Economics & Finance

Glenn Reynolds speculates about declining political support for the death tax:

I think that one difference may be that society does less to “make it possible” for people to get wealthy now. A hundred years ago, or even fifty, the politics of inheritance taxes were different. But then the government mostly defended the country and engaged in various public-good activities, like building roads or supporting research. There was pork, and income transfer, of course, but it was a much smaller part of the picture. So the notion that one was “giving back” to a system that made wealth possible made some sense.

He’s right, but it’s worse than that. Modern government not only transfers wealth on a grand scale from one group to another, it seeks to make the accumulation of wealth much more difficult in the first place. A quick calculation of how many marginal dollars one has to earn in 2005 vs. 1900 to accumulate an additional dollar of after-tax estate value makes clear how much harder it is now. (And that calculation considers only explicit taxes, not the many regulatory and legal costs — licensing, zoning, environmental regulations, safety regulations, EEOC regulations, lawsuits, etc. — that didn’t exist in the past.) From the perspective of many people who are actually trying to create wealth, government is the enemy. The way to make things better for everyone is to reduce disincentives to wealth creation, not to punish further those who are successful enough to run the government’s gantlet.

Leftists who write things like “fuck the small businessman” would do well to ask themselves where our society’s wealth comes from. It comes largely from productivity gains based on capital investment. Inheritance is traditionally an important source of such capital. Taxing inheritance reduces the capital stock, because government won’t invest it as effectively as family will, and because productive people have less reason to work hard, save and invest when they can’t share their wealth with their heirs. It’s also wrong to confiscate people’s property.

Blog goddess Natalie Solent has written two posts that I’d like to bring to your attention, but I’m only going to discuss them in one. (What a bargain! And we pass the savings on to you!)

The first post is a fisking of a British textbook used in a Religious Studies course. Natalie tears into the material with gusto, since the author of the textbook blames the inequality of living standards between developing nations and industrialized countries on world trade and a lack of foreign aid. NATO also adds to the problem by acting as the world’s police force.

Got that? World trade creates poverty. Mean nations who happen to be rich won’t give their wealth away to those who deserve it. And NATO screws everyone over by trying to keep genocide and regional conflicts from flaring up.

If this is what they’re teaching the youth in the UK then I weep for the Commonwealth. I’m also wondering why some Socialists are writing a textbook on religion, since I thought they hated that sort of thing.

Click on the link and read the post. It’s very good, and Natalie does a very good job of pointing out the absurdity of it all. But that’s not what’s really puzzling me.

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Friedman discusses Social Security, deficits, trade, monetary policy, immigration, education and more. Very much worth reading, as always.

(via Don Luskin)

The importance of the growth rate increases, the further into the future we look. If a country grows at two percent, as opposed to growing at one percent, the difference in welfare in a single year is relatively small. But over time the difference becomes very large. For instance, had America grown one percentage point less per year, between 1870 and 1990, the America of 1990 would be no richer than the Mexico of 1990. At a growth rate of five percent per annum, it takes just over eighty years for a country to move from a per capita income of $500 to a per capita income of $25,000, defining both in terms of constant real dollars. At a growth rate of one percent, such an improvement takes 393 years.

–Tyler Cowen

Some manufacturing executives are complaining that they can’t find applicants with the right skills for the available jobs. According to John Engler, President of the National Association of Manufacturers, “A full 36 percent of our members have said they have employment positions unfilled right now because they cannot find qualified workers. This confirms what our members have been telling us: that the people applying for manufacturing jobs today simply do not have the math, science and technological aptitude they need to work in modern manufacturing.”

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