Dear Jacob,
Your article “Why I Favor Limited Government” has given me an opportunity to think about and respond to several of your arguments. My comments are indented and address your abbreviated statement that precedes each of my responses.
Please accept my responses with all due respect.
Lou Carabini (LEC)
by Jacob G. Hornberger (JGH) — March 2016 issue Future of Freedom
Say what you will about President Harry Truman, but at least he didn’t leave the White House a suspiciously rich man. He also actually went home, to Independence Missouri, and moved into a modest house he didn’t own. It was the same house belonging to his wife’s family where he had lived with Bess (and his mother-in-law!) decades earlier.
Bill Gates has called for a “robot tax” to help maintain government tax revenue when human laborers are let go because a “robot comes in to do the same thing.” He seems to be following the same line of argument that many make for a universal basic income: when a worker in a $50,000/year job is replaced by some automated process and then finds a $25,000/year job, the government will need the extra resources to sustain this worker’s quality of life, but will have lost that much in income taxes by the worker moving to a new lower-paying
If there is one word, one dirty slur, thrown across the economic landscape as a scapegoat for our problems it is the term “speculator.” When one gets into the nitty-gritty of what a speculator is, however, those who disparage this special kind of entrepreneur often don’t understand them. Don’t they have a hand in rapid and disturbing shifts in economic trends? Don’t they prey upon valuable commodities just to line their pockets and stuff their wallets with cash? “Why yes,” is the answer to both questions, and thank heavens.
According to traditional economics textbooks, the current monetary system amplifies the initial monetary injections of money. The popular story goes as follows: if the central bank injects $1 billion into the economy and banks have to hold 10% in reserve against their deposits, this will cause the first bank to lend 90% of this $1 billion. The $900 million in turn will end up with the second bank, which will lend 90% of the $900 million. The $810 million will end up with a third bank, which in turn will lend out 90% of $810 million and so on.
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There are limitations to the standard economic model of supply and demand curves intersecting to reveal the optimal or equilibrium price and quantity of a good. Those limitations, as Austrians are well aware, are due to unrealistic assumptions. But noting that the assumptions are out of this world is not enough, especially if the models are used to explain a world that does not match the assumptions. The application of the simplified models, which indeed reveal important facts about how the economy works, tend to lead many economists astray.
Inflation is the most pernicious of taxes levied by our government. Officials systematically devalue the dollar, then levy capital gains taxes on assets when their dollar price rises.
The “gains” are largely illusory. Rising asset prices over time reflect the fact that the dollar buys less of everything. But the tax obligations triggered by this inflation are very real.
