The Ironic Curse of the Free Market

For about the millionth time the siren song of socialism is alluring the gullible. Even though socialism has a perfect record of disasters it continues to rise from the grave. Today it’s manifested in the young socialist challengers in Democrat primaries who are prevailing over the entrenched old-guard incumbents, as well as the popularity among liberals of Senator Bernie Sanders, an avowed socialist.

The embrace of socialism is a two-sided coin. The other side of the coin is the rejection of the free market. There are only two alternatives for organizing an economy: coercion or voluntary exchange, i.e. socialism or the free market, a centralized or decentralized system.

The free-market, voluntary exchange economy that spontaneously developed roughly 250 years ago has generated wealth far beyond what anyone could have imagined previously. That miraculous achievement, however, is mostly unappreciated by so many of its beneficiaries. That’s a rather astonishing fact. An important question is why?

The free market economy is like Rodney Dangerfield — it gets no respect. The main reason is that its biggest advantage is also, ironically, its curse. A free-market economy is simultaneously blessed and cursed by this reality — it works automatically and organically. The elements that allow it to work so efficiently are below the surface. A free market economy is guided by what Adam Smith famously described as “an invisible hand.” In regard to appreciation and understanding, invisibility is a disadvantage.

Furthermore, when something works automatically there is no inherent need to know how it works. When something functions with no apparent need for intervention or guidance it will be taken for granted. There will be little or no appreciation for its value.

Socialism, in contrast, does not operate automatically or organically. It requires deliberate conscience guidance and control. A fundamental characteristic of socialism is centralized control. That, in fact, is why dictators prefer communism rather than a free market. For dictators and liberals that is an incredibly desirable feature.

Liberal policy goals cannot be achieved in a decentralized system because liberal goals are usually not the goals of free individuals. What liberals want to happen cannot be achieved voluntarily. They do not like the free market because they’re not in charge.

The subtleties of how a free market works are over the heads of liberals. That’s not true of conservatives. You won’t find conservatives advocating socialism or voting for socialists.

A free-market economy is decentralized. Decisions are made at the outer edges of the economy. Decisions are based on the information imbedded in prices and the incentives inherent in voluntary exchange. Producers profit by providing consumers with what they are willing to pay for.

But a modern massively complex economy cannot be a hodgepodge interaction of participants. What makes possible the coordination and cooperation of millions of players?

The price system, private property rights, the profit system, competition, and freedom are all vital to the functioning of a free-market economy. Most people, however, are unaware of their crucial importance. Socialism fails because it has none of these devices and no substitutes for them. Socialism has no internal guidance system. The free market does.

An advanced, modern economy is far too complex to be consciously managed and coordinated by a centralized authority. The complexity makes centralized, conscious control an impossibility.

As Friedrich Hayek explained so well, the issue is primarily one of information. The amount of information necessary for a complex economy to function is millions of times greater than what could be collected and processed by a central authority. In a free market economy that information is possessed by millions of decision makers throughout the economy. That is where the information, as well as the proper incentives, reside. It can be thought of as the logistics of information.

One of the main depositories of information is the price system. Supply and demand determined prices absorb and then broadcast information. Prices are the language and the DNA of the economy.

In free-market economies there’s an automatic, internal process that’s been proven to work. All external, alternatives have never been successful. In fact, they’ve all been disasters.

The market economy has contributed more to human welfare than any other breakthrough since the dawn of civilization. In his book The World Economy: A Millennial Perspective, Angus Maddison documents the details of the economic explosion set off by the free market and the related industrial revolution.

Until the year 1000 per capita income in Western Europe, inflation adjusted, was about $450 a year. Throughout most of human history there was virtually no economic growth. Beginning in 1820 economic growth in Western Europe went from .15 percent per year to 1.5 percent per year. That’s been roughly the average rate of growth since then.

There is no way the significance of that achievement can be exaggerated. Economic growth does far more for human welfare than any government “welfare” program possibly could. Economic growth is a creature of the free market.

For a number of reasons increased wealth is closely connected to health and life expectancy. Until 1820 life expectancy was increasing at .05 percent per year. Since then it’s increased by more than .5 percent per year. In 1820 life expectancy in Western Europe was 36 years. Today it’s approaching 80 years.

Thanks to President Trump and his administration, we are once again experiencing robust economic growth. Economic growth is the only thing that “creates jobs,” especially net jobs. That’s why we are now experiencing a labor shortage.

President Trump understands that the less an economy is constricted the faster it will grow. That’s why he’s doing his best to cut regulations.

Socialist countries such as Cuba, Venezuela, North Korea, and Zimbabwe not only are not growing, they are shrinking. Per capita income in each of these countries is less than it was a hundred years ago. Socialism is a growth killer. South Korea is an economic powerhouse. In North Korea people are starving.

Barack Obama had not the earthliest idea how a market economy operates, but that did not slow him down in his desire to control it, especially with regulations and tax increases. In his opinion robust economic growth was no longer possible. Obama is an economic pessimist; Donald Trump is an economic optimist.

Although Adam Smith did not invent the market economy, he dissected its interworking and inherent structure. He was the first to argue for a free market and explain why regulations and protectionism are counterproductive. He was the first and most persuasive free trade proponent.

Smith made it much easier for people to believe in the blessings of the free market. Smith’s magnum opus is usually referred to simply as The Wealth of Nations. However, its full title is An Inquiry Into the Nature and Causes of the Wealth of Nations.

Smith both asked and answered the most important economic question of all time. He was the first person to even think about that monumentally important question. His answer in so many words was the free market and voluntary exchange. It was true when he wrote it and it is true today.

Smith was the first to see and appreciate how voluntary exchange and economic freedom result in growing wealth for all. He made it possible for readers to understand and appreciate market economies.

The Wealth of Nations was published in 1776, not coincidentally the same year as our Declaration of Independence. They reflected the temper of times. Our founding fathers laid the foundation for political freedom. Smith identified the foundation for economic freedom. Voluntary exchange is the essence of freedom.

It’s been said that that in the 19th century invention was invented. The major reason for the explosion of inventions was the presence of powerful incentives for being an inventor. Thomas Edison and numerous others became wealthy as a result of their many inventions. Even more importantly their inventions benefited their customers. Electric lights are vastly superior to lanterns and candles. We are no longer “a world lit only by fire.”

Today we continue to be beneficiaries of the accumulated inventions since then — electric lighting, automobiles, airplanes, air conditioning, hot water heaters, just to name a few.

Combating the underserved but resilient popularity of the socialist dream is one of the requirements for continued economic growth. That will remain a challenge for conservatives for decades to come.

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◼ The Ironic Curse of the Free Market October 11, 2018

Ron Ross Ph.D. is a former economics professor and author of The Unbeatable Market. Ron resides in Arcata, California and is a founder of Premier Financial Group, a wealth management firm located in Eureka, California. He is a native of Tulsa, Oklahoma and can be reached at rossecon@gmail.com.

Donald Trump’s Real Crime: Obstruction of Liberalism

As Democrats, the media, and the rest of the left flail from one Trump accusation to another, they have not yet admitted what their real problem with him actually is. The particulars of their complaints are not what bothers them most about the president. For example, it’s not obstruction of justice that offends them — what actually bothers them most is obstruction of liberalism. On that, he is guilty as charged.

Donald Trump poses a real and imminent threat to virtually everything liberals hold dear and much of everything that defines them. By doing so he has made their lives miserable.

It’s not just that Trump is obstructing liberalism, it’s that he’s doing it so efficiently and unconventionally. The list of Trump’s offenses is long and growing. Near the top is the near obliteration of Barack Obama’s legacy. Obama, his policies, and his administration were all cookie-cutter liberalism.

Fortunately, for conservatives, Obama was incompetent and lazy. He frittered away most of his eight years in office. His achievements were not robust. Most of them have not withstood Trump’s onslaught and that onslaught is not over. Erasing the Obama legacy is an enormous step backward for liberalism. It will be very difficult for liberalism to regain its momentum.

Liberal policies and goals are, in their minds, a birthright. Resistance to those policies is blasphemous and sacrilegious. They know that this is a fight for survival. Their fear and panic are understandable. Even their hate is understandable, but it is not excusable.

Liberals have never encountered anything like Trump. They can’t knock him off course. Countless times the Trump despisers have believed he was a goner for sure. We got him this time! It’s almost comical to watch. Nothing they do to stop him works as it’s supposed to. He doesn’t play by their rules. He makes liberals feel impotent. He is relentless; he has no reverse gear. His counter punches pack twice the wallop as the first punch. When criticized, he doubles down. No wonder they’re depressed.

Trump baits his opponents and they always take the bait. They’re obviously not the sharpest knives in the drawer. The left has no sense of humor, which is another way he makes them look foolish.

An amazing thing about Trump is that his behavior is not dictated by other people’s opinions. The importance of that can hardly be exaggerated. That attitude is extremely rare and incredibly empowering. One of the keys to understanding the over-the-top hatred of Trump is this: people who have no backbones hate people who do have backbones.

A column by Wayne Allen Root was titled, “Trump Proves the Torture Works.” Specifically, it works to force confessions. His words and deeds have smoked them out and they can no longer contain themselves. They are showing their true colors.

They are controlled by their hatred. They hate every fiber of his being and everything about him — his personality, his attitude, his appointees, and his supporters. The same things liberals hate about him are the things his supporters love about him.

Because of their hatred, they cannot think straight. They can barely think at all. They can only react; they’ve become reptilian. They are still in a state of shock that he won and that he is president.

Trump totally dominates Democrats thoughts and actions. They are completely obsessed with “resistance.” They have no energy or time left to define or advance their own objectives. He has cast a spell on them and taken control of their brains.

An example is his signature motto, “Make America Great Again.” His opponents cannot get those four words out of their minds. They don’t know how to deal them. They have said, “[America] was never that great” (Andrew Cuomo), and “America was always great” (Meghan McCain).

Another example is Trump’s use of tweets to communicate with his base. The media and the rest of the Trump haters despise his tweets. However, they absolutely cannot ignore them. They read them all and report on many of them. In a very real sense, they act as his publicists. Ironically, it’s one of the reasons he got elected. They are drawn like a moth to a flame.

Tweets have provided Trump with a direct and unfiltered connection with friends and foes alike. That is an incredibly valuable asset and it’s one of the ways he has neutered the media. They are no longer the gatekeepers of his message.

For conservatives this is a fun time to be alive. For the others I would only ask, “Hey, Trump haters, how’s that working for you?”

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◼ Donald Trump’s Real Crime: Obstruction of Liberalism September 6, 2018

Ron Ross Ph.D. is a former economics professor and author of The Unbeatable Market. Ron resides in Arcata, California and is a founder of Premier Financial Group, a wealth management firm located in Eureka, California. He is a native of Tulsa, Oklahoma and can be reached at rossecon@gmail.com.

The Growing Popularity of Foot Shooting

These are strange times. One of the behaviors that makes things strange is the growing popularity of foot shooting. Foot shooting, of course, involves shooting yourself in the foot. It’s another way of describing self-destructive behavior. Unfortunately for the rest of us, the damage done is not confined to the shooter.

Foot shooting is quite popular among entertainers, especially actors and comedians. Drama is a deliberate creation of fantasy, of an imaginary world. In order to enjoy a movie or play it is necessary to “suspend disbelief.” For the moment you have to forget that what you’re watching isn’t real and that the actors are acting and “playing” a part. The actors aren’t who they’re pretending to be. Knowing too much about them makes it much harder to suspend disbelief.

Robert De Niro is a great actor who has played many great roles. His profane and overwrought public utterances over the past several months will make it hard for many of his fans to ever watch him again without remembering who he is as a real-life person. In effect, he has blown his cover and that cover is necessary for making what he does work.

Presumably De Niro and other actor-activists got into acting to entertain people. That’s why they earn the big bucks. Now, rather than entertaining, they’re making many of their fans angry and disgusted. As everyone else does in this country, actors have freedom of speech. However, because of the nature of their craft there are good reasons for them to preserve their anonymity. Until recently, I was unaware of the extent of De Niro’s ignorance. I had nothing to base an opinion on.

De Niro, Sean Penn, and Morgan Freeman are extremely good at their crafts. More often than not, however, their acting skills in no way carry over to politics, economics, or science. In regard to acting skill, De Niro scores a ten. In regard to political or cultural acumen, he is a zero.

Comedians have also fallen prey to foot shooting. The purpose of a comedian is to make people laugh. That ceases when humor becomes politicized.

Politicized comedians have not only shot themselves in the foot, they have lost track of their reason for being comedians. Politics kills humor and there’s nothing funny about hate. Johnny Carson, Jonathan Winters, Sid Caesar knew that instinctively.

Actors and comedians need to make a decision — do they want to entertain people or proselytize? For them, it is essentially impossible to serve two masters. One of the masters is incompatible with the other.

I used to be an NFL fan, especially of the San Francisco 49ers in the Joe Montana, Steve Young, Jerry Rice era. So far as I know none of them ever publicly expressed their political opinions.

I have not watched five minutes of a 49er’s game in over a year. The only NFL game I’ve watched in the past year was the Super Bowl. I’ve heard numerous people say essentially the same thing. They say they’re done with the NFL.

Former fans are angry at the players for disrespecting their country, but the greater anger is directed toward the teams’ owners and the NFL hierarchy.

The NFL has unfortunately revealed who and what they are. Although they’re good people in most ways, in this instance they’ve behaved like spineless, clueless cowards. They should have nipped the protests in the bud before they became overblown and out of control.

The owners have demonstrated a disrespect for their fans as well as their country and demonstrated that they are afraid of their own employees. Their brains have been addled by political correctness and virtue signaling. Their self-preservation instincts have gone dormant.

The owners have insulted a large portion of their fan base. It’s hard to forget and forgive being insulted and disrespected. For many of us, the NFL owners and management have managed to take the fun out of watching a football game. Thanks a lot. Pro football was an innocent distraction from the stresses and strains of everyday life.

Many of us are sad that we can no longer watch a game without thinking about what we now know. I loved watching pro football. The only partial upside is that my fall Sunday afternoons have been liberated. That’s only a partial upside, however, because many of my Saturday afternoons have now been commandeered by college football.

Perhaps the greatest practitioners of foot shooting are the media. As have entertainers, the media have elevated their political goals above their reason for being. Because a large fraction of their customers do not agree with those goals, their customer base is now far smaller than it used to be. Much of the media has given up any pretense of objectivity. “Fake news” is a reality. Credibility is their currency. Without it what are they? They certainly aren’t reporters or journalists.

The most pathetic and confused group of foot shooters are the Never-Trumpers, Bill Kristol, Jonah Goldberg, and George Will, for example. Donald Trump so offends their delicate sensitivities that they totally ignore how much he has accomplished for the conservative cause. They have made themselves irrelevant, fortunately. They have actually proclaimed that they wish Hillary Clinton were president. As John McEnroe used to say to the umpires, “You can’t be serious!” Can you imagine the kinds of Supreme Court picks Hillary would be making?

Actors, comedians, athletes, and the media have lost focus. What is transpiring shows too well the ugly results of politicizing every aspect of life. Politics is like a cancer destroying from within whatever it infests.

In a 2013 American Spectator column, “The Politicization Crusade,” I listed “language, science, health care, food, climate, cars, sports, education, the military, and sexual orientation” as examples of some of things that have been politicized. Since then, the list could be expanded and would include humor and children. Let’s hope that at some point the politicization crusade will go too far and end up consuming itself.

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◼ The Growing Popularity of Foot Shooting July 12, 2018

Ron Ross Ph.D. is a former economics professor and author of The Unbeatable Market. Ron resides in Arcata, California and is a founder of Premier Financial Group, a wealth management firm located in Eureka, California. He is a native of Tulsa, Oklahoma and can be reached at rossecon@gmail.com.

The Power and Prevalence of Virtue Signaling

One key to understanding much of the bewildering behavior we see around us is to recognize the power and popularity of “virtue signaling.” Keeping virtue signaling in mind will help you understand a lot of behavior that otherwise makes no sense.

What, for example, is the point of removing Confederate statues or attempting to disown the country’s Founding Fathers because some were slave owners? It makes sense if your objective is to be sanctimonious. You make yourself feel better by looking down your nose at Thomas Jefferson.

Virtue signaling is the modern version of what St. Augustine in the 5th century referred to as “outward signs of inward grace.” A major difference, however, is the kind of grace he referred to actually meant something.

A precondition to needing to virtue signal is guilt. Virtue signaling is one of the left’s package deals that typically involve two steps. Firstly, make people who have done nothing wrong feel guilty. Then, offer them ways to assuage that guilt. It’s little more than a con game but it has worked amazingly well for liberals.

It always helps to keep in mind that everything is relative. In order to feel superior, you need something to feel superior to. Virtuous relative to what? In order to feel holier than thou you need a thou.

Does virtue signaling accomplish anything outside of the individual? Anything tangible, significant? Any activity as widespread and long-lasting as virtue signaling has to have payoffs. The payoffs for virtue signaling are inner, not outer, directed.

An irony is that the need to virtue signal is an insecurity about your own virtue. An observation a psychologist friend likes to make is, “The bigger the front, the bigger the back.” Or as Ralph Waldo Emerson observed, “The louder he spoke of his honor, the faster we counted our spoons.” Virtue signaling is motivated more by insecurities than virtue.

The “signaling” part of virtue signaling means you want others to become aware of your virtue. Why is that important to you? Where does your need to signal come from? Are you so overwhelmingly virtuous that you can’t resist letting others know about it?

Virtue signaling is, of course, closely related to political correctness. Being sensitive to PC and being quick to take offense demonstrates your virtue for all to see.

Recycling is one of the left’s favorite sacraments. It helps overcome the guilt of consuming.

There is an opportunity cost to virtue signaling. Spending time on useless activities, e.g. recycling, marching, allows avoidance of useful, meaningful activities, e.g. being thoughtful and considerate of those around you, e.g. family, friends, and people you work with. Those behaviors can actually make a difference.

Maybe you’ve wondered why actors and other celebrities feel the need to publicly express their political opinions. What is their motivation? Maybe they feel guilty about how amazingly wealthy they are (they shouldn’t).

Donald Trump is the context for much of the virtue signaling we observe. It’s another two-step process. The first step is to decide that Donald Trump is a reprehensible human being. He is crude, unsophisticated, and his personality makes you cringe. The second step is making it crystal clear that you and he are polar opposites. You have absolutely nothing in common with him. You don’t need to provide details about what makes you virtuous, just the fact that you despise him is sufficient to prove you’re virtuous. He is crude, you are refined. Trump provides a backdrop for your identity. It’s ironic that hate is seen as a path to virtue.

Virtue signaling is a substitute for thinking, it is thinking avoidance. It is the latest variation of group think. When you latch on to group opinions you have no need to think for yourself.

Driving a Prius automobile is a popular form of virtue signaling. Driving a hybrid lets others see that you care about the planet and that you’re doing your part to prevent it from being destroyed by CO2. Driving a Prius allows to you drive rudely and carelessly. Cutting someone off or running a stop sign or two are trivial matters compared to saving the planet. Everything’s relative. It’s probably no accident that Priuses have an unusual profile. That helps assure that your virtue signal will noticed.

A favorite demand of leftists on college campuses and endowment fund boards of directors is “divestment.” What is divestment? In the investment portfolios of endowment funds and retirement portfolios are stocks of companies involved in shunned activities such as producing and selling fossil fuels. In such situations activists demand that the colleges or foundations divest, i.e. sell, any stock of such despicable companies.

Divestment is possibly the most useless behavior anyone could ever imagine. How anyone thinks it will have any impact on anything real is a mystery. Because of the way capital markets work, divesting on anything but a massive scale will have no long-term impact on a company’s share price. If they manage to drive a stock’s price down, bargain hunters will drive it back up to its underlying value, relative to other stocks. Other than stoking sanctimony divestment accomplishes absolutely nothing.

Showing your disapproval of the names or mascots of sports teams demonstrates your sensitivity for the supposed feelings of various minority groups. How many of those demanding that the Washington Redskins change their name are Indians? My guess is that it’s a very small fraction.

Wearing ribbons is a popular form of virtue signaling. The ostensible purpose is to “raise awareness” for such things as breast cancer (pink ribbons). Is there anyone who isn’t already” aware” of breast cancer? And once your awareness has been raised, what are you supposed to do with it? As is the case with every variation of virtue signaling, the mission statement is nowhere to be found.

Virtue signalers are delicate creatures who are easily offended. They wouldn’t be caught dead laughing at stereotypical humor. They are overly serious about almost everything. It only hurts when they laugh.

There is a large element of virtue signaling in environmentalism. Devout environmentalists like to think they’re the only ones who care about the environment. Relative to how much they care about the environment you don’t care much at all.

Marching and demonstrating are two popular virtue signaling activities. The next big opportunity will be June 9. It is the “March for Oceans,” or what they’re labeling “M4O.” According the organizers’ website, “This summer we will see a new blue wave of resistance — and celebration — for the other 71 percent of our environment that is the Ocean. The ocean is rising and so are we!”

Uselessness and remoteness are two of the ingredients for virtue signaling choices. Driving a hybrid automobile will make not an iota’s difference to “climate change” (whatever that is). In any case, the “climate disruption catastrophe,” as it’s sometimes called, is not predicted to occur for another fifty years. It was more than two hundred years ago when some of our founding fathers owned slaves. The past is unchangeable and irretrievable. Problems that you can’t do a damned thing about are virtue signaling favorites.

A recent Dennis Prager column, “Three Reasons the Left Wants Evermore Immigrants,” had as reason number three, “the power of feeling good about oneself. It would be difficult to overstate the significance of feeling good about oneself as a primary factor in why people adopt left-wing policies.… In their eyes, they are moral heroes protecting the stranger, the oppressed, the marginalized, the destitute.”

Finally, this just in: The Arcata, California city council voted Wednesday night to remove the statue of President William McKinley from the town square. The statue has been in place for over a hundred years. As per usual, McKinley’s sins have not been clearly elucidated. He was assassinated in 1901. Like Matt Lauer, the statue will vanish into the ether. One of the groups demanding the statue’s removal is the Humboldt State University student group, Movimiento Estudiantil Chicanco de Aztlan, whatever that means. I’m embarrassed to admit I’m a resident of Arcata. Our neighboring town to the north is McKinleyville. The town’s name is probably not long for this world.

These are just a sampling of the ways virtue signaling is dictating behavior far and wide. Being aware of its many manifestations will reduce your confusion and increase your amusement. It’s a shame it’s doing so much damage.

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◼ The Power and Prevalence of Virtue Signaling February 23, 2018

Ron Ross Ph.D. is a former economics professor and author of The Unbeatable Market. Ron resides in Arcata, California and is a founder of Premier Financial Group, a wealth management firm located in Eureka, California. He is a native of Tulsa, Oklahoma and can be reached at rossecon@gmail.com.

Tax Reform Myths and Realities

The recently enacted tax reform/tax reduction is possibly the most misinterpreted and misrepresented policy change in the history of policy changes. For example, it has been accused of benefiting only the wealthy and of adding $1.5 trillion to the federal debt. There are numerous reasons to be highly skeptical of both these assertions.

The issue in the tax reform drawing the strongest criticism from Democrats is the reduction of the federal corporate tax rate. Democrats want you to believe that all the benefits of reduced corporate taxes flow to the wealthiest members of the population. Nancy Pelosi claims all the benefits go to “the wealthiest one-percent.” Knee-jerk reactions to reducing corporate taxes are a classic example of ignorance-based hysteria.

To say that cutting corporate taxes benefits only the wealthy is a gross oversimplification of economic reality. A major part of the damage done by the corporate tax is the profound dishonesty it is based on. The corporate tax is a charlatan’s playground.

It’s unfortunate that the misbegotten term “trickle-down economics” was ever invented. It’s been one of the terms used to demean cutting corporate income taxes. In an advanced, complex, free-market economy money flows in many directions. It goes down, up, sideways, backwards, and forwards. Trickle-down is a concept that does much more to obfuscate than illuminate. No reputable economist considers it a useful term.

Much of the opposition to cutting corporate income taxes is based on the popular myth that corporations are capable of paying taxes. Corporations do write checks payable to the IRS but corporations cannot bear the “burden” of a tax any more than cows or horses can bear the burden of a tax.

If you work for a corporation you pay the tax by having a reduced wage or salary. If you purchase goods or services produced and sold by corporations you pay the tax by paying a higher price for those goods and services. If you own shares of corporations you pay the tax through reduced dividends and lower share prices. It’s silly to think that all these people are wealthy.

No one can possibly know how much he is paying in corporate income tax. That’s one of the reasons a corporate income is a bad tax. There’s no way to know if the tax is progressive, regressive, or proportional. The tax is reducing someone’s real income; it’s just hard to know who that someone is. It’s what Milton Friedman used to refer to as, “Don’t tax me, don’t tax thee, tax that fellow behind the tree.” The corporate tax is the best way to pretend there’s someone behind the tree.

It would no doubt surprise Democrats that a study by William C. Randolph of the Congressional Budget Office estimated that “Domestic labor bears slightly more than 70 percent of the burden of the corporate income tax.” Other studies have come to similar conclusions. In other words, most of the payoff of lowered corporate tax rates would accrue to employees. Ideally the corporate income tax should be reduced to zero, but reducing it by two fifths (from 35 percent to 21 percent) is a major step forward and is already generating substantial positive changes.

Assume, for the sake of discussion, that the entire burden of the corporate income tax is borne by corporate owners. Are all of the owners of corporate shares wealthy? Of course not.

Trillions of dollars of corporate stock are owned by pension plans, which are owned by employees in all income levels. If a reduction of the corporate tax results in a higher level of stock prices and increased dividends, millions of Americans will enjoy more prosperous and worry-free retirement years.

All indications so far are that tax reform is stimulating faster economic growth. Even before tax reform became law, the anticipation of it was one of the causes of faster GDP growth, lower unemployment, and a booming stock market. Black and Hispanic unemployment rates are the lowest they’ve been since they’ve been measured.

In a single masterful stroke Trump and his fellow Republicans have increased the net profits of virtually every corporation in America. That is going to set off an economic chain reaction.

How are lower taxes connected to economic growth? When incentives change, behavior changes. If corporate owners benefit from increased after-tax returns they will have increased incentives to invest and grow their companies. They can’t do that without more employees. The demand curve for labor will shift to the right resulting in a higher equilibrium wage.

Some of the liberated corporate profits will be invested in capital, which will also eventually benefit employees. A higher capital/labor ratio increases average productivity and makes labor more valuable. The much discussed wage stagnation could well be coming to an end.

Both parties are self-identifying. Trump’s policy initiatives have increased the transparency of what each party stands for. It’s becoming clear that there is fundamental difference between the goals and objectives of the two parties.

Democrats are making a high-stakes bet that tax reform will not result in greater economic growth. They have put themselves in the awkward position of rooting against a booming economy. If there is robust growth, Democrats will find themselves in a world of hurt.

The difference between the two sides of the tax cut issue is supporters are optimistic and positive, opponents are pessimistic, defeatist, and negative. The Democrats not only do not believe that faster economic growth is possible, they do not want faster economic growth.

If the pace of economic growth increases, which income groups benefit most? It clearly is not just the wealthy. In fact, the benefits from robust economic growth accrue to all income levels. In a sense, wealthy people don’t need economic growth. They’re already wealthy. Robust growth gives more people the opportunity to become wealthy.

Also, contrast the difference between Obama’s Obamacare and Trump’s tax reform. Obamacare was a transfer of power from individuals to government. Cutting taxes is a transfer of power from government to individuals and private businesses. Not surprisingly, Obamacare failed to achieve most of its promises and has never been popular. Obamacare made government bigger, tax cuts make government smaller.

Furthermore, consider the vast differences between the results of this tax reduction and Obama’s trillion dollar “stimulus.” The stimulus never showed up on the economic radar screen. Tax reform is already showing substantial and measurable effects. Walmart has already increased its starting wage to $11 an hour, plans to lower prices, increase dividends, buy back stock, and increase employee training. All that and the tax reform is barely a month old!

Obama’s stimulus added a trillion dollars to the federal debt with nothing to show for it. In selling the stimulus Obama promised that it would all be spent on “shovel ready” projects. A year later he admitted that there were no shovel ready projects.

The outcomes of the 2018 and 2020 elections will be largely determined by the success or failure of tax reform. If voters feel they’re measurably better off Trump and the Republicans will be richly rewarded. The Democrat Party will be left wandering in the wilderness even more than it is now.

Critics of tax reduction also predict that it will increase the nation’s debt by as much as $1.5 trillion over ten years. That estimate assumes that lower taxes and fewer regulations will have no stimulative impact on the economy. However, if it increases the economy’s growth rate by as little as .6 percent, there will be no increase in the national debt. GDP growth has already increased by much more than .6 percent.

Consider the implications of what could well happen. Lower taxes, a healthier economy, more wealth, all accomplished with absolutely no help from the Democrat Party. Optimism wins, pessimism loses. If the tax cuts and reduced regulations continue to stimulate the economy, there is bound to be increased enthusiasm in the future for doing more of the same. That will be a body blow to everything the Democrats stand for.

Victor Davis Hansen recently described this point in history as “The Great Experiment.” Hansen writes we are going to see the outcome of a test between two competing economic and political philosophies: “the unapologetic progressivism under Obama… and the unregretful conservatism under Trump.… We have been given a great gift in seeing two ideologically opposed solutions back to back, and both may end up adjudicating rhetoric through deeds.”

What a wonderful opportunity we’ve been given. Thank you, Donald!

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◼ Tax Reform Myths and Realities January 17, 2018

Ron Ross Ph.D. is a former economics professor and author of The Unbeatable Market. Ron resides in Arcata, California and is a founder of Premier Financial Group, a wealth management firm located in Eureka, California. He is a native of Tulsa, Oklahoma and can be reached at rossecon@gmail.com.

What’s Revealed by the Harvey Weinstein Saga

The significance of the Harvey Weinstein saga is what it reveals not just about him but rather the entire Democrat party, its leaders, and its supporters. Furthermore, it demonstrates the vast difference between the Democrat and Republican parties.

For Democrats Harvey Weinstein is nothing new. He’s more of the same. There’s little difference between Harvey Weinstein, John Kennedy, Ted Kennedy, Bill Clinton and countless other Democrat politicians and their enablers.

Any large group of humans will include some who are reprehensible. What’s notable about the names above is that in spite of their disgraceful behavior they’ve been elevated to the highest levels of leadership and admiration in one of America’s two major political parties. The Democrat party leaders and their voters apparently have not the slightest problem having abusers of women leading their party or being major campaign donors.

What is the Democrat party’s ethic? It is this: if it feels good, do it. If that’s not the Democrat ethic, what is? It’s clearly not the Ten Commandments, and it’s not “do unto others…” The proof is becoming increasingly obvious and the evidence has been accumulating for decades.

Democrats revere John Kennedy. For nineteen months between 1962 until shortly before his death in 1963 Kennedy carried on a sexual relationship with a 19-year-old intern, Mimi Alford. Four days after she arrived in the White House Kennedy “date raped” Alford who was at the time a virgin.

Although Kennedy had sex with Alford on numerous occasions both in the White House and on presidential trips, he never kissed her. He was, of course, married to Jackie during the entire period. The idyllic Kennedy marriage was a fraud, bought hook-line-and-sinker by Democrats and never questioned by the sycophantic media even though it was well aware of Kennedy’s numerous affairs while he was president.

The party that rails about the unfairness of inequality reveres leaders who exploit inequality. The inequality they exploit is about as wide as it gets, e.g. between a young, vulnerable intern and a middle-aged President of the United States.

Alford kept the abuse secret for over forty years. When it was finally reported by someone else Alford confirmed what had happened and eventually wrote a book entitled Once Upon a Secret. Alford’s story is fascinating and poignant. The abusive relationship left a wake of considerable psychological damage and feelings of guilt. Keeping what had happened to her a secret for all those years allowed Alford to avoid the life mangling notoriety that later befell Monica Lewinsky.

John’s youngest brother, Ted Kennedy, should have been charged with manslaughter for the death of Mary Jo Kopechne, a 29-year-old campaign volunteer whom he left to drown in a submerged car in Martha’s Vineyard, Massachusetts. Kennedy pleaded guilty to “leaving the scene of an accident after causing injury.” Causing “injury” is not quite accurate. He caused a young woman’s death. He received a two-month suspended sentence. If you’re a Kennedy in Massachusetts you can pretty much get away with murder. It was after Ted’s role in Kopechne’s death that Democrats started referring to him as “the Lion of the Senate.”

I dare anyone who admires and respects Bill Clinton to read the 1999 interview of Juanita Broaddrick, a Clinton campaign volunteer, by Lisa Myers, NBC’s chief investigative reporter at the time. You will probably conclude that Broderick is very credible and that she was raped by Bill Clinton. NBC has long denied requests to release the video of the interview.

At the time Clinton was the state attorney general for Arkansas. Since he was the highest ranking law official in the state, there was absolutely nothing Broaddrick could do about what Clinton had done to her. The office he held allowed him to commit violence on women without fear or consequence. He had power, she had none. One of the reasons Democrats relish power is what it allows them to do to those without power.

In a way the Democrats do have high standards, but only for Republicans. Democrats went positively apoplectic (and still do) in reaction to Donald Trump’s taped comments about what celebrities can get away with with women. His words were crude and better left unsaid. However, they were words, not actions.

Trump has done nothing that remotely compares to what numerous Democrat politicians have done to women. How do we know he hasn’t? Because if he had done such things you can be damn-well sure we would have heard about it. You can be absolutely certain the media would not have kept it secret.

The Democrat party is a warm and welcoming environment for philanderers, lechers, lotharios, creeps, mashers, and cheaters. By example, the Kennedys and the Clintons let it be known that their party would protect, defend, ignore, and hide any despicable behavior if it helps advance the Democrat agenda (especially abortion) and defeat Republicans.

On the left there is a far-reaching and effective conspiracy of silence, a major player being the media. As much as being purveyors of “fake news,” the media’s main damage is done with incomplete news and crimes of omission. Hollywood reporters have known since the 1980s about Harvey Weinstein’s perverted and disgusting behavior. They were, among many others, the ones who enabled Weinstein to continue his abuse of women for decades.

When you enable an alcoholic the damage done falls primarily on the alcoholic himself. When you enable an abuser/rapist the damage done is borne by innocent victims. All those who helped keep Harvey Weinstein’s squalid secrets are guilty accessories-after-the-fact to who knows how many avoidable victims.

The enablers should be profoundly ashamed of themselves and many of them probably are. Unfortunately, many of his enablers in the media are incapable of shame. A primary responsibility of the media is supposed to be shining the light of the day on such crimes. Their dereliction of duty is almost criminal.

The Weinstein mess has opened the flood gates for more women to come forward to reveal their abuse by politicians and entertainers. The other week in deep blue California, “More than 240 women around the state Capitol, including some of the most influential women in Sacramento politics, signed an open letter to declare that sexual harassment, and a culture that encourages it, exists in Sacramento.”

Democrat Assemblywomen Autumn Burke said she “was surprised to find rampant sexual harassment in a building of well-educated and well-regarded people.” According the San Francisco Chronicle, some of the women “[c]haracterized the male-dominated hierarchy in state politics as a breeding ground for misbehavior, much like the film industry.” It would have been more accurately described as the Democrat male-dominated hierarchy. Sacramento is infested with Democrats. Republicans are hard to find there.

The open-letter signers have taken to social media to post “me-too” messages, “disclosing long-closeted stories of being propositioned and harassed, belittled and demeaned and cornered and groped.” Closeting the stories for so long has allowed it to continue. One of the letter signers said staffers “have told her about men in the Capitol who make it known when their wives are out of town.” For Democrats, marriage vows are so yesterday.

Gavin Newsom is the current Lieutenant Governor in California and former mayor of San Francisco. He is the odds-on favorite for succeeding term-limited Jerry Brown as governor. Newsom is one of the small number of young rising stars in the Democrat party. In 2007 he admitted to having an affair with his best friend and campaign manager’s wife. In numerous glowing articles about Newsom, that fact is rarely mentioned. Swamp is a good description of Washington, D.C., but Sacramento smells even worse.

Another candidate for governor is Democrat Los Angeles mayor Antonio Villaraigosa. In 2007 it was revealed that he was having an affair with Telemundo news anchor Mirthala Salinas. According to the Los Angeles Times, “Villaraigosa’s admission casts a fresh shadow over his own personal conduct: He has two adult daughters born out of wedlock and his wife filed for divorce in 1994 over a separate affair for which he later publicly apologized. It may also have damaged his carefully crafted image as a family man. The revelation also raised ethical questions about Salinas’ decision to become involved with a politician she was covering as a journalist.”

Conservatives are frequently stunned when we witness the hypocrisy Democrats manage to get away with. Everyone is familiar with what’s called a “poetic license.” Somehow Democrats have managed to secure for themselves a “hypocrisy license.” It would be a wonderful day if that license got revoked.

Hypocrisy, however, is a misdemeanor compared to Democrats’ long record of disgusting behavior, abuse, and disrespect of women. We can only hope that recent events make it clear to more people that the Democrat party does not deserve their support.

Democrats have many times claimed that Republicans are waging “a war on women.” It appears that there is, in fact, a war on women, but the evidence indicates the soldiers are all Democrats. It’s far reaching and it has a long history.

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◼ What’s Revealed by the Harvey Weinstein Saga November 1, 2017

Ron Ross Ph.D. is a former economics professor and author of The Unbeatable Market. Ron resides in Arcata, California and is a founder of Premier Financial Group, a wealth management firm located in Eureka, California. He is a native of Tulsa, Oklahoma and can be reached at rossecon@gmail.com.

California in an Oyster Shell

Most people in the rest of the country know that the state of California is a strange place. Unless you live here, however, you can’t fully appreciate just how dysfunctional it has become.

A case in point is what is happening to Coast Seafoods Company, the state’s largest shellfish producer. The company has been operating an oyster farm in Humboldt Bay for the past 65 years. However, the company may cease operation because the California Coastal Commission in June voted 6-5 to deny permits for both the company’s existing 230 acres of shellfish farming as well as a proposed 265-acre expansion. Coast Seafoods has 80 employees and an annual payroll of $2 million. Doubling its capacity is a microcosm of what economic growth means and how it happens.

The commissioners who voted to deny the permit renewal and expansion asserted that the company “had not adequately addressed potential impacts to ecologically significant eelgrass beds in the bay.” Humboldt Bay covers a total of 17,000 acres. The disputed area, therefore, comprises less than three percent of the bay.

California has made the accomplishment of virtually any economic activity incredibly costly in both time and money. Coast Seafood’s project, for example, has to be approved by the Humboldt Bay Harbor District, the California Coastal Commission, the North Coast Regional Water Quality Control Board, the California Fish and Game Commission, and the U.S. Army Corps of Engineers.

Even if all those agencies approved the project there would still be obstacles. Three environmental groups, Audubon California, Earth Justice, and California Waterfowl Association, have filed a lawsuit alleging that the oyster farm expansion would “irreparably harm eelgrass in the bay.”

In its attempt to expand its oyster beds Coast Seafoods has so far spent over $2 million for environmental studies. Although the company initially wanted approval to farm 500 acres, it has reduced its request several times in attempts to meet the long list of concerns and demands by the various agencies.

Jack Crider is the harbor district’s executive director. His agency voted unanimously to approve the oyster farm’s renewal and expansion. He said, “By the time we butcher the hell out of this, we’ll be lucky to have 100 acres, maybe 70 or 80 acres, divided up six different ways.… If you were in the oyster industry, would you consider investing in Humboldt Bay after this? It’s just a big trigger to say it’s going to be too expensive and difficult to get a permit. They’ll go to Oregon, they’ll go to Washington, they’ll go somewhere else. They won’t go to California.”

If Coast Seafoods ceases operation, it will not be the first oyster farm to succumb to out of control regulations in California. Two hundred miles south of Humboldt Bay is Drakes Bay. The oyster farm there, in operation since the 1930s, was forced by the U.S. Park Service to suspend operations in 2014. The dispute had raged for over ten years and was considered to be one of the ugliest environmental disputes ever. Fighting the forced closure were Democrat Senator Dianne Feinstein, renowned California cuisine creator Alice Waters, and Food Democracy Now. Even California leftists are powerless against the march of the inexorable agencies.

In her letter to the Park Service Feinstein wrote, “The Park Service has falsified and misinterpreted data, hidden science and even promoted employees who knew about the falsehoods all in an effort to advance a predetermined outcome against the oyster farm. It is my belief that the case against Drakes Bay Oyster Company is deceptive and potentially fraudulent.” Same old same old.

California stacks regulatory agency on regulatory agency. Permission for most projects requires approval from all layers. The result is that every agency has what amounts to veto power over any project. The agencies are populated by self-important board members who see themselves as vital guardians of the planet. Wildlife is assumed to have infinite value for which any minute risk or uncertainty is deemed to be unthinkable. Anything else, human well-being, for example, is assumed to have zero value.

Furthermore, each agency has tunnel vision. They aren’t allowed or motivated to consider anything outside their narrow focus. Nothing else can be considered, no compromises are allowed. Private property rights are given absolutely no consideration. They can do nothing beyond enforcing the rules they’re hired to enforce. This is not the way we should be making resource-allocation choices.

The agencies in no way bear the costs of the decisions they impose on the people and companies they regulate. When their rulings put a company out of business, it’s not their problem. Their job security is untouched.

There is absurd duplication and redundancy throughout the bureaucracies. The Coast Seafoods project must receive “water quality certifications” from the Army Corps of Engineers as well as the North Coast Regional Water Quality Control Board. (Ironically, oysters filter water.)

The regulatory agencies and their environmentalist co-conspirators are expert goal post movers. Their favorite ploy is to add to the already long list of “threatened” species. For example, in the oyster farm issue a new concern is for the black brant goose. Supposedly a three percent reduction in Humboldt Bay eelgrass will constitute an existential threat for the geese in their annual migrations.

Eelgrass, black brant geese, marbled murrelets (a shore bird that nests in old-growth forests) have all been granted victim status and they will not be the last. The supposed at-risk species used to execute the Drakes Bay oyster farm was the harbor seal. Agencies don’t mind taking sides in imagined conflicts between species, e.g. eelgrass vs. oysters, seals vs. oysters, spotted owls vs. barred owls, whatever works.

An article of faith among environmentalists is that every ecology is a fragile, delicate system. Each ecology’s current state is perfect and the tiniest change will set in motion forces too terrible to contemplate. To describe the agencies as “risk averse” is far too tame a description. Negativity overwhelms positivity.

Besides having to cope with all the agencies, California grants incredible power and authority to every imaginable self-appointed protector of the “environment.” A traditional legal doctrine is that to sue someone you must demonstrate “damages” and “standing.” Environmental groups are given wide latitude in making such claims. Everyone is granted “stake-holder” status. In addition, “not in my backyard” resisters successfully stop or at least delay project after project.

In any economy, there are wealth creators and wealth preventers. In California, the wealth preventers hold the upper hand. Because the obstructionists have been so successful in the past at consolidating their power, there are few checks and balances left in the state. The state is politically and philosophically uniform and predictable. Diverse it is not.

The wealth preventers, i.e. environmental groups, trail lawyers, and Democrat politicians, hold the reins of power in California. They are all system wonks and are experts at gaming the system. They feign concern for spotted owls, delta smelt, and eelgrass.

In actuality, logging opponents couldn’t care less about spotted owls. Their real objective is to stop all logging or at least make logging so costly and such a hassle that it’s greatly reduced. If there were a population explosion of spotted owls it would have absolutely no impact on their opposition to logging.

The oyster company’s maddening regulatory mine field is the rule in California and there are only rare exceptions. California’s insanity has gotten so over the top even some liberals can’t ignore it. After the legislature and Governor Brown recently extended its asinine “cap and trade” policy for an additional ten years, San Francisco Chronicle columnist Joe Mathews wrote, “Can our system for controlling greenhouse gases be adopted around the world? Or is California pursuing a lonely one-state war on climate change that will land us in a bubble of economy-destroying regulations?… At its worst California is a bubble of distinctive and convoluted regulations and laws, which are hard to unwind, especially in a state with so many lawyers.”

California is like a petri dish for unbridled Democrat control. It’s the canary in the economic coal mine. The state is demonstrating to the rest of the country what’s in store if Democrats start winning elections. It’s what would have been in store for the whole country if Hillary Clinton had won in November. President Trump has made rolling back regulations one of his foremost priorities.

That California’s economy manages to function as well as it does in spite of the barriers placed in front of it is a tribute to the persistence, energy, and creativity of its wealth creators. California has such immense beauty, natural resources, and human resources the fact that they are being so squandered and wasted is a crime. The difference between what could be accomplished in the state and what is accomplished is incalculable.

“Of all sad words of tongue or pen, the saddest are these, ‘What might have been.’” — John Greenleaf Whittier

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◼ California in an Oyster Shell July 27, 2017

Ron Ross Ph.D. is a former economics professor and author of The Unbeatable Market. Ron resides in Arcata, California and is a founder of Premier Financial Group, a wealth management firm located in Eureka, California. He is a native of Tulsa, Oklahoma and can be reached at rossecon@gmail.com.