Power & Market

The Net Worth of Americans Still Hasn't Recovered from the Last Recession

01/09/2018Ryan McMaken

Axios is reporting today on commentary from Deutsche Bank economist Torsten Slok in which Slok concludes that Americans now have a smaller net worth than they did in 1989: 

A greater share of Americans have more debt than money in the bank than at any point since 1962, according to Deutsche Bank economist Torsten Slok. And, in a note to clients yesterday, Slok said that, despite record stock market wealth and home price levels just shy of housing-bubble highs, Americans are poorer than at any point in nearly a quarter century.

Why it matters: The data suggest that the third-longest economic expansion in history, and the lowest jobless rate in 17 years, has benefitted an exceedingly thin slice of the American public.

Here's the graph that goes with the story: 

axios.PNG

Unfortunately, no link is given to the client note. 

If you're like me, though, you always like a context for research like this, and aren't content with a quick blurb. 

So, to add some background to this, I managed to find a working paper from the NBER, titled "Household Wealth Trends in the United States, 1962-2013: What Happened Over the Great Recession?" which goes into a little more detail on these calculations. 

The Deutsche Bank data appears to be continuing Wolff's research from this older NBER report, which stopped with 2013 data. 

In it, we do indeed see that median household net worth as of 2013 was lower than at any other time shown since 1962: 

networth.png

As the report notes, household wealth plummeted during the Great Recession, and as of 2013, at least, had not recovered. Slok's update suggest that net worth has increased since then. It looks like median household net worth increased from about $63,000 to about $78,000 between 2013 and 2016. That's good, but it's still well below where it was in both 2001 and 2007. 

But why do households appear to be largely spinning their wheels on household net worth?

For decades, net worth in the United States has been closely connected to housing prices. The homeownership rate reached 69 percent in 2004, and those homeowners saw their net worths expand as home prices expanded in the same period. 

In recent years, home prices have gone up considerably. So why has net worth not done the same? 

According the the NBERreport:

Asset prices [including home prices] plunged between 2007 and 2010 but then rebounded from 2010 to 2013. The most telling finding is that median wealth plummeted by 44 percent over years 2007 to 2010, almost double the drop in housing prices... Relative indebtedness expanded, particularly for the middle class, though the proximate causes were declining net worth and income rather than an increase in absolute indebtedness. The sharp fall in median net worth and the rise in overall wealth inequality over these years are traceable primarily to the high leverage of middle class families and the high share of homes in their portfolio. The racial and ethnic disparity in wealth also widened considerably. Households under age 45 saw their relative and absolute wealth declined sharply. Rather remarkably, there was virtually no change in median wealth from 2010 to 2013 despite the rebound in asset prices. The proximate cause was the high dissavings of the middle class, though their debt continued to fall. 

So, the situation did indeed stabilize as home prices rebounded, but Americans were also neglecting to save any money in other forms. In part, they stopped saving in order to pay off debts, which were substantial:

The stagnation of median wealth from 2010 to 2013 can be traced to the depletion of assets. In particular, the middle class was using up its assets to pay down its debt, which decreased by 8.2 percent over these years. This shows up, in particular, in reduced asset ownership rates. The homeownership rate fell from 68.0 to 66.7 percent, that of pension accounts from 45.8 to 44.4 percent, that of unincorporated businesses from 8.2 to 6.6 percent, and that of stocks and financial securities from 15.3 to 14.2 percent. However, the reduction in assets was greater than the reduction of debt. 

So, we end up with a picture in which Americans did see their asset values increase, which did help net worth. But at the same time, owner asset rates among many Americans actually declined, and at a faster rate than debt declined. 

This is a fairly grim picture, and does paint a good picture for the standard of living Americans will enjoy once their prime earning years pass us by. 

All too often, economic indicators rely on current earnings, and current spending. Net worth, however, gives us a glimpse into the future. If net worth is declining or stagnant, than future retirees will eventually spend down their savings more quickly, and then have to cut back their standard of living to pay for basic necessities. 

Moreover, if the current trend continues, Americans will begin the next recession from a far lower level of net worth than they started the 2007-2009 recession with. That is, we'll begin the next recession with our net worth not even having recovered from the last one. That's not a great place to start. 

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The Travesty of Political Psychiatry

12/22/2017Yuri N. Maltsev

Psychiatry possesses a built-in capacity for abuse that is much greater than in any other area of medicine. Politicians realized that and abused psychiatry for blaming their opponents as mentally sick, retarded and dangerous. It was happening all around the world but was mostly prominent under authoritarian and totalitarian socialist regimes. Now it became a part of the arsenal of the political Left here which is completely crazed about the counterrevolutionary results of the last presidential elections.

Following the tradition of Hitler, Stalin, Khrushchev, Mao and Brezhnev “27 Psychiatrists and Mental Health Experts” including Noam Chomsky and Gail Sheehy, who are as much of being psychiatrists as I am an Emperor of China, published a political pamphlet “The Dangerous Case of Donald Trump: 27 Psychiatrists and Mental Health Experts Assess a President (by Bandy X. Lee, Robert Jay Lifton, Gail Sheehy, William J. Doherty, Noam Chomsky, et al).

It is the exactly same type of abuse of psychiatry as was condemned by the American Psychiatric Association’s (APA). The Section 7, of APA’s Principles of Medical Ethics says:

On occasion psychiatrists are asked for an opinion about an individual who is in the light of public attention or who has disclosed information about himself/herself through public media. In such circumstances, a psychiatrist may share with the public his or her expertise about psychiatric issues in general. However, it is unethical for a psychiatrist to offer a professional opinion unless he or she has conducted an examination and has been granted proper authorization for such a statement”. Known as the “Goldwater principle” it is fully shared by the American Psychological Association.

In gross violation of APA’s Principles of Medical Ethics Anti-Trump political activists masquerading as “scientists” can just “diagnose” someone based on prepared speeches, tweets and TV appearances. Fanatics of the Left see no end in their crusade to trash, defame and remove President Trump from office. Bandy Lee apparently can evaluate someone she’s never met and conclude that Trump is mentally unstable, with the potential of turning violent, even though he’s never demonstrated any of such symptoms.

Diagnosis “in Absentia”

During the Nazi era and the Soviet rule political enemies were labeled as “mentally ill” and subjected to inhumane “treatments”. In the period from the 1960s up to 1986, abuse of psychiatry for political purposes was reported to be systematic in the Soviet Union, and even internationally renown Nobel laureates like Solzhenitsyn and Sakharov were all declared paranoiacs and schizophrenics. The fame of the chief KGB psychiatrist Andrei Snezhnevsky who gave the diagnosis of sluggish schizophrenia to numerous “enemies of the people” in absentia including Nobel laureates Andrei Sakharov, Joseph Brodsky and concluded that they were worthless. The prevalence of Snezhnevsky’s theories directly led to a broadening of the boundaries of disease such that even the mildest behavioral change could be interpreted as indication of mental disorder1. His numerous followers in the West definitely include Bandy X. Lee, Robert Jay Lifton, Gail Sheehy, William J. Doherty, Noam Chomsky and other 22 American “psychiatrists” who never met or examined Trump but “diagnosed” his disdain of socialism as a mental disease.

The practice of incarceration and torture of political adversaries in psychiatric hospitals in Eastern Europe, PRC, and the USSR damaged the credibility of psychiatry as a science in these states and internationally. I was blessed to know a great psychiatrist Tom Szasz who led a movement against psychiatry as it was and still used by Bandy Lee and her ilk as another form of coercion and violence against us. I recommend his “Idleness and Lawlessness in the Therapeutic State”to everyone to read as it is a classic of our time. Political abuse of psychiatry taking place in the US today should be condemned; otherwise all of us can discover ourselves restrained in psychiatric wards.2

Republished from Lewrockwell.com.

  • 1. Bloch, Sidney; Reddaway, Peter (1985). Soviet psychiatric abuse: The shadow over world psychiatryWestview PressISBN 0-8133-0209-9.
  • 2.  http://www.szasz.com/idleness.pdf
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Three Cheers for the GOP Tax Plan

12/20/2017Tho Bishop

Last night the Senate passed the Republican proposed tax plan, a major political victory for Trump and the GOP-controlled Congress. 

At the Mises Wire, we have featured numerous articles pointing out many of the fallacies involved with the general debate on the issue of "tax reform." For example, the absurdity of "revenue neutral" reform, the danger of raising rates through eliminating loop hopes, the fallacy of trying to address the deficit through eliminating deductions on state and local taxes, and the general notion that tax breaks can be equated to tax subsidies. While the Republican bill does fall for some of these traps, the result of the bill as a whole is a genuine reduction in the tax burden for the majority of Americans. That is always something worth celebrating.

There are additional benefits to be found within the bill as well.

For example, the elimination of the Obamacare individual mandate is a small, but significant, step to improving the American healthcare system. As I noted in March, when Paul Ryan's attempt at Obamacare reform failed, the rise of direct primary care and other market solutions meant that the best thing the GOP could do is simply provide as much freedom as possible for Americans to opt out of government-managed insurance markets:

Given that this is happening naturally on the market already, the legislative focus for those in Washington concerned about American healthcare should be preventing any future laws and regulations that would destroy this model going forward. Further, rather than trying to completely overhaul Obamacare, simply eliminating the individual mandate tax and allowing Health Savings Accounts to be used for healthcare membership would be subtle ways of empowering the market to revolutionize American medicine. This should be coupled with real tax cuts, not “revenue neutral reform” to help Americans keep their own hard-earned money to help pay for it.

The tax bill is also a significant step forward for American's looking to opt out of government education. A provision, spearheaded by Senator Ted Cruz, expanded 529 education savings accounts so they could be used for K-12 schooling, and not just college tuition. While we have frequently seen Republican education reform packages expand the role of tax-funded charter schools, this measure is the rare victory for true private schools - such as Bob Luddy's Thales Academy - that are able to educate without the strings of the state attached. 

Now of course, for all the good the bill does do, there is one thing that it doesn't do: cut spending.

As we've noted over, and over, and over again, we will never see the true benefits of reducing government revenue if we don't couple it with a reduction in what the government consumes. A growing national deficit will have to be paid one day, one way or another. As American history is filled with reminders on the difficulty politicians face in raising taxes, this means we are likely to see the difference made up either by inflation or another form of default. (This likely outcome is why I plan to invest a portion of my tax savings in alternatives to Federal Reserve Notes.)

There are also a number of giveaways that were rewarded in order make sure the everyone fell in line for the vote. Given the track record of Republican moderates like Susan Collins, just about anything she gained from the deal is a loss for the rest of us. Further, tis the season for a number of terrible bills to be passed through DC in the coming week and a half as Washington continues its century-old tradition of eroding your freedom under the cloak of the holiday season. In the words of Kurt Vonnegut, so it goes. 

So while this tax plan isn't a silver bullet for all that ails the US economy - and is certainly no sign that the swamp is truly being drained - anything that allows Americans to keep more of their pay check, enables more choice in healthcare, and boosts private competition to government schools is a victory worth celebrating. 

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The Overreaction on Trump's Proposed Change to Federal Lands

12/14/2017Ryan McMaken

The Trump administration recently announced it was considering a partial reversal of the Obama administration's designation of new national monument lands in Utah. The lands in question were already federal lands, but Obama's move heightened restrictions on the usage of the land, and lessened the likelihood the lands would ever be transferred to state control. 

Trump's announcement brought overreactions from many, some of whom implied that the Trump administration was somehow privatizing the land. This is not at all the case, and there's little reason to believe that the federal lands in questions will stop being federal lands any time soon. See: "Trump's Action on Federal Lands is Not Privatization."

The Blaze called me for some additional comments: 

“There seems to be an overreaction, from both sides, in looking at this as a major change,” [McMaken] said.

From the start, McMaken was irked by the misconception that the issue was being framed as a situation in which public lands were being privatized. Mainstream media organizations “acted as if this was a situation in which public lands were going to be sold off into private hands, and that’s not the case,” McMaken said...

“There’s an assumption among many Americans people in Eastern states that it’s either federal land or it’s private land,” McMaken said. “But when you look at a lot of these Western states, they have lots of state parks and if you poll the local population, what you’re gonna find out is that people love their public land.”

McMaken added: “It’s not a situation where land is being de-federalized. It was federal land, and it’s going to continue being federal land.

“There is a common misconception that federal lands are the only type of public lands,” McMaken said. “This, of course, is not the case. Even if the Trump administration were to turn some federal lands into state lands, the state legislatures in those states would then face enormous pressure from voters to keep those lands as public lands for the use of residents. It is by no means a safe assumption that any lands that cease to be federal lands will become privatized.”

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The Fed's New Inflation Measure Moves Beyond Consumer Prices

12/13/2017Ryan McMaken

If you've been shopping for real estate or stocks lately, you might be wondering how the Fed gets away with all that talk about how inflation is "low," "muted," or "below expectations."

uig.PNG

The reason for this is the Fed largely bases policy on consumer prices, rather than on a broader measure that might include a variety of assets. The Fed often even excludes food and energy from its inflation measure.

Needless to say, this leaves much to be desired from any true measure of inflation. As Brendan Brown has explored multiple times here at mises.org, asset prices are a key indicator of where we are in the business cycle, and are essential in evaluating the real effects of monetary policy.

Recognizing that consumer prices are doing a bad job at giving us a true picture of the economy, the New York Fed in September released a new measure of inflation called the Underlying Inflation Gauge (UIG) which takes into a account a broader range of products, services, and assets.

Not shockingly, the UIG shows a higher rate of inflation than the CPI, and also shows a different trend. the UIG has been increasing in recent years while consumer price trends have been falling.

In October, the CPI measure was 2.0, while the UIG measure was 2.9. Moreover, the UIG measure is at the highest level recorded since September 2006, near the height of the last housing bubble.

The implications for monetary policy can also be seen in the graph. While consumer price growth (according to the CPI) was plummeting in 2014 and 2015 — bottoming out at -0.2 percent in April 2015 — the UIG measure was holding much more steady. It hasn't fallen below one percent since the last recession.

Last week at Bloomberg, Joseph G. Carson delved into what we can learn about monetary policy using the new measure: 

Some may argue that the recent explosion in asset values could be tied to the new technological advances and gadgets. While these new innovations have clearly added value to the economy and created enormous wealth in the process, they cannot fully explain the broad surge in all types of real and financial asset values.

In a fundamental sense, asset values are highly contingent on the current level of and future expectations for inflation and interest rates. To be sure, a persistently low inflation rate suggests little downside risk to the economy, creating a vision of endless and uninterrupted economic growth, boosting investor confidence and risk taking. 

Monetary policy has played a key role in asset price cycles. Not only has the Federal Reserve used its balance sheet to buy trillions of dollars of financial assets, boosting the values of all type of assets and anchoring long-term rates in the process, it also directly linked its official rate decisions to a specific rate of consumer inflation. The transparency of its future policy path has created the impression of an accommodative monetary policy, encouraging more risk-taking in asset markets...

The UIG carries three important messages to policy makers: the obsessive fears of economy-wide inflation being too low is misguided; monetary stimulus in recent years was not needed; and, the path to normalizing official rates is too slow and the intended level is too low.

Harvard University professor Martin Feldstein stated in a recent Wall Street Journal commentary that “The combination of overpriced real estate and equities has left financial sector fragile and has put the entire economy at risk.” If policy makers do not heed his advice odds of another boom and bust asset cycle will be high -- and this time they will not have the defense mechanisms they had after the equity and housing bubbles burst. 

Here at mises.org, of course, we've explored the problem with the "two-percent" standard for inflation, while noting the problem with ignoring asset prices. 

I do not share the Fed's hope that we can tinker our way to an especially good measure of price inflation via the usual empirical measurement tools. But some measures are indeed better than others, and it is good to see that even the Fed is admitting that the long habit of picking and choosing a quite limited number of consumer prices has been especially bad in analyzing where we are in the boom-bust cycle. 

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The Best Defense Is a Capitalist One

12/07/2017Ryan McMaken

Political scientist John Mueller is not convinced that nuclear weapons are the driving force behind the lack of major wars in recent decades. His article "The Essential Irrelevance of Nuclear Weapons" in International Security (Fall 1988) offers a informative contrary view to the often-bland assertion that nuclear weapons — and not the highly destructive nature of conventional wars — are what keep world powers away from new wars. 

In the case of the deterrence offered by the United States, Mueller is especially unconvinced, especially since the potential military power of the US government if far greater than anything any other single state can muster. 

It's not just fear of American nuclear weapons that's a deterrent, Mueller notes. It's American economic power that really matters. In discussion of post World War II deterrence against the Soviets, Mueller examines how American economic power inspired fear: 

[E]ven if one accepts these assumptions [i.e., the assumption that American nuclear power restrained the Soviets in Western Europe], the Soviet Union would in all probability still have been deterred from attacking Western Europe by the enormous potential of the American war machine. Even if the USSR had the ability to blitz Western Europe, it could not have stopped the United States from repeating what it did after 1941: mobilizing with deliberate speed, putting its economy onto a wartime footing, and wearing the enemy down in a protracted conventional major war of attrition massively supplied from its unapproachable rear base. 

The economic achievement of the United States during the war was astounding. While holding off one major enemy, it concentrated with its allies on defeating another, then turned back to the first. Meanwhile, it supplied everybody. With 8 million of its ablest men out of the labor market, it increased industrial production 15 percent per year and agricultural production 30 percent overall. Before the end of 1943 it was producing so much that some munitions plants were closed down, and even so it ended the war with a substantial surplus of wheat and over $90 billion in surplus war goods. (National governmental expenditures in the first peacetime year, 1946, were only about $60 billion.) As Denis Brogan observed at the time, "to the Americans war is a business, not an art."

If anyone was in a position to appreciate this, it was the Soviets. By various circuitous routes the United States supplied the Soviet Union with, among other things, 409,526 trucks; 12,161 combat vehicles (more than the Germans had in 1939); 32,200 motorcycles; 1,966 locomotives; 16,000,000 pairs of boots (in two sizes); and over one-half pound of food for every Soviet soldier for every day of the war (much of it Spam). It is the kind of feat that concentrates the mind, and it is extremely difficult to imagine the Soviets willingly taking on this somewhat lethargic, but ultimately hugely effective juggernaut. That Stalin was fully aware of the American achievement-and deeply impressed by it-is clear. Adam Ulam has observed that Stalin had "great respect for the United States' vast economic and hence military potential, quite apart from the bomb," and that his "whole career as dictator had been a testimony to his belief that production figures were a direct indicator of a given country's power." As a member of the Joint Chiefs of Staff put it in 1949, "if there is any single factor today which would deter a nation seeking world domination, it would be the great industrial capacity of this country rather than its armed strength."Or, as Hugh Thomas has concluded, "if the atomic bomb had not existed, Stalin would still have feared the success of the U.S. wartime e~onomy."

After a successful attack on Western Europe the Soviets would have been in a position similar to that of Japan after Pearl Harbor: they might have gains aplenty, but they would have no way to stop the United States (and its major unapproachable allies, Canada and Japan) from eventually gearing up for, and then launching, a war of attrition.

In his book Wartime, Paul Fussell briefly examined the industrial nature of the Second World War. 

[W]hat counted was heavy power and it is the bulldozers, steam-rollers, and the earth graders of the Seabees that constitute the sppropriate emblems of the Second World War. "Perhaps there was a time," says Geoffrey Perrett, "when courage, daring, imagination, and intelligence were the hinges on which wars turned. No longer. The total wars of modern history give the decision to the side with the biggest factories." And in Europe as well as the Pacific, the industrial basis of "victory" was even more clear. As Louis Simpson puts it in his poem "A Bower of Roses," in one battle near Dusseldorf:

For every shell Krupp fired, 

General Motors sent back four.

...One Canadian has remembered: "I knew we were going to win the war when I saw the big Willow Run aircraft factory outside Detroit. My god, but it was a big one."

Thus, for those states, like the United States that benefit from immense capitalist-fueled wealth, global deterrence is built in. Mueller even concludes that a standing army and a ready navy are not even especially important. It is the potential for mobilizing large amounts of warmaking machinery that poses the real deterrence to foreign threats.

Nuclear weapons however, remain relevant since they level the playing field for small states. 

Not all states — or, more importantly, not even all alliances of small states — can access an enormous industrial output that the North Americans can. 

As Mueller explains, those states are already deterred from making war on large wealthy states. Large wealthy states, however, are not deterred from making war on smaller, poorer states. 

Thus, for small states, nuclear weapons do have importance as a defensive weapon. North Korea, for example, can't possibly hope to ever win a war of attrition with even a small industrial power. However, if it can deter attack on itself with even a small number of nuclear warheads that can be delivered to the urban centers of its enemies. 

Naturally, this only works from a defensive point of view. Nuclear weapons offer no offensive advantage:

Both defensive and offensive realists agree, however, that nuclear weapons have little utility for offensive purposes, except where only one side in a conflict has them. The reason is simple: if both sides have a survivable retaliatory capability, neither gains an advantage from striking first. Moreover, both camps agree that conventional war between nuclear-armed states is possible but not likely, because of the danger of escalation to the nuclear level. 

While it's true that maintaining nuclear weapons is somewhat expensive, it's quite cheap compared to maintaining a large conventional navy, air force, and industry from which to produce conventional weapons. 

Ultimately, though, what really grants a state or group of states true power to deter attack and invasion is access to large amounts of capital. 

Lenin wasn't imagining things when he looked around the world and saw that the capitalist powers of the world were waging multiple wars. He was wrong, of course, that capitalism causes war. But, there is no denying the wartime capability is greatly enhanced by the wealth created through the trade, productivity, and wealth generated by capitalists. Unfortunately, this defensive capability has come with vast offensive capability as well. 

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The Supreme Court and the Right to Not Bake a Cake

12/06/2017Ryan McMaken

Anyone who claims there's too much democracy in the United States needs to keep in mind that American law and policy is ultimately decided by five millionaires at the Supreme Court. 

This week, we're being reminded that the Supreme Court of the United States is hearing arguments in the case of a small-time baker who refused to bake a cake for a gay wedding. This, apparently, is a matter of such importance that it requires the intervention of the federal government and its court system to decide for whom a tiny small business shall be forced to bake desserts. In other words, the court's majority of five people will decide for 320 million people what is mandatory for anyone who wants to open a small business in the United States. 

The fact that Americans regard this sort of thing as perfectly natural and legitimate illustrates just how thoroughly Americans have abandoned all notions of self government and any opposition to rule from distant, powerful elites. 

Opponents of Donald Trump may be wringing their hands about the rise of populism, but the public's continued deference to the Supreme Court illustrates quite well that populism in the United States, far from growing out of control, is quite timid and of no threat to anyone currently in power. 

In the discussion of the Court's decision to hear the case, we're reminded of two important issues:

1. The Supreme Court's ability to decide the Constitutionality of every law in the United States — from local ordinances to federal statutes — is based on a fanciful myth.

2. The American legal concept of "public accommodation" essentially abolishes property rights. The proper remedy is to restore property rights — and to steer clear of endless and pointless debates about religious freedom or freedom of speech. 

On the first point, see:

"The Mythology of the Supreme Court" by Ryan McMaken - A discussion of how the Supreme Court jealously protects its political power and encourages an aura of manufactured majesty with measures such as prohibiting television cameras in its chambers. 

"Abolish the Supreme Court" by Ryan McMaken — in the wake of the death of Justice Scalia, we examined how appointments to the court have always been political appointments, and often have been done for purposes of political payback and pandering to certain special interests. Judges are not, and never have been, lofty legal scholars who steer clear of partisan politics. 

"Scalia's Fate" by Jeff Deist: Deist reminds of of several important points about the Court: 

Culture wars should not be legal wars. As Ron Paul explained time and again during his years in Congress, the public remains deeply misinformed about several key points:   

  • The concept of judicial review is a fabrication by the Court, with no basis in Article III. 
  • Constitutional jurisprudence is not constitutional law.
  • The Supreme Court is supreme only over lower federal courts: it is not supreme over other branches of government.
  • Congress plainly has constitutional authority to define and restrict the jurisdiction of federal courts.

And on the matter of public accommodation, we've taken a look at the several ways that micromanaging the actions — and even the imagined intent — of small business owners has long been an especially pointed assault on private property orchestrated by the Courts and Congress. 

"The Trouble with Public Accommodation" by Ryan McMaken - if we're worried about the availability of resources for disfavored minority groups, the answer lies in more freedom, not less. 

"'Discrimination' Isn't About Religion, It's About Private Property" by Ryan McMaken - framing a baker's of photographers as a matter of "religious freedom" ignores the fact the issue is really just about property rights. 

 

 

 

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Trump's Action on Public Lands in Utah Is Not Privatization

12/04/2017Ryan McMaken

As we've noted at mises.org many times, the amount of land owned by the federal government in Western states is enormous. Today, the feds control 640 million acres (not counting the far larger federally-owned areas of coastal sea floor). And in most Western states, the Federal government owns more than a third of all the land. In the case of Utah, the federal government owns 65 percent.

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And, the Federal government is likely to continue owning at least 65 percent of the land in Utah, in spite of a recent decision by the Trump administration to shrink two National Monuments created by the Obama administration in its final months. 

In an article titled "Ruled by DC: Get the Feds Out of Western Lands," I looked at the two new monuments: 

In the final days of his administration, President Obama has decided that with the stroke of pen, he shall further consolidate direct federal control over lands within Western states. Specifically, Obama created the Bear Ears National Monument and the Gold Butte National Monument in Utah and Nevada, respectively. The Obama Administration claims that Obama's unilateral edict was necessary because Congress had not passed any legislation on the matter.

Indeed, the Obama-appointed Interior Secretary stated that "protecting the area using legislation would have been preferable" but that in the absence of legislation, it was necessary to simply declare the lands to be National Monuments. 

Today, the Trump administration announced that it will take a different approach

President Donald Trump said Monday that he’ll shrink two national monuments in Utah that contain stunning red-sandstone vistas, historic relics and energy resources, arguing his predecessor overstepped in protecting the land...

“Some people think that the natural resources of Utah should be controlled by a small handful of very distant bureaucrats located in Washington,” Trump said. “They’re wrong. The families and communities of Utah know and love this land the best, and you know the best how to take care of your land.”

If one takes a look at the media reports on this matter, one might be left with the impression that the land is ceasing to be federal land — which is not happening.

There is no indication that the land is being "privatized" in any way. Instead, it appears much of the land would simply revert to its old status, which was as federal land administered by by Bureau of Land Management or the Forest Service. 

Indeed, this article by Jason Chaffetz confirms this: 

In the case of Bears Ears National Monument, all of that land was already federal land mostly managed for conservation use. With President Obama’s monument designation, the maintenance fell to the already-strapped National Park Service. Many of these lands were once managed successfully by other agencies – like the Bureau of Land Management and U.S. Forest Service – and can be again.

In spite of the fact that these "public" (i.e., government-owned) lands look to continue to be public lands, one observer claimed the move is: "the largest attack on parks and public lands in our nation’s history."

Now, it may be that local politicians want to privatize the land. For that to happen, two things would need to happen first: 

  1. The land would need to be handed over the state or local governments.
  2. The state and local governments would then have to privatize the lands — often over the objections of local voters. 
  3. OR, the Federal government could sell off land directly (The Trump order doesn't do this.)

But let's say the first condition actually happens, and millions of acres of federal lands are handed over to the Utah government. Well, that's obviously not privatization. 

But even if the State of Utah controlled the land, it would still have to deal with what would be predictable opposition from local residents. This would include sportsmen and local merchants — people who are hardly lefty tree-huggers. 

Chaffetz himself got a taste of this when he pushed legislation de-federalizing 3 million acres (out of 640 million acres) of federal land. It didn't go over well with hunters, to say the least. But local also know that local wilderness lands can be a cash cow for the local tourist industry. 

In other words, de-federalization of land is a long way from privatization of land. 

But, for everyone outside of Utah, this should be none of our business. If federal lands become Utah lands — as should be the case for all federal lands inside the boundaries of any US state — then it becomes a local matter for people in Utah. 

And out West, most voters love their public lands. 

There's one caveat: we've heard a lot about how various groups from Indian tribes have supported the designation of the two monuments because they are an important "cultural landscape."

But here's the thing: either these lands are Indian lands or they are not. If they are Indian lands, then the proper thing to do is make them tribal lands, and not federal lands. (Tribal lands are important, and there should be more of them.)

But, if they are not really tribal lands, then their administration needs to be state or local or private. After all, ownership of large tracts of land is just another "power" the US government invented for itself. 

For more, see: 

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The State and Local Tax Deduction Is Not a Subsidy

11/30/2017Ryan McMaken

Roy Cordato recently wrote a very good article for the Carolina Journal on the deduction of state and local taxes:

Should you ever be taxed on “income” that is not, in any meaningful sense, yours?

This is the fundamental question facing Congress in deciding whether to eliminate the deductibility of state income and local property taxes from federal taxable income, a policy change proposed by President Trump. Unfortunately, this question is unlikely to become part of the debate over tax reform. Instead, those who support the president focus on issues that are completely beside the point.

Some are arguing people living in higher tax states “benefit more” from the current system of state and local tax deductibility than people in low tax states. Those who point out this discrepancy often go on to claim this justifies the elimination of the deduction because these differentials between states actually constitute an “unfair subsidy” to those living in high tax states — New York, Connecticut, and California, for example — by those living in lower tax states like North Carolina, Texas, and New Hampshire.

But to call this deduction a subsidy of one set of taxpayers by another is putting the cart before the horse. The first question that needs to be answered is, is it appropriate, from either an ethical or economic efficiency perspective, to tax the revenue used to pay state and local taxes in the first place? If it is not, then any talk of subsidization of one group by another as a result of not taxing these revenues is irrelevant. Plus, in a tax setting, to subsidize means either to directly take income from some and transfer it to others or to benefit some categories of taxpayers by allowing them to operate under a different set of rules than all other taxpayers. The deductibility of property and sales taxes does not fit either of these categories.

Supporters of this change also argue the current system encourages higher taxes at the state and local levels. First of all, it’s not clear why this would justify taxing revenue that, from an ethical or economic perspective, shouldn’t be taxed in the first place. Once again, the cart is going before the horse. But what makes this a rather bizarre argument, particularly for conservatives, is that their remedy is to expose more of a person’s income to taxation at the federal level. They are, in fact, arguing for a transfer of taxing power from state and local governments to the federal government. So much for federalism.

So again, the question that goes begging is, should you be taxed on income that you are not allowed to take ownership of? As a question of morality or tax fairness, it is difficult to see how the answer could be yes. I don’t think anyone would claim that it is morally justified for an individual to be taxed on someone else’s income. But this is exactly the case with income that goes to paying state income taxes and property taxes. It is income we are forced to give up all rights to, with no enforceable promise of anything in return. Morally, as opposed to legally, this money is not our own, i.e., we have no choice about how it is allocated. Therefore, to not allow state income taxes to be deductible from federal taxes is the moral equivalent of taxing people on income that is someone else’s. In this case, it belongs to the state or local government.

[Read the rest of the article.]

One of Cordato's best observations here is that — even if one is okay with the idea of taxation in general —  it is totally inappropriate to tax income that the taxpayer is being forced pay as taxes. Income that is taxed is never really income at all. It's just money the taxpayer must hand over involuntarily without being able to save it, spend it, or do anything other than watch it go straight out the door to the government. To call this money "income" is thus absurd. But this doesn't stop that advocates for the elimination of the deduction on those taxes. A good sampling of their demands for more taxes can be found in their response to my article on the topic. They're so fired up about the imaginary "subsidy" that the deduction creates, they want to tax "income" that isn't income at all. 

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The November-December issue of The Austrian is now online!

11/28/2017Ryan McMaken

The November-December issue of The Austrian, now in mailboxes, is now also available online [PDF]. In this issue, we take a look at whether central bankers can really be trusted to centrally plan the global economy. Also included is the latest book review from David Gordon, and numerous photos from our 35th Anniversary Gala and from our Fellows program.

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