Saturday, August 18, 2012

All We Need to Know in Pictures

Our Founders were cognizant of the potential danger that lurked in democracies. History taught them the peril of majority rule particularly when "enlightened statesmen will not always be at the helm" (Federalist 10). That is why they formed a Republic.  And why they did not provide for a direct tax (income tax) in the Constitution.  They spent significant rhetorical capital to warn against the risk of tyranny that could result from the majority having power--and in particular, taxing power--over the minority.  In Federalist 10 James Madison writes:  The apportionment of taxes on the various descriptions of property is an act which seems to require the most exact impartiality; yet there is, perhaps, no legislative act in which greater opportunity and temptation are given to a predominant party to trample on the rules of justice.  Every shilling with which they overburden the inferior numbers, is a shilling saved to their own pockets."  

Today nearly half of Americans do not pay any income tax at all.  Our Founders would consider that a recipe for disaster. They understood one thing.  Over the course of history human nature does not change.  That is why Madison wrote:  But the most common and durable source of factions has been the various and unequal distribution of property.  

Class warfare rhetoric is not how this country became great.  It is how unenlightened leaders hang onto power.

Chart 1

Wednesday, August 15, 2012

The Debilitating Cost of Government Regulation

Too infrequently when the  political rhetoric flies do we step back and consider the issue dispassionately.  Too often we succumb to emotional appeals without analyzing the matter in a logical, fact-based fashion. 

The August 13th edition of BARRON'S cites an upcoming report by the Competitive Enterprise Institute called Tip of the Costberg.  The study measures the cost to the economy of businesses complying with federal regulations.  During the first half of this year the cost was $1.806 TRILLION.  To put that number into perspective, the federal budget for 2012 is $3.6 trillion which means the cost of regulatory compliance for business is equivalent to 50% of the national budget.  

Imagine how many jobs would be created if that money were invested in the private sector economy instead of fattening the same bureaucracies that snoozed while Bernie Madoff skimmed billions from his clients.