Sex and Economics: Is Capitalism Less “Bang” for Your Buck?



Several months ago, I wrote a piece titled, “My Vagina Doesn’t Care for Your Identity Politics,” in which I discussed how the most recent presidential election played directly into the idea of identify politics—that an individual should engage in or refrain from certain activities based on a particular group to which they belong.

Alas, here I am again with another discussion of sex and economics. Vaginas (and orgasms) are once again an apparent topic for discussion.

A recent article in the New York Times discussed a study that suggested women behind the iron curtain in communist East Germany reported more sexual satisfaction (in the form of more orgasms) than their Western, capitalist counterparts. The author uses this data to suggest that communism was (is?) better for women in many ways and that this “benefit” of communism is sadly overlooked.

Some might remember that Eastern bloc women enjoyed many rights and privileges unknown in liberal democracies at the time, including major state investments in their education and training, their full incorporation into the labor force, generous maternity leave allowances and guaranteed free child care. But there’s one advantage that has received little attention: Women under Communism enjoyed more sexual pleasure.

Europe’s Lessons for Economic Growth



A bird’s-eye view of the Eurozone economies a decade after the financial crisis invites three conclusions: Governments that made unpopular free-market reforms are already reaping the fruits; families and businesses are acting more sensibly than their governments; last but not least, people have behaved much differently than the European Central Bank (ECB) intended.

The fastest growing countries are Ireland (6.6 percent), Spain (3 percent) and Portugal (2.8 percent). The first had already engaged in reform before the financial crisis, the second did so later on, and the third applied them sequentially under a right-wing government and then a left-wing coalition that included some communists! These three countries have also created the most jobs in the past three years, followed by none other than Greece, which is beginning to grow after undergoing traumatic shock therapy.

All Eurozone countries except Spain and France already comply with the fiscal rules of the union. Ireland’s state accounts are practically balanced, and Greece’s show a surplus of almost 1 percent!

In recent years, if one paid too much attention to Europe’s strident populist movements known as “indignados” (“the outraged ones”), it looked as if most Europeans had bought into third world demagoguery. But far from the fiery streets, families and businesses were patiently purging the excesses of the go-go years. Four years ago household debt amounted 97.5 percent of family income, and now the proportion is down to 93.6 percent. This is one among several areas where the United States might learn something European. In the U.S., household debt has now reached $12.73 trillion according to the Federal Reserve, surpassing the all-time record.

The Double Tax on Saving



In an earlier post I argued for expanding tax-deferred retirement accounts because they eliminate the double tax on saving that exists under the current tax system. Here is the basic idea. People earn income and pay income tax on that income. If they save it and then earn interest (or dividends, or capital gains, etc.), they will be charged income tax on income that has already been taxed, amounting to a double tax.

To see that this is the case, consider this simple example (numbers chosen to make the example easy to follow).

Assume that with no income taxes, you decide to buy a new computer which costs $1000. Further assume the interest rate is 5%. Instead of buying the computer, you could put the money in the bank and earn 5% interest, or $50 a year. With no taxes, it costs the same amount to buy a $1000 computer as to receive $50 a year in interest.

Now, assume that there is a 50% income tax. (California’s highest income tax bracket is 13.3%, so combined with the highest federal rate of 39.6%, a high-income Californian could be paying a 52.9% rate.)

Parental Choice Smear Campaign Falls Flat



Opponents of parental choice in education have been in overdrive portraying private school scholarships (and by association, those who support or use them) as racist to diminish their popularity. Results from a new national poll suggest opponents’ strategy isn’t working.

According to the 11th annual Education Next  poll public support for a variety of private school choice options has increased, and it is especially strong among Black and Hispanic Americans.

Privately-funded tax-credit scholarships are the most popular private school choice option, with majorities of Americans supporting them (p. 11, question 12a), including:

  • 63% of Hispanics
  • 61% each, parents and Blacks
  • 56% of Republicans
  • 54% each, all respondents and Democrats
  • 52% Whites

A Unilateral Free Trade Policy Would Be Hugely Beneficial for Brexit Britain



My new monograph, A Trade Policy for a Brexited Britain, was published on Friday by the Institute of Economic Affairs. Here is a brief synopsis:

Adam Smith once observed that “Consumption is the sole end and purpose of all production; and the interest of the producer ought to be attended to only so far as it may be necessary for promoting that of the consumer. The maxim is so perfectly self-evident that it would be absurd to attempt to prove it.”

Economic activity is justified by how much it enables us to expand our consumption and one way to do that is to buy at the cheapest price.

Another way is to promote specialization in order to exploit the efficiency benefits of comparative advantage in production. To quote Smith again:

“It is the maxim of every prudent master of a family, never to attempt to make at home what it will cost him more to make than to buy. The tailor does not attempt to make his own shoes, but buys them of the shoemaker... What is prudence in the conduct of every private family, can scarce be folly in that of a great kingdom.”

He gives the example of Scotland being able to use greenhouses to produce wine at 30 times the cost of importing it.

Why would we want to produce something that we can buy more cheaply?

It follows that tariffs are self-harmful, both because they make us pay more than we need to and because they impede efficient production.

These home truths should be the drivers of UK post-Brexit trade policy. The UK should therefore promote free trade, which would lower import prices and increase productivity and wages.

The primary way to promote free trade is to eliminate all tariff and non-tariff barriers to imports. Consumers can then buy at the cheapest prices.

But wouldn’t such a policy of Unilateral Free Trade (UFT) harm our producers and employment?

In general, no.

UFT would reduce employment and wages in tariff-protected sectors, but it would reduce the costs of imports and thereby raise employment and wages in the non-protected sectors. Since over 90% of workers currently work in non-protected sectors, the impact of UFT on producers and employment would be overwhelmingly beneficial.

An objection sometimes made is that UFT would preclude the UK threatening other countries with “tit for tat” tariff policies. It is true that UFT would preclude such policies, but this is actually to be desired because tariffs are self-harm. The primary objective of trade policy should be to promote consumers’ interests, not producers’ interests. If other countries’ governments choose to harm their own people by imposing tariffs, then that is between them.

UFT should also be supplemented by efforts to reach trade agreements with major trading partners, including the EU. The purpose of these deals should be to promote free trade, but the recent record of trade agreements is not auspicious: multilateral trade deals have achieved little trade liberalization in over two decades. Recent deals such as the Transatlantic Trade and Investment Partnership do not seek to promote free trade as much as to promote regulatory harmonization and the woolly notion of “partnership.” The UK should avoid such deals and instead seek genuine free trade deals that focus on reducing trade barriers.

As for the EU, a trade deal is desirable but not essential and the UK should be ready to walk away from any bad deal offered by the EU. Contrary to common perception, the UK has little to fear from the EU imposing tariffs on exports from the UK: EU tariffs are mostly low and World Trade Organization rules prohibit the EU from imposing punitive tariffs. And as it is in the UK’s interest to maintain free trade with the EU, it is also in the EU’s own interest to maintain free trade with the UK.

Slavery and Justifications for Southern Secession in Their Own Words



With the national debate over removing monuments to confederate war heroes dominating headlines, perhaps we need a reminder of the principles and justifications for southern secession for which these men fought. The following excerpts are from the articles of secession adopted by five states, and the ordinances of secession adopted by the legislatures, conventions, and voters of the remaining states.

All the ordinances make clear that the primary motivation for secession was the rise of a “sectional party” (re: anti-slavery Republican party in the Northern States), and the perception that slavery’s abolition was imminent. Notably, for those ordinances that went to a vote, the legislation passed by overwhelming majorities of the voting public in Southern States. For the purposes here, “ordinances” are the actual resolutions passed by the legislatures and conventions to officially secede from the United States. “Articles” or “declarations” refer to the justifications for secession included in separate supporting documents.

These full text for these documents can be found at http://www.civil-war.net/pages/ordinances_secession.asp and the Civil War Trust, https://www.civilwar.org/learn/primary-sources/declaration-causes-seceding-states. Specific underlined references to slavery are highlights made the by the author.

South Carolina, articles of secession, adopted December 24, 1860.

“The ends for which the Constitution was framed are declared by itself to be “to form a more perfect union, establish justice, insure domestic tranquility, provide for the common defence, promote the general welfare, and secure the blessings of liberty to ourselves and our posterity.”

“These ends it endeavored to accomplish by a Federal Government, in which each State was recognized as an equal, and had separate control over its own institutions. The right of property in slaves was recognized by giving to free persons distinct political rights, by giving them the right to represent, and burthening them with direct taxes for three-fifths of their slaves; by authorizing the importation of slaves for twenty years; and by stipulating for the rendition of fugitives from labor.

“We affirm that these ends for which this Government was instituted have been defeated, and the Government itself has been made destructive of them by the action of the non-slaveholding States. Those States have assume the right of deciding upon the propriety of our domestic institutions; and have denied the rights of property established in fifteen of the States and recognized by the Constitution; they have denounced as sinful the institution of slavery; they have permitted open establishment among them of societies, whose avowed object is to disturb the peace and to eloign [sic] the property of the citizens of other States. They have encouraged and assisted thousands of our slaves to leave their homes; and those who remain, have been incited by emissaries, books and pictures to servile insurrection.

For twenty-five years this agitation has been steadily increasing, until it has now secured to its aid the power of the common Government.... A geographical line has been drawn across the Union, and all the States north of that line have united in the election of a man to the high office of President of the United States, whose opinions and purposes are hostile to slavery. He is to be entrusted with the administration of the common Government, because he has declared that that “Government cannot endure permanently half slave, half free,” and that the public mind must rest in the belief that slavery is in the course of ultimate extinction.

This sectional combination for the submersion of the Constitution, has been aided in some of the States by elevating to citizenship, persons who, by the supreme law of the land, are incapable of becoming citizens; and their votes have been used to inaugurate a new policy, hostile to the South, and destructive of its beliefs and safety.

 

Mississippi, Ordinance of Secession adopted January 9, 1861
Excerpt from the declaration or articles of secession

Our position is thoroughly identified with the institution of slavery – the greatest material interest of the world. Its labor supplies the product, which constitutes by far the largest and most important portions of commerce of the earth. These products are peculiar to the climate verging on the tropical regions, and by an imperious law of nature, none but the black race can bear exposure to the tropical sun. These products have become necessities of the world, and a blow at slavery is a blow at commerce and civilization. That blow has been long aimed at the institution, and was at the point of reaching its consummation. There was no choice left us but submission to the mandates of abolition, or a dissolution of the Union, whose principles had been subverted to work out our ruin.

 

Alabama, Ordinance of Secession adopted January 11 , 1861
No articles of secession available, but from the Ordinance of Secession:

“Whereas, the election of Abraham Lincoln and Hannibal Hamlin to the offices of president and vice-president of the United States of America, by a sectional party, avowedly hostile to the domestic institutions and to the peace and security of the people of the State of Alabama, preceded by many and dangerous infractions of the constitution of the United States by many of the States and people of the Northern section, is a political wrong of so insulting and menacing a character as to justify the people of the State of Alabama in the adoption of prompt and decided measures for their future peace and security, therefore:....”

 

Georgia, Ordinance of Secession adopted January 19, 1861
The Georgia Declaration (articles) of Secession presents a detailed history of the growth of the anti-slavery movement as the central justification for secession. The following is from the opening paragraph from the declaration:

“The people of Georgia having dissolved their political connection with the Government of the United States of America, present to their confederates and the world the causes which have led to the separation. For the last ten years we have had numerous and serious causes of complaint against our non-slaveholding confederate States with reference to the subject of African slavery. They have endeavored to weaken our security, to disturb our domestic peace and tranquility, and persistently refused to comply with their express constitutional obligations to us in reference to that property, and by the use of their power in the Federal Government have striven to deprive us of an equal enjoyment of the common Territories of the Republic. This hostile policy of our confederates has been pursued with every circumstance of aggravation which could arouse the passions and excite the hatred of our people, and has placed the two sections of the Union for many years past in the condition of virtual civil war.

....

“The question of slavery was the great difficulty in the way of the formation of the Constitution. While the subordination and the political and social inequality of the African race was fully conceded by all, it was plainly apparent that slavery would soon disappear from what are now the non-slave-holding States of the original thirteen. The opposition to slavery was then, as now, general in those States and the Constitution was made with direct reference to that fact. But a distinct abolition party was not formed in the United States for more than half a century after the Government went into operation. The main reason was that the North, even if united, could not control both branches of the Legislature during any portion of that time.”

 

Texas, Ordinance of Secession February 23, 1861, popular vote 46,153 in favor, 14,747 against. Excerpt from the articles of secession.

“In all the non-slave-holding States, in violation of that good faith and comity which should exist between entirely distinct nations, the people have formed themselves into a great sectional party, now strong enough in numbers to control the affairs of each of those States, based upon an unnatural feeling of hostility to these Southern States and their beneficent and patriarchal system of African slavery, proclaiming the debasing doctrine of equality of all men, irrespective of race or color – a doctrine at war with nature, in opposition to the experience of mankind, and in violation of the plainest revelations of Divine Law. They demand the abolition of negro slavery throughout the confederacy, the recognition of political equality between the white and negro races, and avow their determination to press on their crusade against us, so long as a negro slave remains in these States.

....

“We hold as undeniable truths that the governments of the various States, and of the confederacy itself, were established exclusively by the white race, for themselves and their posterity; that the African race had no agency in their establishment; that they were rightfully held and regarded as an inferior and dependent race, and in that condition only could their existence in this country be rendered beneficial or tolerable.

“That in this free government all white men are and of right ought to be entitled to equal civil and political rights; that the servitude of the African race, as existing in these States, is mutually beneficial to both bond and free, and is abundantly authorized and justified by the experience of mankind, and the revealed will of the Almighty Creator, as recognized by all Christian nations; while the destruction of the existing relations between the two races, as advocated by our sectional enemies, would bring inevitable calamities upon both and desolation upon the fifteen slave-holding states.

“By the secession of six of the slave-holding States, and the certainty that others will speedily do likewise, Texas has no alternative but to remain in an isolated connection with the North, or unite her destinies with the South.”

 

Virginia, Ordinance of Secession adopted by convention April 17, 1861; ratified by vote 131,201 to 37451 May 23, 1861. No articles of secession. Quote from the ordinance of secession:

“The people of Virginia in their ratification of the Constitution of the United States of America, adopted by them in convention on the twenty-fifth day of June, in the year of our Lord one thousand seven hundred and eighty-eight, having declared that the powers granted under said Constitution were derived from the people of the United States and might be resumed whensoever the same should be perverted to their injury and oppression, and the Federal Government having perverted said powers not only to the injury of the people of Virginia, but to the oppression of the Southern slave-holding States.”

 

Arkansas, Ordinance of Secession adopted May 6, 1861
No articles of secession. Excerpt from the Ordinance of Secession:

“Whereas, in addition to the well-founded causes of complaint set forth by this convention, in resolutions adopted on the 11th of March, A.D. 1861, against the sectional party now in power in Washington City, headed by Abraham Lincoln, he has, in the face of resolutions passed by this convention pledging the State of Arkansas to resist to the last extremity any attempt on the part of such power to coerce any State that had seceded from the old Union, proclaimed to the world that war should be waged against such States until they should be compelled to submit to their rule, and large forces to accomplish this have by this same power been called out, and are now being marshaled to carry out this inhuman design; and to longer submit to such rule, or remain in the old Union of the United States, would be disgraceful and ruinous to the State of Arkansas.”

Kentucky, Ordinance of Secession adopted November 20, 1861
No articles of secession. Excerpt from the Ordinance of Secession:

“Whereas, the Federal Constitution, which created the Government of the United States, was declared by the framers thereof to be the supreme law of the land, and was intended to limit and did expressly limit the powers of said Government to certain general specified purposes, and did expressly reserve to the States and people all other powers whatever, and the President and Congress have treated this supreme law of the Union with contempt and usurped to themselves the power to interfere with the rights and liberties of the States and the people against the expressed provisions of the Constitution, and have thus substituted for the highest forms of national liberty and constitutional government a central despotism founded upon the ignorant prejudices of the masses of Northern society, and instead of giving protection with the Constitution to the people of fifteen States of this Union have turned loose upon them the unrestrained and raging passions of mobs and fanatics, and because we now seek to hold our liberties, our property, our homes, and our families under the protection of the reserved powers of the States, have blockaded our ports, invaded our soil, and waged war upon our people for the purpose of subjugating us to their will;....”

The following states appeared to have no specific reference to slavery in their ordinances of secession and articles of secession were not available:

  • Louisiana, Ordinance of Secession adopted January 26, 1861
  • Florida, Ordinance of Secession adopted January 11, 1861
  • North Carolina, Ordinance of Secession adopted May 20, 1861
  • Tennessee, Ordinance of Secession sent to conference May 6, 1861, adopted 104,471 to 47,183 on June 8 1861
  • Missouri, Ordinance of Secession adopted October 31, 1861

Tax Reform V: Eliminate the Estate Tax



The estate tax amounts to a penalty on the heirs of those who have accumulated wealth over their lifetimes. It raises less than 1% of federal revenues, so it provides almost no benefit to anybody, but imposes a big cost on a few.

There are many ways for the wealthy to avoid the estate tax, so it collects little money from the really wealthy but can hit particular individuals hard. The heirs of small business owners and family farmers who die unexpectedly, without having drawn up plans with their tax attorneys, will may have to liquidate the businesses to pay the taxes they owe. The point is, it raises little revenue, it is easily avoided by those who are prepared, but it places a substantial burden on some.

From a fairness standpoint, the wealth people accumulate over their lifetimes comes to them as taxable income, so taxes have already been paid on those estates. Arguing for the elimination of the estate tax is not arguing that estates should be untaxed, it is arguing that they should not be taxed twice.

The accounting and legal services the wealthy use to avoid the estate tax are not free, so there is some cost imposed on the economy to avoid the tax, and the provisions of the estate tax might also influence how individuals decide to bequeath their estates. These people have earned their incomes, and they should have the right to distribute them as they prefer after they die, just as they have that right while they are still alive.

Why keep a tax that raises little revenue, has high compliance costs, and imposes substantial costs on a few Americans?

Tax Reform IV: Corporate Tax Reform



The United States has one of the highest corporate income tax rates in the world. While both the Obama administration and Trump administration have criticized American companies for moving operations off-shore, and considered a variety of policies for punishing them if they do, a better approach would be to design policies that make it attractive for all corporations to locate their operations in the United States.

One way to do that would be to lower the corporate tax rate. While the current 35% rate is high, many corporations pay minimal income taxes because the overly-complex tax code has so many loopholes. Eliminate them to simplify the tax code and make more revenue subject to tax, and lower the corporate rate to 22%. I’m suggesting 22% because in an earlier post I suggested a 22% personal income tax rate, and it’s good tax policy to set the personal and corporate rates at the same level so corporate income is neither favored nor disfavored by the tax system relative to personal income.

Despite there being a good case for eliminating all deductions and loopholes in the corporate tax structure, I’d argue for enlarging two.

First, corporate dividends should be deducted from taxable income. They are paid to individuals who pay individual income taxes on them, and this would eliminate a double tax. Interest payments are already deductible. Why shouldn’t dividends be treated the same way?

Second, allow corporations to expense all of their investment expenditures. Currently, they are depreciated, with complex rules that set up a host of different depreciation schedules. Their tax accounting is unnecessarily complicated, and depreciation for tax purposes is largely unrelated to the actual depreciation in the value of their assets. On the whole, expensing depreciation is revenue-neutral, although compared to the existing tax structure it would convey a tax advantage to expanding companies and a tax disadvantage to contracting companies. This is likely to be beneficial to the economy as a whole, however.

When thinking about corporate tax reform, the ultimate goal should be to design a system that attracts corporations to the United States rather than repelling them.

Review: Atomic Blonde‘s Stylish Action Bolstered by Duplicity of War



Current events have bolstered Atomic Blonde‘s, giving the film substance beyond its role as a conventional summer action movie better at scoring at the box office than provoking thought. Accusations of Russian influence in domestic elections, eyebrow-raising flights by private jet by millionaires advising presidential candidates, and historically low levels of trust in information from the White House all play into the duplicitous character of Cold War espionage and international intrigue that is at the core of story underlying Atomic Blonde.

Set in 1989 Berlin, just days before the fall of the Berlin Wall, the movie is a classically crafted action film in the tradition of Jason Bourne and James Bond. Stuntman turned Director David Leitch (John Wick, Confessions of an Action Star) has created a stylish, visually engaging film with plenty of action, well choreographed fights and car chases, and brutal violence. The only substantive difference between Atomic Blonde and other action films is the lead female character—literally the Blonde.

The movie’s premise is a common plot device for international espionage stories—the bad guys (the Soviet Union’s KGB spies) have obtained top-secret information on the good guys, in this case a list of the names and locations of English and allied-nation spies. Complicating matters is a double agent code-named Satchel who may or may not have the names and who may or may not be selling them to the Russians. England’s top undercover agent, Lorraine (Charlize Theron, Cider House Rules, Monster, Mad Max: Fury Road), is dispatched by MI6 (Britain’s foreign intelligence agency) to Berlin to recover the list and track down Satchel.

Lorraine is supposed to work with station chief David Percival (James McAvoy, Chronicles of Narnia, X-Men: Apocalypse, Split), who is working undercover in East Berlin. Somehow, the KGB keeps showing up where she is, and Lorraine soon realizes she is caught in a double cross. So, she starts working with her own contact, Merkel (Swedish actor Bill Skarsgard, Anna Karenina, The Divergent Series: Allegiant). Along the way she befriends a young French agent Delphine Lasalle (Sofia Boutella, Kingsman: The Secret Service, Star Trek Beyond, The Mummy) who is in way over her head. Complicating matters even more is the relentless and ruthless billionaire arms dealer Aleksander Bremovych (Danish actor Roland Moller, R, Horsens State Prison, Land of Mine) who is also interested in the names. John Goodman (Rosanne, Raising Arizona, Patriot’s Day, 10 Clover Lane) performs a solid turn as CIA agent Emmett Kurzfield assigned to work with MI6, although his role will have audiences wondering why he is on screen until the very end.

These complications serve the film well, preventing a well-trodden plot from becoming too predictable and relying completely on the characteristic (and predictable) action scenes to engage the audience. Screenwriter Kurt Johnstad (300, Act of Valor, 300: Rise of an Empire) has pulled together a generally tight script with believable dialogue and enough mystery to never fully reveal the true extent of the intrigue until the end.

Atomic Blonde is a clearly a vehicle for Theron, and she does a fine job playing the role of the dour, emotionally broken British intelligence agent. Unfortunately, this character type also prevents her from showing much range. The audience gets a whiff of her humanity through the relationship with Lasalle, but the detached personalities that are a spy caper staple prevent much real emotion or connection with other characters. Then again, she’s great at kicking butt and she knows how to use the requisite toys well.

Most spy film fans will be entertained by Atomic Blonde. The story may also remind us of how fact, fiction, and loyalty are inevitably corrupted during times of war, cold or hot. There are no winners, and those who prosper the most are those with the fewest scruples. Wars inevitably devolve into a brutishness where ends justify means.

Tax Reform III: Tax Employer Health Care Benefits; Offer a Tax Credit to Health Insurance Purchasers



In an earlier blog post I suggested eliminating all personal tax deductions, with a possible exception related to health care. One of the well-publicized problems with the American health care system is that employer-provided health insurance is not taxed, pushing us to a system in which people get health insurance from their employers. A better option would be to allow a competitive market in which people shop for their own health insurance, as they do with homeowner insurance, auto insurance, life insurance, and really, all insurance except for health insurance.

One way to change the system is to make employer-provided health insurance a taxable benefit, taking away the tax advantage of buying health insurance through one’s employer. That would impose a tax cost on those receiving the benefit, which could be offset by allowing everyone to deduct the cost of their health insurance from their taxable income.

One problem with the deduction is that those with higher incomes would benefit more from it than those with lower incomes whose tax liabilities may be less than what they would have to pay for health insurance. So, provide everyone with a refundable tax credit up to some limit, or maybe as a percentage of their premium cost. For example, the credit could be 85% of the cost of their premiums. This is not that original an idea, in that it is similar to one of the proposals John McCain made when he was running for president.

This policy would have a huge beneficial effect on the market for health care, although it would not be optimal for tax policy. Simply looking at the tax system, the best option would be just to tax employer-provided health insurance and use the extra revenues to lower tax rates for everyone. The problem is that politically, it would be very difficult to tax health insurance benefits without some offset. The tax credit provides a mechanism that would not impose a cost on those who now receive the benefit, would invigorate the market for health care and health insurance, and would encourage everyone to buy health insurance.

It is not a perfect policy, but it is a politically feasible way to improve on what we have now.

  • MyGovCost.org
  • FDAReview.org
  • OnPower.org
  • elindependent.org