The Miller’s Organic Farm Case: Part 1 Why write about a disturbing misfortune when to all appearances nothing can be done? In the Amish village of Bird-in-Hand in a remote area of Pennsylvania, Miller’s Organic Farm has been in business for a century. Today, it supplies organic foods—grass-fed beef, raw milk and eggs, dairy from grass-fed water buffalo, and all types of produce—to a private food club of 4,000 members who pay top dollar for high-quality whole food. Members want food from a farmer who doesn’t process his meat and dairy products at U.S. Department of Agriculture facilities. Aaron Miller,  the owner, chooses to defend his preparation of food as the way God intended it. He himself has run the farm for a quarter of a century with no electricity, no fertilizer, and no gasoline. Observers are impressed with crop yields he achieves by the oldest and 100 percent organic methods. The farm’s website says:  “…we are proud to be entirely chemical, cruelty, and GMO-free. The animals are born and raised without antibiotics or hormones, and they spend their entire lives naturally and stress-free out on pasture. All the farm’s food is traceable, pure, and grown on nutrient-dense soil, under traditional time-honored methods.” Sounds to me like the consolidated dream about a dozen environmentalist organizations: opposing animal cruelty, GMO, and use of chemical fertilizers—not to mention eliminating fossil fuels (no gas, no electricity). Last summer, armed federal agents sent by the USDA demanded that Miller cease operations and prepared to hit him with more than $300,000 in fines. That would shut Amos Miller down. They demanded that he stop selling meat until he comes under federal agencies that regulate it. Miller responds that such regulation “hurts the nutrition of the food…you wash it in these things, you’re given these vaccines, and the cows get all types of medicine, I don’t do any of that…your regulatory process will actually hurt the quality of my food and that’s what I’m being paid top dollar for…” Federal agents camped at the farm to take inventory of his meat, dairy, and other food to make sure he is not selling anything and not increasing his production. Miller took the case to the U.S. District Court of Eastern Pennsylvania, which ruled in favor of the USDA. The USDA dictated the following text required to be posted on the farm’s website: “To the Members of Miller’s Organic Farm: Please be advised…Miller’s Organic Farm violated the Court’s Injunction Order and Consent Decree. Accordingly, we will not provide fresh or newly slaughtered amenable meat, meat food products, poultry, and poultry products for sale or purchase unless and until Miller’s Organic Farm liquidates its existing…frozen meat and poultry inventory and complies with other requirements of this Order and other orders of the Court… “…We are working diligently with the government to find some long-term solutions…” But what “long-term” (or even short-term) solution? Miller’s farm is in violation of what might be called “bedrock” USDA regulations. The court order listing violations is an outline of the USDA’s Food and Inspection Service regimen. Farmer Miller’s own judgment of how to produce the highest quality food is a flat-out rejection of regulation. A decision of the court suggests the government’s position on Miller’s methods. On July 21, 2021, Federal Judge Edward G. Smith signed a 39-page order imposing sanctions on  Miller and the farm, including a $250,000 fine and other penalties “to effect defendants’ future compliance, by making them aware  of the seriousness of their violations and the consequences of future violations…” The farm was ordered to pay the fine within 30 days or face further penalties “including imprisonment of Amos Miller.” The farm is ordered not to slaughter any animals in violation of the order or face a $25,000 a day penalty. Miller is ordered to cease and desist all meat and poultry retail operations, except to get rid of inventory. In summer, 2022, Amos Miller, continuing his six-year legal battle with the USDA (represented by the U.S, Justice Department), filed papers with the Eastern District Court of Pennsylvania. Miller also has taken some of the decision-making to the Third Circuit Court of Appeals in Philadelphia, including an appeal to change attorneys (which has been denied).   Walter Donway is an author and writer with more than a dozen books available on Amazon and an editor of the e-zine Savvy Street. He was program officer or director at two leading New York City foundations in the healthcare field: The Commonwealth Fund and the Dana Foundation. He has published almost two dozen articles in the Blockchain Healthcare Review. (0 COMMENTS)

Part of the reason Republicans hadn’t more effectively fought the election integrity battle before now is somewhat shocking. The 2020 contest was the first presidential election since Ronald Reagan’s first successful run in 1980 in which the Republican National Committee could play any role whatsoever in Election Day operations. For nearly 40 years, the Democratic National Committee had a massive systematic advantage over its Republican counterpart: The RNC had been prohibited by law from helping with poll watcher efforts or nearly any voting-related litigation. Democrats had accused Republicans of voter intimidation in a 1981 New Jersey gubernatorial race. The case was settled, and the two parties entered into a court-ordered consent decree limiting Republican involvement in any poll-watching operation. But Dickinson Debevoise, the Jimmy Carter-appointed judge who oversaw the agreement, never let them out of it, repeatedly modifying and strengthening it at Democrats’ request. Debevoise was a judge for only 15 years, but he stayed 21 years in senior status, a form of semi-retirement that enables judges to keep serving in a limited capacity. It literally took Debevoise’s dying in 2015 for Republicans to get out of the consent decree. Upon his passing, a new judge, appointed by President Obama, was assigned the case and let the agreement expire at the end of 2018. This is from Mollie Hemingway, “If Republicans Win on Tuesday, Thank, the Election Integrity Movement,” The Federalist, November 4, 2022. I think of myself as someone who pays a lot of attention to U.S. political issues, but I had had no idea that the Republican National Committee had been prevented for almost 40 years from engaging in poll-watching. That’s a huge disadvantage. Another excerpt: The RNC got involved in 73 election integrity cases in 20 states for the midterms, with plans to expand. They won a lawsuit against Michigan Secretary of State Jocelyn Benson for restricting the rights of poll challengers; got Maricopa County, Arizona, to share key data about its partisan breakdown of poll workers; won an open records lawsuit against Mercer County, New Jersey, for refusing to share election administration data; won a lawsuit against the North Carolina State Board of Elections for restricting the rights of poll watchers; and reached a favorable settlement against Clark County, Nevada, in which the county agreed to share information about its partisan breakdown of poll workers on a rolling basis. The whole thing is worth reading.   (1 COMMENTS)

There is, of course, as Elon Musk suggested, some probability that the aggression against Mr. Pelosi covers some yet unknown reality (Kurtis Lee, “Elon Musk, in a Tweet, Shares Link From Site Known to Publish False News,” New York Times, October 30, 2022): In a reply to Mrs. Clinton’s tweet, Mr. Musk wrote, “There is a tiny possibility there might be more to this story than meets the eye” and then shared a link to an article in the Santa Monica Observer. The article alleges that Mr. Pelosi was drunk and in a fight with a male prostitute. To explore that possibility, though, one should not look at individuals and websites known for inventing facts or accepting them only if they fit with their muddled ideology and implausible beliefs; one should not rely on sources that have demonstrated a lack of rational methodology in the search for the truth. If we believe the NYT story, Mr. Musk, who later deleted his post, is not himself totally immune to that defect: A 2021 editorial in The Los Angeles Times about websites that “masquerade as legitimate local newspapers” noted that the Santa Monica Observer, “owned by onetime City Council candidate David Ganezer, is notorious for publishing false news.” In 2016, for example, the publication advanced a claim that Mrs. Clinton had died and that a body double was sent to debate the Republican presidential nominee, Donald J. Trump. But anybody not used to the discipline of research can be easily fooled by doubtful sources. A good story by Robby Soave in Reason gives an idea of how Donald Trump himself thinks (“The Paul Pelosi Conspiracy Theories Are an Embarrassment for the Right,” November 2, 2022). Besides lending credence to the gay prostitute theory, Trump repeated another “alternative fact” that seems to have been invented: You know, probably, you and I are better off not talking about it. The glass, it seems, was broken from the inside to the out and, you know, so, it wasn’t a break in, it was a break out. The “it seems,” uncharacteristic of Trump’s intuitive certainties, looks contradicted by the rest of the sentence. The rise of the Internet and especially of the social media has revealed a disturbing fact: how ignorant is part of the general public and how easily they fall into implausible theories—that Sandy Hook was a government-organized hoax, that the 2020 election was stolen, etc. The woke are not better and generally don’t have the excuse of lacking education—although perhaps “education” should be put in scare quotes. One can, I think, be knowledgeable and intellectually honest on the either side of the orthodox left-right divide; but this is not the current state of the public debate. Suddenly, with the Internet and the social media, the proud ignorant have become able, at near zero cost, to express their muddled intuitions for the whole wide world to see. The big difference is this near zero cost. The idea of charging a price for an efficient access to social networks may be part of the (privatly evolved) solution; perhaps charging much more than Musc suggests for Twitter would be even better. The higher the price, the fewer the number of individuals who think that echoing implausible stories is worth it; they will go back to their TV sets. To be clear: these individuals are respectable as long as they don’t use their proud ignorance to impose their preferences and values on others by force. Where does the proud ignorance displayed by both the woke crowd and the conspiracy theorists leave the Enlightenment promises of popular education, the perfectibility of mankind, and the possibility of a free society? On that challenging question, it is useful to read James Buchanan’s small book, Why I, Too, Am Not a Conservative (or, as a poor substitute, my Regulation review). (0 COMMENTS)

In the 50 years since The Limits to Growth was published in 1972, its grim Malthusian message has gripped the social consciousness. Its central thesis was that since the earth’s resources are finite, it would not be able to support the exponential rates of economic and population growth and would collapse before the end of this century. This proclamation has become the fountainhead behind calls for growing centralization and the establishment of limits to curtail the freedom of individual choices. Global institutions such as the  World Health Organization, the World Economic Forum  have pointed to air pollution, climate change, overpopulation, and water scarcity as some of the biggest threats to human well-being. The consensus among policy-makers, politicians, and environmentalists seems to be that entrepreneurs and firms good will use the cheapest means of production possible, even as they degrade the environment. Therefore,  any reliance on market mechanisms to solve the problem of environmental degradation and to provide sustainability are automatically ruled out. Similarly, the consensus that consumers are driven by personal desires to overconsumption implies consumer sovereignty must be put on hold in pursuit of a sustainable world in which the needs of today are met without compromising on the needs of future generations. It follows from such consensus that the solution must be global, as there are potentially massive consequences for failure, and that a centrally planned approach is the only feasible solution. The centralized approach to solving the problem of environmental degradation assumes rational, well-informed people with massive resources will deal with the massive issues of environment conservation in a well-intentioned and efficient manner for the public good. This approach in practice would mean doing away with civil liberties if they interfere with the plan of environment conservation. But as sovereign individuals who desire a free world and who hold values of liberty and dignity of human beings sacred, we must pause before making such a Faustian bargain. Stop and think carefully about the true nature of environmental degradation, the effects of scarcity on the economy, and how a spontaneously ordered system such as the market might deal with it. Apart from the intellectual stimulation that history provides, it can also provide us with lessons from past experiences, and we have enough evidence from the experiments of centralized planning  to make us intellectually suspicious of it.   Markets Deal with Scarcity. The economy consists of huge numbers of buyers and sellers who respectively supply and demand vast quantities of goods and services. Therefore, there is an enormous amount of information available to them in a decentralized manner- but this information about demand and supply are important for everyone as it impacts the decisions they make in their day to day lives. This is where monetary valuation comes in. Based on competition between buyers and sellers through a bidding process,  prices are formed which convey information about such things. Prices in the market act as coordinating signals which convey information about important economic data  scattered in a decentralized manner. The role of prices in coordinating actions in the market was one of the core arguments advanced by Fredrick Hayek on why centralized planning could never allocate resources as effectively as markets do. When something is scarce in the market, a large number of its users compete in the market over its possession which leads to the increase in its prices initiated by the seller to economize on its existing stock. The increased price is a signal in the market reflecting its scarcity. If the claims of The Limits to Growth are true, then prices of natural resources which are used heavily in energy consumption should increase. This increase in the price is necessary to substantiate the claim that this resource scarcity limits to economic growth, as energy consumption is bound to increase with increases in economic activity. If the resource prices today were exponentially higher than they were in the past, But the reality has been much different. Despite the fall in the purchasing power of the dollar and the cartelization of oil,  an item that cost 50 dollars in 1970 would theoretically cost 335.5 US dollars in 2020 (50 x 6.71 = 335.5). But the increase in the rice of oil is quite low relative to the fall in the value of the dollar, which suggests that the real increase in the price of the oil barrel is negligible. Might this convince people to change their minds?   Vibhu Vikramaidtya is a scholar with research interests in capital theory, monetary theory, and business cycles writing about events in the economy from a legal and economic standpoint. His other works can be found at the Austrian Economics Center, the Libertarian Institute, and beinglibetarian.com.  (0 COMMENTS)

In late 2021 and early 2022, a number of pundits warned that the Fed was moving too quickly to tighten monetary policy. It is now clear that these pundits were wrong. Not only did the Fed not do too much tightening, there’s almost no evidence that the Fed has tightened monetary policy at all, at least to any measurable extent. Roughly a year ago, it became apparent (even to the Fed) that the economy was moving toward overheating.  So why might an abrupt tightening in late 2021 have been a mistake?  After all, inflation is a big problem, and tight money is the only reliable way of reducing inflation.  Tight money can reduce NGDP growth to a level consistent with 2% inflation. The standard answer is that the Fed needs to be careful, as tight money imposes pain on the labor market.  And I believe that is true—we all saw what happened in 2008 when the Fed over tightened.  The unemployment rate shot up to 10%. If that’s your criterion for over tightening, then the Fed certainly has not done so.  Indeed not only has the Fed not imposed excessive pain on the labor market, they’ve produced such rapid NGDP growth in 2022 that the labor market is almost absurdly hot.  Job openings are currently far above the level of previous boom periods such as late 2019. A desirable policy of bringing inflation down through gradualism would balance the costs of inflation and unemployment.  It would impose a modest amount of pain on the labor market, but not too much.  But the Fed has not imposed any pain at all.  Indeed it hasn’t even returned to labor market back down to the boom conditions of late 2019.  There’s been no balancing of costs.  And there’s been no significant reduction in inflation at all.  Despite what you read in the press, there’s been no tight money policy in 2022. Later this year, I plan to release a book that discusses problems in the way we measure the stance of monetary policy.  Here are some mistakes that have been made in 2021-22: 1. Assuming that interest rates measure the stance of monetary policy.  They don’t.  Rising rates do not indicate tighter money.  The money supply is also not a good indicator. 2.  Gradualism in adjusting the policy instrument.  It’s true that you’d like to bring NGDP growth down gradually, so as not to create a lot of unemployment.  But that does not mean that you need to raise the target interest rate at a gradual pace. 3.  Confusing a falling stock and bond market with tight money.  (This is referred to a tighter “financial conditions”.)  The most expansionary monetary policy in my lifetime (1966-81) was accompanied by a very weak performance of the stock and bond markets.  Markets hate high inflation—but high inflation is not a product of tight money.  Don’t equate tight financial conditions and tight money. 4.  Assuming that monetary policy affects NGDP with a long and variable lag.  In fact, monetary policy affects NGDP almost immediately, as we see in the few monetary shocks that are clearly identified (such as 1933).  It seems like a long lag if you assume that rising rates are tight money, but they are not. 5.  Too much focus on inflation and not enough focus on NGDP growth.  There was a long and utterly useless debate about whether inflation was caused by supply or demand side factors.  It doesn’t matter!  What matters is NGDP growth, which is 100% demand driven.  And NGDP growth has clearly been too high. 6.  President Biden waited too long to reappoint Powell.  It’s possible that Powell felt uncomfortable making the decision to tighten monetary policy just a month or two before Biden was to make his decision on a new Fed chair. 7.  Most important of all (by far), the Fed’s FAIT fiasco.  The Fed signaled an intention to target the average rate of inflation at 2%, just as it adopted a highly expansionary monetary policy.  FAIT actually would have been a great idea, if implemented properly.  But as soon as stabilizing the average inflation rate required a tight money policy, the Fed announced that the policy was asymmetric, and that they would not offset inflation overshoots with future undershoots. In late 2019, monetary policy in the US was in a very good place, the best policy I’ve seen in my entire life.  Tragically, all these gains were thrown away over the following few years, in a reckless attempt to artificially create prosperity by printing lots of money.  FAIT would have been a great policy.  Asymmetric FAIT has been a disaster. PS.  I got this email from Bloomberg: It’s that time of the month—jobs day. The US nonfarm payrolls report will be scoured for any clue that the Fed can downshift to a 50 bp hike next time around or reaffirm a higher terminal rate. Evidence may be mixed: The economy probably added 195,000 jobs in October, fewer than in September but still OK. No, 195,000 would not be OK; it would be far too high.  I’m not advocating high unemployment, but is it too much to ask that the Fed at least bring the labor market back to the historically strong boom of late 2019, instead of the almost absurd overheating that we see today?  In any case, Bloomberg was wrong.  The economy added 261,000 jobs in October, and previous months were also revised upwards.  Nominal wage growth was also above expectations.  We’re still booming. PPS.  A few months back, a whole bunch of commenters told me that the US entered a recession in early 2022.  These people need to reconsider their model of the economy.  Ditto for those people who warned that the Fed was tightening too aggressively in early 2022.   Time for some soul searching.  (I did some soul searching in January, when I realized that the Fed’s FAIT was a sham.) (0 COMMENTS)

Heading into the winter, Europe is facing an energy shortage. This is a true shortage, not a Smurfage – it is characterized by artificial restrictions on both supply and price. In a recent Foreign Policy Magazine article, Brenda Shaffer illustrates many different ways this shortage was created by European policymakers. I want to call attention to a few worthwhile points she makes and, being incurably pedantic, I also have a small nit to pick. She points out how European policymakers have an incentive to attribute all their energy problems to Putin and his recent invasion of Ukraine, even though Europe’s energy troubles are far from a new occurrence: Russian President Vladimir Putin’s throttling of the gas taps has undoubtedly made things worse, but this will already be the third winter of Europe’s energy crisis. In the winters 2020-2021 and 2021-2022, Europe already experienced significant spikes in the prices of electricity and natural gas, as well as gas shortages that led to increased use of coal and fuel oil. European policymakers either did not take notice or preferred not to change course. What caused the shortages in the previous years? In short, industrial policy and central planning. European policymakers decided they could divine the “correct” mix of energy sources needed to provide energy to an entire continent, and passed laws and regulations attempting to shape the market according to their plan: Europe’s crisis has been two decades in the making. Aiming to engineer a fast transition from fossil fuels and nuclear energy to renewable sources, European policymakers forced profound changes in the energy supply. At the same time, they ignored projections for continued demand for oil and natural gas, as well as the need for a reliable baseload fuel source to back up intermittent solar and wind. Many EU member states cut back domestic production of fossil fuels and constrained imports, with the notable exception of gas from Russia. Shaffer also points out that it’s not as though Russia is the only available option for natural gas. There are many other sources of natural gas available to Europe, but policymakers have blocked or otherwise hobbled imports from these sources, even today: Europe’s policy of blocking gas supplies created shortages that started causing price spikes two winters ago. Believing it will soon be able to do without gas, Europe has also blocked long-term contracts for imports, with the result that Europe is starving for gas even though it is surrounded by some the world’s largest gas reserves—not just in Russia, but also in North Africa, Central Asia, and other regions. The EU could have easily ensured access to reliable gas supplies at affordable prices but is now dependent on the costly spot market instead. Even today, while European officials trot the globe for new gas volumes, they are refusing to sign long-term contracts with the courted producers. Despite all of this, European policymakers continue to push forward in the same mode of central planning that created this mess in the first place: European leaders are aware that their energy market designs are not working. National governments are bailing out or outright nationalizing collapsing utilities. Most are now setting electricity and gas prices for customers. Moreover, Europe’s high cost of carbon has not deterred utilities from firing up mothballed coal plants and switching from gas to fuel oil for electricity and heat…Instead of focusing with urgency and laser sharpness on these issues—and reversing mistaken decisions such as various countries’ nuclear phaseouts—European leaders continue to push new projects that are untested and far from commercially viable. My main nitpick is Shaffer’s use of the term “shortage.” In economics, shortages mean something more precise than a low supply, or high prices. It’s not quite true that a “policy of blocking gas supplies” will by itself create shortages, although it would certainly contribute to price spikes. To truly create shortages, prices would have to be prevented from rising to their market clearing level. And, to her credit, she does mention both the use of price controls and how they have this effect: Today, Europe’s proposed caps on gas and electricity prices, along with new levies on energy producers, will further restrict supplies while seeking to protect consumers from the high prices that could induce them to lower the thermostat and turn down the lights. Here she points out one of the great virtues of prices. Prices don’t merely convey information about the relative supply and demand of goods; they also provide an incentive to act on that information. I would have liked it if Shaffer made the connection between price caps and shortages more explicit throughout her piece. To an economist, the connection between them may seem so obvious as to go without saying, but when communicating with the public, it’s important to make that connection as clearly and forcefully as possible. Nonetheless, Shaffer has done well to point out both how European policymakers have engineered this crisis, and how they have every incentive to put the blame entirely on Putin rather than publicly admit their error or reverse course.   Kevin Corcoran is a Marine Corps veteran and a consultant in healthcare economics and analytics and holds a Bachelor of Science in Economics from George Mason University.  (0 COMMENTS)

What would you say if someone told you that many academics, the US government, and the media overstate income inequality, understate the real income growth of US households, overstate poverty, and understate income mobility? If someone had asked me, I would have said I believe it. I’ve followed these issues, and even written about most of them. But on reading The Myth of American Inequality: How Government Biases Policy Debate, even I was blown away by the strength of the evidence for these conclusions. The book’s three authors are former US senator and former economics professor Phil Gramm, Auburn University economics professor Robert Ekelund, and former assistant commissioner of the Bureau of Labor Statistics John Early. The authors take a deep dive into the data and use largely government-generated data to make their case. They point out that in computing household incomes, the US Census, part of the Department of Commerce, systematically leaves out two-thirds of the transfer payments that federal, state, and local governments give to people. This dramatically understates income of people in the lowest-income two-fifths (which economists and statisticians call quintiles) because these two quintiles, and especially the lowest, receive a hugely disproportionate share of transfer payments. The Census also leaves out taxes paid to federal, state, and local governments. Because higher-income people pay most of the taxes, failure to subtract these taxes substantially overstates the income of higher-income people. Both factors cause the Census Bureau to systematically overstate income inequality. They also show that the government’s usual measure to adjust for inflation, the Consumer Price Index, systematically overstates inflation and, therefore, understates the growth of real wages and real household incomes. Adjusting the data for both transfer payments and the overstatement of inflation, the authors show that the percentage of US households in poverty, rather than being in the low teens, is actually only about 1.1 percent. Along the way, the authors show that US income mobility is high: the vast majority of people, over their lifetimes, move from one quintile to another. They also dispel a number of myths about the rich, the top 1 percent, the top 0.1 percent, and the incredibly wealthy Forbes 400. As a disturbing bonus, they show that in recent years some federal government agencies have encouraged people to be more dependent on government welfare. This is from David R. Henderson, “Myths of Economic Inequality,” Defining Ideas, November 3, 2022. The results of correcting for inflation with a measure that adjusts for substitution and for quality improvements: Gramm et al. note that while using the CPI shows a measly 8.7 percent growth in real wages between 1967 and 2017, using a measure that corrects for substitution bias and for improvements in the quality of goods and services yields the conclusion that real wage rates over those fifty years rose by a whopping 74.0 percent. Over that same period, using the CPI shows that real median household income rose by 33.5 percent, but using a price index that accounts for substitution and quality improvements shows the increase to be 93.3 percent. That seems to accord with our observations. Think about what people have now that they didn’t and how those things have contributed to their well-being: houses with two bathrooms and widescreen TVs, mobile phones that can be direction finder, music player, calculator, and more, and medical care that improves our life expectancy and keeps us from having long stays in the hospital. Those are only three of many improvements. Read the whole thing. Thanks to one of the co-authors, John Early, for quickly answering a question I had about 2 of the tables in the book. (0 COMMENTS)

The top 10 percent of households in the United States earn about 33.5 percent of all income, but they pay 45.1 percent of income-related taxes, including Social Security and Medicare taxes. In other words, their share of all income-related taxes is 1.35 times larger than as large as their share of income. That is the most progressive income tax share of any OECD nation. In Germany, the top 10 percent earn 29.2 percent of the income and pay 31.2 percent of income-related taxes, 1.07 times their share of income. The French top 10 percent earn 25.5 percent of the income and pay 28.0 percent of the income taxes, 1.10 times their share of income. If the top earners pay a smaller share of income taxes in other countries, that means everybody else pays a greater share. In the United States, the top 10 percent of income earners pay 7.6 percent of GDP in income-related taxes, and the bottom 90 percent pay 9.2 percent. In Germany, the top 10 percent of earners pay a similar 7.4 percent of GDP in income-based taxes, but the remaining 90 percent in Germany pay 16.4 percent of GDP, 77 percent more than in the United States. In France, the top 10 percent pay 7.1 percent of GDP; the remaining 90 percent of taxpayers pay 18.2 percent of GDP, 97 percent more than in the United States. Even in Sweden, the top 10 percent of earners pay only 5.9 percent of GDP in income-related taxes, 22 percent less than in the United States; the other 90 percent of earners pay 16.3 percent, 77 percent more than in the United States. This is from page 54 of Phil Gramm, Robert Ekelund, and John Early, The Myth of American Inequality: How Government Biases Policy Debate. It was published in September. The book is first rate and their deep dive into the data is very careful. I learned a lot. My review of the book will be published on the Hoover Institution’s Defining Ideas site tomorrow. It’s a long review and so I didn’t have space to deal with the comparison between taxes in the United States and taxes in the OECD countries, most of which are in Europe. When I first read the paragraphs above, I said to myself, “Well, of course; that’s because most of the European countries have a stiff value-added tax (VAT.)” Then I read the paragraphs more carefully and saw that it’s about simply taxes on income and, therefore, doesn’t include the VAT. They drive that point home in the very next paragraph, on page 55, writing: Even these numbers understate just how progressive the total tax burden is in America. The United States collects only 35.8 percent of all tax revenues from sources other than income, such as sales and excise taxes, the smallest share of any country in the OECD. Most OECD members have large value-added taxes (VATs). These taxes are paid on most purchases by all consumers. The VAT is one of the most regressive forms of taxation, which means that the tax systems of the rest of the developed world are even less progressive than indicated by the income tax comparisons. Wow! Remember that two thirds of OECD countries have a VAT of 20 percent or more. (0 COMMENTS)

This tweet caught my eye: I prefer the glass half full (or more precisely one fourth full) interpretation.  Especially if the glass is very large.  And LA is an exceedingly large glass, comprising 502 square miles of land.  That means there is roughly 125 square miles of non-residentially zoned land, more than five times larger than Manhattan (which is 23 square miles.) Even though I’d prefer no zoning at all, I’m actually quite pleased to hear both candidates support much more housing in non-residential portions of LA. Residential zoning is a huge problem, but it’s far from the only problem when it comes to housing construction in California.  Almost as important is the excessively restrictive regulations on building new housing anywhere in the city, which make new housing construction much more expensive than it would be in a free market, or even in a less tightly regulated market like Chicago. Consider the following two facts: 1. In recent years, California has been experiencing a net out-migration of residents. 2. Most of California is run by progressive governments with highly dysfunctional policies in areas such as taxes, business regulation, crime and education. You might assume that those facts are closely related.  In fact, almost the entire net population outflow is due to bad housing policies.  If California simply deregulated housing, its population might grow almost as fast as in Texas and Florida.  Given the extremely high prices here, the construction of new housing would be enormously profitable if not constrained by regulation. I live in Orange County, one of the few places in California that is not poorly governed.  It also has a nice climate.  And yet the county is now actually losing population.  Irvine is the only Orange County community that is still growing rapidly.  That’s not because it’s better governed than the other OC cities, rather it is one of the few that still allows substantial home building.   Republicans like to criticize the ineffective progressive governance in most of this state.  And yet, even if all of the problems they correctly cite were fixed—if California were to become as business friendly as Texas and Florida—it would do little to stem the outflow of population from coastal California (although it would help the Central Valley.)  Unfortunately, some Republicans refuse to embrace the deregulation of housing, and at the national level the GOP is gradually shifting in a NIMBY direction. (0 COMMENTS)

Last week, President Biden said: Some airlines, if you want six more inches between you and the seat in front, you pay more money but you don’t know it until you purchase your ticket. Look, folks, these are junk fees, they’re unfair and they hit marginalized Americans the hardest, especially low-income folks and people of color. Actually, I just flew on Thursday and Monday, and I purchased more leg room. It felt closer to 3 inches than 6 inches, but whatever it was made a big difference. You actually do know it before you purchase your ticket. Indeed, the airlines make it quite obvious. Why doesn’t Biden know that? Could it be that he hasn’t purchased an airline ticket in a long time? Just a hunch. How are they unfair? They give people a choice. Lower-income people who, I presume he’s saying, value leg room less, can pay less. How does that hit marginalized Americans? Actually, I think it helps. The reason is that the payment for those extra 3 inches, multiplied over all the passengers who pay it on a given flight, more than makes up for the lost revenue from the extra seats the airline could have had, or else the airlines wouldn’t do it. If so, this helps marginalized Americans because the airline makes more money on the flight with more legroom. The airline needs to make a certain amount of revenue to justify a flight. There will be more flights and, therefore, more seats. So Biden can help marginalized Americans by withdrawing his statement. There’s a specific way he can disproportionately help black Americans: get the Food and Drug Administration to back off from its proposal to ban menthol cigarettes. The Harvard School of Public Health states: Manufacturers have long targeted Black Americans with advertisements for menthol cigarettes, which remain the overwhelming preference among Black smokers. Although they smoke at similar rates as the general population, Black smokers experience greater health consequences from the habit. This has been linked in part to their higher consumption of menthol cigarettes. Manufacturers tend to “target” people who want their product. The FDA is proposing to target black Americans by banning the product. If your view is that people’s preferences don’t count and that the government should prevent people from doing something that harms them, then you could conclude that the FDA is helping them. But if your view is that people should be allowed to consume even things that harm them, especially when they know, as pretty much everyone does, that cigarettes harm those who smoke them long-term, then you would conclude that the FDA is hurting them. My view is the latter.   (0 COMMENTS)