Browsing the blog archives for November, 2015.

Trump and Political Correctness

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Political correctness is killing all of us, but now there’s Donald Trump.

Before I continue this post, let me clarify that I have not endorsed Trump. His candidacy clearly offers some vigor and vibrancy to the field, but we’re still early in the vetting process. I largely agree with him on a number of issues, however, including his recognition of two menaces that face our nation—illegal immigration and political correctness. I don’t want to get into the weeds of policy in this post, but suffice to say that these two issues are joined at the hip. Illegal immigration continues unabated in the U.S. and very few politicians prior to Trump have been willing to address it because of fears of political correctness.

Here’s how it works. Anyone who opposes open borders is a racist because the majority of current illegals in our nation are not of European descent. Besides, we are told that, “the U.S. is a nation of immigrants,” so anyone who seeks to explain the obvious flaws in connecting open borders today to open immigration a century ago is ignorant of history. There’s a script you have to follow on this issue lest you be scorned as a bigot.

Of course, the political movement correctness is internally inconsistent. In the immigration example, notice how justifying today’s open borders on immigration policies of the 1800s and early 1900s is legitimate and based on an understanding of history. Of course, the world has changed in many ways progressives have championed. The Federal Researve, fiat currency, Social Security, and Obamacare all represent stark departures from life in the U.S. circa 1900. The PC comeback to arguments for the gold standard claim that things have changed and you can’t live in the past. Even those who question man-induced climate change are called “flat-earthers.”

In short, PC is about stifling debate on certain issues. It leverages emotion and surface-level logic to squelch arguments that would be difficult to win in a more rational setting where all sides would be required to defend their claims in detail. It hides behind “stop the hate” and other slogans designed to portray free speech as irresponsible. The PC crowd demands that opposition speech is insensitive to certain groups of people and therefore should be controlled. Apologies are demanded from anyone who utters anything that might be offensive even if it is unintended or misunderstood. Fearing reprisal from the media and others, most politicians refrain from discussing certain topics and issue apologies whenever demanded. Of course, this only legitimizes the PC effort.

Nowhere is the PC movement more pervasive than on the college campus. They promote “safe zones” to protect students from alleged harassment. They designate certain areas on campus as “free speech zones” so as to restrict certain kinds of speech elsewhere. Oppose the safe zones and you are tagged and someone who seeks to promote intolerance. Even capitalism is a dirty word and its proponents are tagged as insensitive to the plight of those it has allegedly left to suffer.

Back to Trump. In the early stages of his campaign—when naysayers told us that he would not be taken seriously—demands for apologies were constant. A few examples include his use of the term “anchor baby,” his supposed indirect insult of Jeb Bush’s wife, and his lack to response to a statement (not a question) about President Obama’s religion. In each of these instances, Trump refused to apologize. Since then, the demands have waned, and many Americans seem to appreciate Trump as someone willing to speak his mind, even if his choice of words isn’t always perfect. His style is rubbing off on others. Even Jeb Bush mustered up the courage to use the term “anchor baby” without apology.

I’m a big proponent of using choosing your words wisely, especially when discussing difficult topics. I also understand that you shouldn’t yell “fire” in a crowded theater or directly incite a riot. However, I understand that nobody is perfect, and I am willing to live with occasional utterances of ignorance or stupidity in the interest of the free exchange of ideas. We need more speech, not less. Win or lose, if Trump is able to expose PC for the effort at mind control it is, then more politicians might be willing to engage in direct conversations about the future of our country without fear of reprisal. For this reason, if for no other, I’m glad to see Trump in the race.

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Evaluating the Republican Tax Proposals

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Many of the Republican candidates have been chastised because their proposed tax plans will increase the budget deficit. Pundits (and CNBC debate moderators) frequently argue that a net decrease in rates without cutting spending will increase the gap between government revenues and expenditures, thereby increasing the deficit. But this argument is problematic for one key reason.

Economies are dynamic and consist of lots of moving, integrated parts. Because each of these parts influences other parts, it’s inappropriate to assume that changing one of them will not have an effect on the others. Raising the minimum wage provides a good illustration because it prompts companies to hire fewer workers and/or raise prices, thereby increasing unemployment and inflation. Consumers who spend more on these higher-priced products and services have less money to spend elsewhere, thereby hurting other businesses. Those who claim that raising the minimum wage simply lines the pockets of minimum wage workers without considering the negative repercussions in other areas are shortsighted. They are engaging in static analysis—assuming one change will not result in other changes—which is why their conclusions are incorrect.

Economic proposals should be assessed with dynamic analysis so that their long term, multifaceted effects are evaluated. Consider the following principles that support dynamic analysis. I could list more, but these are some of the obvious ones:

  1. Simplifying a tax system improves business decision-making because it becomes easier to evaluate the financial pros and cons of each alternative.
  2. Lowering the marginal tax rate increases the incentive to produce; in some instances the increased production can more than compensate for the lower rate, and tax revenues can actually increase. This occurred during the Reagan years, as explained in part by the Laffer Curve.
  3. Tax incentives/breaks/loopholes provide incentives to individuals and companies to spend less efficiently in order to get the tax benefit. Eliminating these incentives helps all of us make better, more productive decisions. The mortgage tax deduction is a good example because it provides an incentive for each of us to spend more on housing that we otherwise would. Why not buy a bigger house when part of the higher payment can be passed along to other taxpayers?
  4. Taxes punish behavior, so they should be applied in the least punitive manner possible. Consider that taxing income punished income generation, while taxing sales punishes consumption. Given a choice, it’s better to tax sales because the alternative to spending is saving, which is also good for the economy.

There are various Republican tax proposals on the table, each of which should be evaluated through dynamic analysis.  Most of them score well along the above criteria because they lower taxes and simplify decision-making. So why do some pundits and voters fail to grasp this? Some can be excused because they don’t know any better, but others see static analysis as a useful shortcut to make a political point. Central planning works well in a static world because its unintended, negative consequences are not considered. Others take a static approach because it can be based in emotions. Responses like “We can’t give tax breaks to the rich” or “All workers deserve a living wage” illustrate the emotional folly of this type of thinking. They work well with the misinformed.

The solution to this problem is simple, but not easy. The next time your leftist friend fails argues for or against a policy without considering its intermediate and long-term economic and social effects, take the time to outline them in detail in detail. I suggest that you keep the discussion as simple as possible and avoid using technical terms like static and dynamic analysis. Remember…the argument for free enterprise solutions always strengthens when long-term effects are considered. Some won’t have the patience to endure a logical discussion that digs deeper than a sound bite. Some will exit the conversation when they begin to see their own ideas beginning to unravel. But a few will see the light, and the extra time is worth it.

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