65 percent were substantially better off. Their average real income had increased by over 70 percent.

This evidence means that the optimists have won the debate on the big issue of whether the industrial revolution helped or hurt ordinary people. It helped. But smaller debates remain. Did the working class become worse off during the early years of England’s industrialization, 1790 to 1840, when real income per person grew at only about 0.3 percent per year? Growth at such a slow rate made a deterioration in the lot of the working classes possible. A simple numerical illustration will show why. If we take 0.3 percent per year as the annual rate of growth of real income, average real income in 1840 would have been about 16 percent higher than in 1790. The share of total income going to the lowest 65 percent of the income distribution need only have fallen to 86 percent of its 1790 level to negate the benefit of rising average income. Although they do not agree on how much, most economic historians agree that the distribution of income became more unequal between 1790 and 1840. Moreover, if we add the effects of unemployment, pollution, urban crowding, child labor, and other social ills, the modest rise in average income could well have been accompanied by a fall in the standard of living of the working classes.

The modern debate over this issue, which began with a 1949 paper by T. S. Ashton, has focused on other measures of living standards, especially wages. Ashton himself used changes in the cost of living-measured by the prices of basic commodities-to conclude that real wages rose after 1820.

The debate heated up considerably during exchanges between the pessimist Eric Hobsbawm and the optimist Max Hartwell in the late 1950s and early 1960s. According to Hobsbawm, Ashton’s evidence on real wages was inconclusive. He argued that high unemployment indicated that living standards may have deteriorated before 1840. Hobsbawm stressed that evidence on consumption also implied that living standards did not rise and may have fallen between 1790 and 1840. He placed particular emphasis on these estimates of consumption, reasoning that a decline in food consumption per person indicated a decline in the standard of living. He noted that the number of beef and sheep slaughtered at various markets failed to keep pace with the growth of population before 1840.

Hartwell criticized Hobsbawm’s use of evidence. The problem with looking at the volume of beef and sheep sold at particular markets, he noted, was that new markets were appearing. Hartwell also emphasized the appearance of new, previously unavailable consumer goods after 1820, such as popular periodicals, inexpensive cotton clothing, and the exotic fruits made available by improved transportation. But Hartwell’s main point was that few theories can explain falling real wages in the face of economic growth-particularly when rising labor productivity accompanied that growth. He emphasized that it would take implausibly high increases in unemployment or inequality for living standards to fall when average income was rising.

The debate gradually receded into the background until a 1983 paper by Peter Lindert and Jeffrey Williamson brought new life to the controversy. Lindert and Williamson produced new estimates of real wages for the years 1755 to 1851. Their estimates were based on money wages for workers in several broad categories, including both blue-collar and white-collar occupations. Their cost of living index attempted to represent actual working-class budgets.

The Lindert-Williamson series produced two striking results. First, real wages grew slowly between 1781 and 1819. Second, after 1819 real wages grew rapidly for all groups of workers. For all blue-collar workers-a good stand-in for the working classes-the Lindert-Williamson index number for real wages rose from 50.19 in 1819 to 100 in 1851. That is, real wages doubled in just thirty-two years.

Lindert and Williamson’s findings were reinforced by estimates that economist Charles Feinstein made of consumption per person for each decade between the 1760s and 1850s. He found a small rise in consumption between 1760 and 1820 and a rapid rise after 1820. Other evidence that supported the hypothesis of rising real wages came from statistics on life expectancy at birth and on literacy rates. According to historians E. A. Wrigley and Roger S. Schofield’s population history of England, life expectancy at birth rose from thirty-five years to forty years between 1781 and 1851. A modest increase in literacy in the generation before 1840 also supported Lindert and Williamson.

Although the evidence favors the optimists, doubts remain. For example, pessimists have long maintained that the largely unmeasurable effects of environmental decay more than offset any gains in well-being attributable to rising wages. Wages were higher in English cities than in the countryside, but rents were higher and the quality of life was lower. What proportion of the rise in urban wages reflected compensation for worsening urban squalor rather than true increases in real incomes? Williamson-using methods developed to measure the ill effects of twentieth-century cities-found that between 8 and 30 percent of the higher urban wages could be attributed to compensation for the inferior quality of life in English cities. Yet even the 30 percent estimate was much too small to fully offset the rise in real wages before 1850.

Another criticism of Lindert and Williamson’s optimistic findings is that their results hold only for workers who earned wages. We do not know what happened to people who worked at home or were self-employed. Because the consumption per person of tea and sugar failed to rise along with real wages, Joel Mokyr has suggested that workers who were not in the Lindert-Williamson sample may have suffered sufficiently deteriorating real incomes to offset rising wage income and leave the average person no better off.

Contemporary pessimists argue that for at least some part of the industrial revolution the happiness and well-being of the lower classes was not rising much, if at all. Even if one accepts their argument, however, it is not necessary to abandon the optimists’ position. For example, the industrial revolution had a positive effect on real income, but its positive effect may well have been offset by the negative effect of frequent wars (the American Revolution, the Napoleonic wars, the War of 1812). Some economic historians include bad harvests, rapid population growth, and the costs of transforming preindustrial workers into a modern labor force as additional causes of slow growth before 1820.

So careful economic research has narrowed the debate. Whether one is an optimist or pessimist today depends on whether one believes that the sustained rise in real wages began in the 1820s or the 1840s. Virtually all participants agree that growth was slow at best before 1820 and rapid after 1840.

Posted in American Culture, American History, Economics, Government and Politics, Intellectual History, Moral Philosophy, Political Philosophy, Poverty | Tagged: , , , , , , , , , , , , , | 1 Comment »

Origin of the Spirit of Capitalism: Middle Ages Scholasticism, not Protestantism

Posted by Tony Listi on March 31, 2008

In the lecture at the link below, Samuel Gregg, Director of Research at the Acton Institute, critiques Weber’s claim that Protestantism gave rise to the spirit of capitalism. He argues that medieval scholastics actually gave rise to the ideas that would form the foundation of the spirit of capitalism.

http://www.isi.org/lectures/lectures.aspx?SBy=search&SSub=title&SFor=Commercia

Posted in Catholicism, Catholicism vs. Protestantism, Christianity and Politics, Economics, Government and Politics, Intellectual History, Moral Philosophy, Political Philosophy, Politics and Religion, Religion and Theology | Tagged: , , , , , , , , , , , , , , | Leave a Comment »

A Beer Story: Tax Cuts for the Wealthy

Posted by Tony Listi on March 21, 2008

The wealthy pay most of the taxes, so it should be no surprised that they get a larger percentage of the tax cut total back!  It is only fair. 

——

Suppose that every day, ten men go out for beer and the bill for all ten comes to $100. If they paid their bill the way we pay our taxes, it would go something like this:

The first four men (the poorest) would pay nothing.
The fifth would pay $1.
The sixth would pay $3.
The seventh would pay $7.
The eighth would pay $12.
The ninth would pay $18.
The tenth man (the richest) would pay $59.
So, that’s what they decided to do. The ten men drank in the bar every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve. ‘Since you are all such good customers, he said, ‘I’m going to reduce the cost of your daily beer by $20. Drinks for the ten now cost just $80.

The group still wanted to pay their bill the way we pay our taxes so the first four men were unaffected. They would still drink for free. But what about the other six men – the paying customers? How could they divide the $20 windfall so that everyone would get his ‘fair share?’ They realized that $20 divided by six is $3.33. But if they subtracted that from everybody’s share, then the fifth man and the sixth man would each end up being paid to drink his beer. So, the bar owner suggested that it would be fair to reduce each man’s bill by roughly the same amount, and he proceeded to work out the amounts each should pay.

And so:

The fifth man, like the first four, now paid nothing (100% savings).
The sixth now paid $2 instead of $3 (33%savings).
The seventh now pay $5 instead of $7 (28%savings).
The eighth now paid $9 instead of $12 (25% savings).
The ninth now paid $14 instead of $18 (22% savings).
The tenth now paid $49 instead of $59 (16% savings).
Each of the six was better off than before. And the first four continued to drink for free. But once outside the restaurant, the men began to compare their savings.

‘I only got a dollar out of the $20,’declared the sixth man. He pointed to the tenth man,’ but he got $10!’

‘Yeah, that’s right,’ exclaimed the fifth man. ‘I only saved a dollar, too. It’s unfair that he got ten times more than I!’

‘That’s true!!’ shouted the seventh man. ‘Why should he get $10 back when I got only two? The wealthy get all the breaks!’

‘Wait a minute,’ yelled the first four men in unison. ‘We didn’t get anything at all. The system exploits the poor!’

The nine men surrounded the tenth and beat him up.

The next night the tenth man didn’t show up for drinks, so the nine sat down and had beers without him. But when it came time to pay the bill, they discovered something important. They didn’t have enough money between all of them for even half of the bill!

And that, boys and girls, journalists and college professors, is how our tax system works. The people who pay the highest taxes get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up anymore. In fact, they might start drinking overseas where the atmosphere is somewhat friendlier.

David R. Kamerschen, Ph.D.
Professor of Economics, University of Georgia

Posted in American Culture, Budget, Spending, and Taxes, Economics, Government and Politics, Poverty | Tagged: , , , , , , , , , | 27 Comments »

Myths Christians Believe About Wealth and Poverty

Posted by Tony Listi on March 12, 2008

Please listen to http://www.acton.org/daily/nowatacton_200709051337.php

1. The Piety Fallacy: Good intentions are all that matter. Piety is no substitute for technique. Good intentions are no substitute for good consequences. God holds us accountable for our intentions, but public policy should help people regardless of the nature of intentions. God asks us to love him with all our mind too, so he holds us responsible for the manifest consequences of our actions (something apprehended by the mind). (e.g. rent control, child labor)

2. The Freeze Frame Fallacy: Assuming certain trends or demographics will always stay the same. A single point in time and place is not representative of all reality. Things change. Life is not static. (e.g. population growth)

3. The Artsy Myth: Confusing aesthetics and economics; attributing ugliness or harshness to the free market. Such aesthetic judgments may be true, but such judgments should not be made in isolation, cut-off from economic realities. But poverty is not pretty either. Beauty is expensive; don’t punish the poor just so you have something nice to look at or feel good about something. Heed Maslow’s hierarchy of needs: physical needs come before aesthetics. (e.g. corporations like Wal-Mart)

4. Zero-Sum Game Myth: If I become rich, doesn’t that make someone else poor? The wealth of the First World causes the poverty of the Third World. Economics is not like chess, checkers, sports, or war. The free market (and free trade) is a win-win game overall, not a win-lose game, though not everyone ends up on top. Our GDP goes up over time and correlates to free trade. The pie is not static; it grows.

We are created in the image and likeness of God. God is a creator and so are we! We are his co-creators, and so there is nothing evil about business or production. Rather business people imitate the creative nature of God in providing goods and services.

Q&A: 
Bill Gates of all people should know how wealth is created and yet even he doesn’t get it. Rather than making the Third World productive, he would prefer to make the Third World dependent and thus permanently vulnerable to poverty.

Is all this talk about income inequality merely a reflection of the entrenched  materialism in our culture that in turn fosters envy and jealousy of others success and wealth? Most likely. One can reduce envy by making everyone poor (a possibility) but not by making everyone rich (impossible).

People who are taxed the highest give the least to charity. Conservatives give more to charity too (http://www.arthurbrooks.net/index.html). Compassion literally means “to suffer together.” It is hard to suffer with the poor using someone else’s money.

What is the moral relevancy of a person who becomes wealthy through free exchange? None.

Posted in American Culture, Christianity and Politics, Economics, Government and Politics, Politics and Religion, Poverty | Tagged: , , , , , , , , , , | 2 Comments »

Mandated Giving Doesn’t Come from the Heart

Posted by Tony Listi on March 11, 2008

My fellow Christians, take heed!

http://www.acton.org/publications/randl/rl_174article04.php  

By Robert A. Sirico

It seems that some Biblical fallacies never go away, especially as regards redistribution and the poor. Hardly a day passes when I don’t hear some version of the following: The Gospels speak clearly on the issue of the poor. They must be cared for. Special obligation falls to the rich who have the resources to care for them. This country has programs in place that are designed to do just that. Therefore, Christians have an obligation to politically support these programs.

The problem here is the slick move from personal ethics to public policy. What is required of us as individuals may or may not translate into a civic policy priority. In the case of the welfare state, it is possible to argue that it does great good (though I would dispute that). Whether it does or does not, however, a government program effects nothing toward fulfilling the Gospel requirement that we give of our own time and income toward assisting the poor.

The reason has to do with matters of the human heart. If we are required to do anything by law, and thereby forced by public authority to undertake some action, we comply because we must. That we go along with the demand is no great credit to our sense of humanitarianism or charity. The impulse here is essentially one of fear: we know that if we fail to give, we will find ourselves on the wrong side of the state.

Remember that the government has no money, no resources, of its own. Everything it has it must take from the private sector, which is the engine of wealth creation. If we can imagine a world in which there is no private sector at all, we can know with certainty that it would be a world of bare subsistence at best: universal impoverishment.

Wealthy societies today can afford to create large welfare states while avoiding that fate. But let us never forget the funds that make it possible do not appear as if by magic. They are taken from others without their active consent except in the most abstract sense that people might vote for them.

I cannot see how this method of redistributing wealth has anything to do with the Gospel. Jesus never called on public authority to enact welfare programs. He never demanded that his followers form a political movement to tax and spend. Nor did he say that the property of the rich must always be forcibly expropriated. He called for a change in the human heart, not a change in legislation. There is a massive difference.

There are other grave dangers in confusing the welfare state with personal charitable obligation. The more people hear that the welfare state discharges their moral mandate to give, the more these programs crowd genuine charity. “I gave at the office,” becomes the attitude. This is essentially what was behind the comment by Ebenezer Scrooge in A Christmas Carol when he dismissed his need to be charitable. “Are there no poorhouses?”

There are further problems. The programs are not effective over the long term. They generate dependency and bureaucracy. They create upside-down incentives. But leaving all that aside, the core message here is that, from a moral point of view, they do not fulfill the criterion that the Gospels specify for generosity, which must come from within and cannot be imposed from the top down.

Rev. Robert A. Sirico is president of the Acton Institute for the Study of Religion and Liberty in Grand Rapids, Michigan.

Posted in American Culture, Budget, Spending, and Taxes, Christianity and Politics, Economics, Government and Politics, Moral Philosophy, Political Philosophy, Politics and Religion, Poverty, Socialism | Tagged: , , , , , , , , , | 2 Comments »

Wealth, Work, and the Church

Posted by Tony Listi on March 6, 2008

WATCH THIS VIDEO: http://www.acton.org/media/20080214_wealth_work_church.php

The Christian tradition has always held an ambivalent position toward wealth. The Bible itself seems to condemn the rich and extol the poor, though Abraham, David, and Solomon were obviously very wealthy yet godly men. Recently, the “Prosperity Gospel” promoted in some Pentecostal Churches has argued that it is God’s will that all true believers should receive material blessings and that poverty is a curse. This lecture will explore the biblical foundations of work and wealth creation in light of the history of the Church to find the proper balance between these competing ideas of the place of earthly riches in Christianity.

This is just the best presentation I’ve ever seen of what the Bible really says about wealth, the rich, and economics in general! It cites Scripture and interprets them with clarity and authority.

Posted in Christianity and Politics, Economics, Government and Politics, Moral Philosophy, Political Philosophy, Politics and Religion, Poverty, Religion and Theology | Tagged: , , , , , , , , , , , | 1 Comment »