Florida: Not one of America’s top Energy Leaders

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Free Enterprise reports:

Thanks to surging production in the country’s oil and gas shale regions, the U.S. is importing significantly less oil and bolstering its energy independence. The Energy Information Agency expects U.S. crude imports this year to average 6.7 million barrels a day, down by nearly a million barrels a day from 2013 averages. The decline comes amid a boom in oil and gas production in places such as North Dakota, where monthly output has nearly quadrupled over the past four years.

Renewables are also pulling more weight. Last year, wind generated more than 168,000 thousand megawatt hours of electricity, and solar power currently generates almost 9,000 thousand megawatt hours of electricity to power our economy annually. All of this new domestic generation is strengthening the country’s energy security, prompting the U.S. Chamber of Commerce’s Institute for 21st Century Energy to lower its Index of U.S. Energy Security Risk to 95.3 last year, down from 102 the year before.

From Texas — which takes top honors as the country’s top oil, natural gas, and wind producer — to hydro-power leader Washington state, our info-graphic showcases America’s resilient energy industry by highlighting the top energy-producing states for each energy source.

America

EDITORS NOTE: The featured image is courtesy of photographer Ron Antonelli/Bloomberg.

How “mortgage” became just another word for trouble

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Nearly 80 years ago Stewart McDonald, the Federal Housing Administration’s first administrator, observed: “To many people, ‘Mortgage’ became just another word for trouble—an epitaph on the tombstone of their aspirations for home ownership.” Over the last 7 years, the same epitaph has been written for many millions of aspiring homeowners.

When established in 1934 by Congress, FHA implemented strong, commonsense underwriting standards—increasing down payments to a minimum of 20%, establishing reliable and speedy loan pay downs with a 15-20 year loan term, using a residual income test to assure a borrower’s reasonable ability to pay, and requiring demonstration of a good credit history. From 1934 to 1960, these standards helped millions upon millions of Americans safely and confidently achieve the American dream of eventually owning their home free and clear of a mortgage and helped increase the homeownership rate to new heights. Over its first 20 years, the FHA paid only 5,712 claims out of 2.9 million insured mortgages for a cumulative claims rate of 0.2%.

Yet by 1962 Time Magazine would observe: “Homeowners of a new and unattractive breed are plaguing the Federal Housing Administration these days. Known as ‘the walkaways,’ they are people who find themselves unable to meet their mortgage payments—and to solve the problem simply move out their belongings at night, drop their house key in the mailbox and disappear.” What had caused an FHA mortgage to become just another word for trouble?

Powerful interest groups such as the National Association of Realtors convinced politicians to replace FHA’s sound underwriting practices with increasingly risky ones.  From 1957 to 1961 Congress raised FHA’s maximum loan to value ratio (LTV) four times so that by 1961 the maximum LTV was 97%.

In 1963 the FHA commissioner issued a report analyzing why is was suffering from mounting foreclosures:

The Congress expects, many home buyers require, and the housing industry needs the high volume of home construction and the active market for existing homes that can be soundly achieved and sustained through the liberality of the terms on which FHA is authorized to insure mortgages….The Federal Housing Administration is deeply committed to a program of accurate underwriting based on adequate analysis, accurate information, and sound judgment. This report will help us to keep our risk-rating processes in line with the changing times.

However, the very next year, FHA abandoned the very risk-rating process it had been relying on.

As a result the increasingly lax standards for FHA insurance once again made foreclosures commonplace. From 1975 to 2011, over 3 million FHA borrowers would lose their homes to foreclosure. Over time, powerful lobbies, politicians, and HUD pushed to replicate FHA’s abandonment of commonsense underwriting at Fannie Mae, Freddie Mac, and other parts of the mortgage market. For 8 million families experiencing foreclosure from 2007 to the present, “mortgage” once again became just another word for trouble.

The only way to bring stability to our housing market is to once again assure that the preponderance of mortgages are safe—ones that have a low risk of turning into trouble under economic stress. This requires a return to common sense underwriting. Today this safety standard is being  met with respect to 0% of FHA insured mortgages and only 38% of all new home purchase mortgages nationwide.

EDITORS NOTE: The featured image is courtesy of AEI and Shutterstock.

Time to abolish Florida Property Taxes

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The time has come to address the matter of abolishing property taxes in Florida and returning our homes, land and infrastructure back into the hands of its owners not the landlord in the Tax Collector and County Property Appraisers.

This will reduce your house payment, it will give you back the freedom of property ownership without fear of having your home confiscated. It frees you from the subservient position as renter to the tax collection office even if your home is paid for. It will empower you and put the government back in its place as your servant, not your master.

It does not matter if you own a $50,000 double wide trailer or a $50 million mansion. If you own it, you worked for it and the government has no claim on it. PERIOD. Ever.

Progressive politicians from both political parties embrace property taxes and the power it gives them and the government over your accumulated wealth. You work hard you raise your families and yet you are chained to the wall of City Hall and the County Administration building. Enough already. Its time to stop this redistribution of wealth.

What is a Budget?

You all have a family and or a household budget. In our local government an annual budget is a financial, operating, and capital plan for the coming fiscal year. It provides an outline of service levels provided to the citizen and public capital investments in the community, to be used by both you the citizen and the local government.

What is a Millage Rate?

The millage rate is the tax rate that is applied to property values to generate the revenue needed to pay for services proposed in the budget. A mill is a rate of tax equal to $1 for each $1,000 of assessed taxable property value. If a piece of property has a taxable value of $100,000 and the millage rate is 1, the property owner would pay $100 in taxes.

The time has come to zero out the millage rate and fire the landlord (County Tax Collector and Property Appraiser). All services being paid for in property taxes need to be funded from revenues that come from the sale of goods and services not your home or business structure and land. Each county must cut its waste and ensure good stewardship of tax dollars to help. From what  I can see (after reviewing the county budgets in all 67 counties) there is massive waste and abuse of taxpayer money including big salaries for executives, etc. Shall I can continue?

The County Tax Collector, with the assistance of the Property Appraiser, is nothing more than an over paid landlord sucking the citizenry dry and redistributing their wealth to local government agencies.

Proposal

Request that all Florida law makers that agree start drawing up plans for the FY 15 legislative session in March 2015 to abolish property taxes.

Tax payer money spent to fund illegal immigrants, their education, their health care and the like must be cut off and this money used to fill part the void in the loss of property tax revenues. Annually Florida tax payers fork out $5 billion to educate, medicate and incarcerate illegal aliens. This would free up more than enough cash to help in the elimination of property taxes statewide in Florida. The 67 counties can divvy up this savings to pay their police and fire departments. The lottery offsets the cost for schools.

The median property tax in Florida is $1,773.00 per year for a home worth a median value of $182,400.00. Florida counties collect an average of 0.97% of a property’s estimated fair market value as property tax. This money belongs in the pocket of the homeowners not the government. The government did nothing to build this house other than regulate the builders to appease tree huggers and spotted owl lovers.

Section 200.065 of State Statutes outlines the rolled-back millage rate, known as the “no tax increase” rate

because it allows the entity to generate the same property tax revenue from year to year, adjusted only by any new properties that may have been placed on the property tax roll. I want his statute to read – zero state wide and the property taxes returned to the control of Florida citizens.

Let’s see who has the guts to tear down the statist tax and spend legislature and return the wealth accumulated from hard working Americans in property taxes and put it back in their wallets.

Mandated by the State: Smart Meters and Obamacare

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I a Florida homeowner and careful about my usage of electricity. My electric bill last month was $41.56. People buying health insurance choose their plans carefully as well to fulfill their health needs and economic situation. If I am forced to pay a fine of $13 for not doing anything it would result in a 31% monthly increase in my electric cost for no logical reason.

Florida Power & Light (FP&L) has spent hundreds of millions of dollars to install what they refer to as “smart meters” on the properties they service. They require all of their customers to allow installation or face a monthly fine for what they refer to as opting to a “non-standard” meter. The Federal Government put together Obamacare and now forces all who have their standard health insurance plans the government describes as non-standard to scrap them and comply with what the government wants or face a fine.

The meter on my home was here when I bought it ten years ago so did I buy a home with a non-standard meter? My meter is no more non-standard than millions of the people who are being forced off their insurance plans because the government says they know what is best for consumers. Where the Supreme Court says it is all right to tax people for not having government mandated insurance the PSC says it is fine for FPL to tax conscientious homeowners who choose to keep their standard meter.

Just as there are all kinds of bad things being unveiled about Obamacare and the havoc it has caused the new meters from FP&L are like what Pelosi said about Obamacare… you have to install it to find out what it is all about and I and many thousands of others are not interested.

See the similarity in how citizens are being mandated to do what the government or monopoly demands. Is that right?

If there are any sane people in the state government would you please intercede with the PSC and eliminate the mandatory sign up for the FP&L meter or face monthly fines?

The Progressive Income Tax: Backed by the envious, used by the greedy by DOUG BANDOW

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Most Americans dislike the income tax, now more than a century old. The rates are too high. The provisions are unfair. The recordkeeping is onerous. The revenues are wasted.

Other than that, Mrs. Lincoln, how was the play?

But there are fans. The politicians, certainly, of both parties. What good would it do to serve in Congress if you didn’t have any money to spend? There are other sources of public money, to be sure, but none so effective at plucking the geese while minimizing the hissing. Withholding means many Americans look forward to receiving a refund even though that means they have provided an interest-free loan to the very officials conscripting people’s money for dubious purposes.

The beneficiaries of the politicians’ largesse also share in the income-tax lovefest. Uncle Sam needs money to write checks. He can borrow, but there’s a limit to investors’ credulity. Borrow too much and they might doubt Washington’s ability to repay. Moreover, robust tax collections are necessary to repay debts. So creditors, too, benefit from the income tax, even if they don’t enjoy paying on the other end.

Don’t forget about the armies of tax preparers and IRS agents who, at the end of the day, end up with much of the deadweight loss.

Then there are the fans of expensive and expansive government. Jonathan Cohn of the New Republic argued that the money collected has gone for building infrastructure, cleaning the environment, and keeping us safe from foreign threats. Alas, a lot of federal building is politically driven, conservation measures spend huge amounts inefficiently to control minimal problems, and military outlays go to defend scores of foreign societies rather than our own. In all these cases, less would be more.

More dangerous may be the social engineers. For instance, Yale economics professor Robert J. Shiller suggested using the income tax to mitigate “some of the worst consequences of income inequality.” He proposed indexing taxes to income inequality.

It’s a genuinely nutty idea: Inequality measures are sensitive to data distortion based on dates chosen, units measured, and more. Moreover, they incorporate no judgments about how the inequality arose. Were opportunities obstructed, systems manipulated, wealth extracted, people defrauded? Or did a generally free society operate naturally and deliver ever-changing income and wealth patterns? If the latter, what is the government trying to “correct”? And if the former, is the government correcting the right things?

Worse, though, is the weird presumption that seizing private wealth from mostly productive taxpayers and giving it to political operators noted for their electoral skills rather than economic judgment would somehow remedy financial disparities. There is no evidence that increasing Washington’s resources would yield greater social or economic justice, improve economic efficiency or growth, or make people wealthier or freer.

To the contrary, experience demonstrates that the majority—most people outside of those who make their living from the federal trough—are likely to end up worse off. Extensive bureaucracies soak up a lot of money before it leaves government hands. Cash gets tossed at influential interest groups, such as businesses, non-profits, contractors, and unions. Benefits for the poor are dwarfed by middle class welfare, such as Social Security and Medicare. Federal largesse gets bestowed on foreigners through misnamed foreign aid, which long meant taking money from poor people in rich countries and giving it to rich people in poor countries. America’s defense budget is another form of foreign aid, subsidizing some of the wealthiest countries on the planet.

Providing more money to expand these and other programs is supposed to close the income and wealth gaps? The social engineers just assume that the benevolent dictator model, in which angels enact direct transfers that make people healthier and happier, can actually exist.

Unfortunately, the income tax creates additional harms. By taxing work, the levy discourages work. The higher the rate, the greater the incentive to choose leisure and invest in consumption and tax shelters. Moreover, credits and deductions give legislators the opportunity to play social engineers, providing subsidies and manipulating behavior sub rosa.

The greater the resulting complexity, the more wealth is wasted in compliance activities rather than invested in productive endeavors. Indeed, the system most benefits tax professionals who profit from the system’s failings. Today the tax code and IRS rules run nearly 75,000 pages. And there never is any certainty; my Cato Institute colleague Chris Edwards noted nearly 5,000 tax changes over the last decade. Ever-confused taxpayers are a captive audience for tax preparers and litigators.

Income taxes impose a number of other burdens. There is no financial privacy, since Uncle Sam is empowered to rummage through everyone’s personal affairs. And taxpayers are expected to maintain potentially extensive records for possible inspection for years. For instance, use a home office and you’d better keep your utility bills, home repair charges, and gasoline receipts!

Moreover, as Edwards pointed out, the entire enforcement process is built around a denial of due process. From start to finish the burden of proof falls on the taxpayer, not the government. The Fifth Amendment right against self-incrimination is out the window. Fourth Amendment protections against unreasonable searches and seizures don’t apply. Sixth and Seventh Amendment guarantees of a jury trial don’t cover the U.S. Tax Court.

Contrast this with the sales tax. You pay it when you purchase something and you are done with it. You don’t have to keep personal records. You don’t have to file a return. There is no government rummaging around through your bank records for enforcement.

Even social engineering usually is at a minimum. Consumption levies typically include little variations of rates among goods, with at most occasional exemptions of “necessities” and surcharges for “luxuries.” There seldom is much attempt to manipulate rates to achieve objectives other than raising revenue. Even politicians don’t claim that they can use the sales tax to solve the “problem” of income inequality.

The first income tax in U.S. history was proposed in 1814 to fund the ill-fated War of 1812. Happily, the conflict ended before Congress could demonstrate the dire consequences even of taxation with representation. In 1861, a desperate national government turned to the income tax to fund its war to conquer the Southern states seeking to separate. Americans sacrificed both independence and liberty in that conflict.

A search for revenue to replace declining tariff collections led to another income tax in 1894, but the Supreme Court declared the levy unconstitutional. Legislators probably could have met the jurists’ objections by scaling back the tax. Instead, 15 years later Congress proposed a constitutional amendment, which was approved on February 2, 1913, during the heyday of the Progressive Era. From modest beginnings it has grown into a monster.

There is a necessary role for government, but it is far more limited than today’s Leviathan in Washington. Government must be funded, but it should be by something other than today’s income tax, which has made it far too easy for politicians to mulct the public. There are many reasons for Americans’ steady and serious loss of liberty, but the income tax ranks high among them.

doug bandowABOUT DOUG BANDOW

Doug Bandow is a senior fellow at the Cato Institute and the author of a number of books on economics and politics. He writes regularly on military non-interventionism.

EDITORS NOTE: The featured photo is courtesy of FEE and Shutterstock.

CLICHES OF PROGRESSIVISM #2 — Because We’re Running Out of Resources, Government Must Manage Them

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The Foundation for Economic Education (FEE) is proud to partner with Young America’s Foundation (YAF) to produce “Clichés of Progressivism,” a series of insightful commentaries covering topics of free enterprise, income inequality, and limited government.

Our society is inundated with half-truths and misconceptions about the economy in general and free enterprise in particular. The “Clichés of Progressivism” series is meant to equip students with the arguments necessary to inform debate and correct the record where bias and errors abound.

Leaders and experts who support free enterprise and who understand the importance of fiscal responsibility and entrepreneurship will author the pieces. A book will be released in 2015 featuring the best editorials in the series. The opinion editorials and columns will be published weekly on the websites of both YAF and FEE: www.yaf.org and www.FEE.org.

See the index of the published chapters here.

#2 — Because We’re Running Out of Resources, Government Must Manage Them

Milton Friedman once said “If you put the federal government in charge of the Sahara Desert, in five years there’d be a shortage of sand.” The great economist wasn’t just being cute. He’s pointing to a very serious problem with government management of resources. And in this chapter, we’ll talk about why it’s a problem. But first we should ask: Why are people so concerned that we will run out of resources? And how can we find a reasonable balance between using resources and conserving them?

When most people think about resources, they think about the possibility they might be used up. And running out of resources means there will be nothing left for future generations. This scares people. So the notion goes something like: If parents let kids get into the groceries on the first night of the camping trip, there won’t be any sandwiches left for the picnic. The parents wisely ration the resources and restrict the kids’ access so that there is something to left for later. People who think government should manage resources are thinking that government will behave like wise parents. But does it?

What you may not have realized is that people in the market—under certain conditions—find a balance between consumption and conservation, which one might call “sustainable.” But first there has to be a complete market mechanism. This may be hard for some people to get their heads around, because most people think markets cause over consumption. And certain kinds of markets can.

Healthy markets only exist under certain rules. The main rules are what we might call the Three Ps: Private property, price signals and profit. These are the basic conditions of exchange. Without them there can be no healthy market.

Private property means that an individual has full ownership of a resource. We know who the owner is, how much they own and that right cannot be taken away arbitrarily. The owner may also have the authority to divest himself of the resource. That means we know the difference between mine and thine and in so knowing, we have the one of the conditions under which to conserve, trade, or consume.

Prices are what economist Steven Horwitz calls “information wrapped in an incentive.” When the price of some resource goes high enough, owners have the incentive to do any number of things. They might use less of the resource (i.e. conserve it), they might find new creative ways to increase the supply of the resource, or they might find a substitute, which ends up conserving the resource. Of course, we make any such choice because we expect of future returns, otherwise known as profit. And in this equilibrium created by prices, property and profit markets balance use with conservation.

Consider a resource that was once highly sought after: whale blubber. Whale blubber was used as an energy resource in the 19th century. But in the case of whales, there were only two of the three Ps. Whalers had prices and profit, but no private property. The whales belonged to what is known as the Commons—which meant anyone could hunt them. Unsurprisingly they were nearly hunted to extinction. Because no one owned them, whalers had a perverse incentive to hunt them quickly. The whales rapidly became scarce. Indeed, as the number of whales went down, the price of each individual whale went up and the incentives to hunt increased. But this can’t happen if there is a robust private property regime in place. If people could own whales, their incentive is not destroy them unsustainably, but to raise them. (Ironically, fossil fuels saved the whales thanks to substitution.)

In the 19th Century American West, wild bison (buffalo) roamed the unfenced, commonly-held Plains by the millions. They were hunted nearly to extinction. By contrast, people could own and raise cattle and the use of barbed wire on private property made it feasible to do so. Today, there are far more cattle in the Plains than bison and even where bison are privately-owned, their long-term survival is now better assured than it ever was on “public” property.

Consider trees. In North America, there are more trees than there have been in over a hundred years. Not only do foresters have incentives to regrow trees they harvest, they have incentives to cut them at a sustainable rate. Of course, in certain parts of the world—like Amazonia and Africa—concerns about forest clearing are justified. The big difference between forests in North America and South America? In one case, forests are largely government managed and in the other they largely privately managed.

Since 1900, U.S. forestland acreage has remained stable for more than a century. Unlike some regions in the world where deforestation is happening at a rapid pace, the US has actually maintained its forestland for the past 100 years. When one includes the heavily forested Northern Forests of Canada, forestland in North America since 1900 has grown—by a lot, according to the UN State of the World’s Forests reports.

By contrast, forests in many parts of the world are losing ground, even losses in these areas are slowing. Still, that leaves the question: why are North America’s forests growing while forests in other areas being lost? Certainly the biggest factor is whether the country has the Three Ps. The absence of property rights is known as the Tragedy of the Commons. If we look at the facts around the world, places that have stable private property rights have stable forestland. Places that don’t have tragedies of the commons—with its attendant rush to exploit.

Political leaders in areas without private property rights have tried to solve the problem of over-exploitation of forestland through the application of government management—that is: simply forbid people from using the resource or have the government allocate it “sustainably.” Contrary to Progressive conservation clichés, neither policy works particularly well.

In the case of bans, black markets form and there is a race to exploit the resource. Poachers and illegal exploiters emerge as the problems persist. For example, black rhinos are under threat in Africa despite bans. Because the profit motive is even stronger under bans, risk takers come out of the woodwork. In the case of government allocation of resources, the process can easily be corrupted. In other words, anyone who is able to capture the regulators will be able to manipulate the process in his favor. What follows is not only corruption, but in most cases considerations of “sustainability” go by the wayside, along with all the market mechanisms that constitute the true tests of sustainability.

 

Max Borders
Editor & Director of Content
The Freeman

Summary

  • It is simplistic to assume that people will blindly use up what sustains them without regard to the incentive structures they face; if they have incentives to conserve, they will do so.
  • Private property is a powerful incentive to conserve resources. You lose if you squander what’s yours.
  • When property is held “in common,” you have a license to use and abuse resources with little incentive to nurture and improve them.
  • For more information, see http://tinyurl.com/pn3qlfb, http://tinyurl.com/ot533p3 and http://tinyurl.com/ngchvyo. 
Max Borders

Max Borders

ABOUT MAX BORDERS

Max Borders is the editor of The Freeman and director of content for FEE. He is also co-founder of the event experience Voice & Exit and author of Superwealth: Why we should stop worrying about the gap between rich and poor.

RELATED STORY: CLICHES OF PROGRESSIVISM #1: Income Inequality Arises From Market Forces and Requires Government Intervention

EDITORS NOTE: The featured photo is courtesy of FEE and Shutterstock.

In Us We Trust? by GARY CHARTIER

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David Rose argues that trust is a prerequisite of economic growth. David C. Rose. The Moral Foundation of Economic Behavior. Oxford University Press. 2011. 269 pages. $40.16.

Economists find it easy to model human actors as rational utility maximizers, evaluating possible decisions in light of their likely outcomes and choosing those options with the most utility-maximizing consequences.

But in The Moral Foundations of Economic Behavior, David Rose argues that economic development depends on trust, and that trust can only be expected to feature prominently in a particular society when those who live in it understand key moral requirements—in particular, duties that preclude negative conduct.

As Rose notes, people who reason this way may not be particularly good trading partners. If someone assesses her options in each situation and alters her plans as her judgments about the best way to maximize her utility change, she’s unlikely to prove very reliable; she may steal from others or defraud them. And this kind of behavior will tend to dispose others not to want to trade with her. The more widespread a tendency to maximize individual utility is in a given society, the more wary people will be about trading with each other, and the more resources they will likely spend detecting and preventing opportunistic behavior.

In such a society, the benefits of widespread trade won’t be available. The society will be poor.

Those who are, in the economists’ sense, “rational” won’t be likely to behave as case-by-case maximizers. They may not be concerned about the societal consequences of fostering distrust, but they almost certainly want others to deal with them. And anyone with the reputation of being willing to cheat others is someone with whom others won’t want to trade. The discipline imposed by continuous dealing will thus dispose rational actors, even ones who might be inclined to cheat, to behave reliably.

However, the discipline of continuous dealing can’t make everyone reliable all the time. Frequently, people engaged in trading relationships are strangers, and it’s not always possible for either to be aware of the other’s reputation. And institutional mechanisms designed to require accountability from those who steal and defraud are anything but uniformly effective.

Rose focuses on a further, even more serious problem: Reputational and similar mechanisms for ensuring good behavior only work when theft and fraud can be effectively detected, but they frequently cannot. People often enjoy what Robert Frank has termed “golden opportunities”—opportunities to take advantage of others with essentially no possibility of detection. These opportunities are particularly likely to arise in connection with open-ended contracts that leave the parties with lots of discretion. One party to such a contract may be able to cheat the other with no realistic possibility of detection: While it may appear to an observer that she’s fulfilling her obligations, she may in fact be taking unfair advantage of her trading partner.

While no one may be able to detect this kind of cheating, the expectation that it might occur is enough to put a damper on people’s expectations. Trust will be inhibited, and thus so will trade—and therefore prosperity. A society can achieve the kind of wealth that widespread trust makes possible only if everyone is committed to being trustworthy even when no one’s watching and even when behaving in an untrustworthy manner won’t lead to perceptible harm to any individual.

To foster prosperity, people need to be moral, not in order to avoid bad consequences, or even in order to achieve good ones on a case-by-case basis. They need to have internalized preferences for trustworthiness—most effectively fostered by culture—that can’t be overridden by the desire to benefit themselves or others in particular situations. They need to think of the duty to be trustworthy as, effectively, absolute. A society in which people reason this way will be able to sustain widespread, persistent trust. Economic relationships among strangers will be possible, social cooperation will flourish, and prosperity will ensue.

Rose is clear that the economist qua economist can’t show that people ought to be moral, or what form moral principles ought to take. But he argues that economists can show that societies in which particular moral principles are widespread will prosper. And I’m inclined to agree: Cooperation among strangers is the foundation of prosperity, widespread trust makes cooperation possible, and a moral—and not merely instrumental—commitment to reliability is a foundation for widespread trust.

There are interesting questions to ask about Rose’s arguments: When does background injustice reduce the duty to be trustworthy? What determines when a putative moral requirement really is a moral requirement? How shall we determine just what open-ended, relational contracts actually require? But, however we resolve these questions, Rose has made a convincing case that a society full of trustworthy people will be effectively positioned to experience the miracle of economic growth.

ABOUT GARY CHARTIER

Gary Chartier is a professor of law and business ethics and associate dean of the Tom and Vi Zapara School of Business at La Sierra University in Riverside, California. He is the author of Anarchy and Legal Order: Law and Politics for a Stateless Society, published by Cambridge University Press.

EDITORS NOTE: The featured photo is courtesy of FEE and Shutterstock.

Free the Poor: Does economic freedom alleviate poverty? by Julian Adorney

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2014 marks the 50th anniversary of the War on Poverty, and many claim that President Johnson’s program has lifted millions out of poverty.  But if we really want to help the poor, research suggests that economic freedom does more than government aid.

Economic Freedom Within the United States

In “A Dynamic Analysis of Economic Freedom and Income Inequality in the 50 States: Empirical Evidence of a Parabolic Relationship,” Daniel L. Bennett and Richard K. Vedder argue that, past a certain point, economic freedom decreases inequality. Increasing economic freedom benefits the poor and middle class more than it helps the wealthy.

Bennett and Vedder analyze the 50 states in terms of their economic freedom and their income inequality over 25 years (from 1979 to 2004). Bennett and Vedder define economic freedom as more or less the degree to which government is limited. They measured and ranked states according to the size of government, the level of taxation, and the level of labor market regulation. They define income inequality using the Gini coefficient. Because different states have radically different levels of economic freedom (compare New York and North Dakota, for instance), the authors were able to draw on a wealth of data about relative economic freedom in 50 distinct economies.

The authors find a parabolic relationship between a state’s economic freedom and its income inequality. As states initially become more economically free, most of the gains go to the wealthy. But at a certain inflection point X, which 21 states had already hit by 2004, the relationship shifts: past this point, as states become more free, income inequality declines.

But does income inequality decline because the rich lose wealth (perhaps through fewer opportunities for crony capitalism), or because the gains from increasing economic freedom go primarily to the poor?  In “Income Inequality and Economic Freedom in the U.S. States,” Nathan J. Ashby and Russell S. Sobel find that it’s the latter.

Ashby and Sobel analyze the 48 states of the continental United States in terms of their economic freedom and the incomes of their poor, middle-class, and wealthy residents over 20 years (from the early 1980s to the early 2000s). They use the same measure of economic freedom as Bennett and Vedder.

The authors find a strong positive correlation between a state’s economic freedom and the income level of the poorest 20 percent of residents. Freer states did better by their poor than less free ones. In particular, Ashby and Sobel found that increasing the economic freedom of a state by one unit (equivalent to moving from 40th-freest state to 7th freest-state) increased the incomes of its poorest residents by 11 percent. By contrast, the same change increased the incomes of the richest quintile by just over a third of that (4.3 percent). The middle class also saw increases, greater than the rich but less than the poor. Increasing a state’s economic freedom by reducing taxation and regulation creates broadly shared prosperity across all quintiles. Their research helps explain why, as states become more economically free, their income inequality declines: The poor and the middle class see more gains than the wealthy.

But couldn’t this be a case of mistaken causality? Maybe some states have less poverty because they have more natural resources. With less poverty, they need less government to help the poor, meaning they’re economically freer. But Ashby and Sobel anticipated this claim. They control for about a dozen variables, including education, geography, and median income. The last controlled variable is especially important; it places richer and poorer states on a level playing field, so to speak, for the study. It combats the idea that perhaps wealthier states need less government because they have less poverty, and firmly points the arrow of causality toward economic freedom reducing poverty.

Ashby and Sobel’s research is a compelling argument against government poverty programs. Other research, for instance the Mercatus Center’s Freedom in the 50 States annual report, notes the positive effects of economic freedom on aggregate economic growth. But because their data is left in the aggregate, it’s difficult to determine to whom exactly the economic gains go. But by breaking down their research by quintile, Ashby and Sobel make a case that economic growth especially helps the poor.

Economic Freedom Worldwide

Nor is the connection between economic freedom and bottom-rung prosperity unique to the United States. Recent research in the Economic Freedom of the World (EFW) 2013 Annual Report finds the same trend internationally.

The Economic Freedom of the World (EFW) Annual Report, published by the Fraser Institute, analyzes around 150 countries in terms of factors like their economic freedom, closeness to a laissez-faire state, poverty levels, and per capita income. The results are a striking indictment of the idea that more government intervention in the economy can help the poor.

As EFW points out, the shares of a country’s GDP going to the bottom 10 percent are pretty consistent regardless of how free the country is. From communist states to progressive countries to almost laissez-faire societies, the poorest 10 percent of citizens receive about 2.5 percent of the country’s wealth. No amount of progressive policies has changed that number. But for the poor, life is still much better in an economically free country than in one with more government. More economically free countries have more wealth than less free ones, meaning the poorest 10 percent can end up with thousands of dollars more per year. The poorest citizens of the 25 percent most-free countries earn an average of $10,556 per year. The poorest citizens in the middle 50 percent of countries earn less than a third of that.

So why does more economic freedom mean less poverty? The answers are well-known to libertarians, but worth reviewing. In societies with more economic freedom, decreased taxes and regulation make it easier to accumulate savings and to start or expand a business. Today in the United States, getting permits and navigating the legal maze to start a business can cost tens of thousands of dollars. Getting the permit for a food truck, and complying with the various laws, can cost $15,000 at the high end. Regulations in the United States overall cost about 1.5 percent of the country’s income per capita. But in other countries this cost is even higher; in Germany regulations sap 4.7 percent of the nation’s income per capita. In Italy it’s 14.2 percent.

Some of these regulations drain money from existing corporations, leaving them with fewer funds to expand; others impose hefty costs on anyone wishing to start a business. Both ultimately discourage wealth creation. Countries or states with more economic freedom therefore have more jobs, more innovation, and more goods and services—ultimately more wealth—than societies burdened by a heavy government.

As we approach the 50th anniversary of the War on Poverty, legislators would do well to bear these data in mind. The cure for poverty is not more well-meaning government programs to make the United States resemble Europe. The solution, as it has always been, is more economic freedom.

ABOUT JULIAN ADORNEY

Julian Adorney is an entrepreneur and fiction writer. He has written for the Ludwig von Mises Institute and runs a libertarian blog.

EDITORS NOTE: The featured photo is courtesy of FEE and Shutterstock.

Was stopping Nevada’s fracking rush behind the Bundy Showdown? by Marita Noon

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The story of rancher Cliven Bundy has captured an abundance of media attention and attracted supporters from across the West, who relate to the struggle against the federal management of lands. Bundy’s sister, Susan, was asked: “Who’s behind the uproar?” She blamed the Sierra Club, then Senator Harry Reid (D-NV), and then President Obama. She concluded her comments with: “It’s all about control”—a sentiment that is frequently expressed regarding actions taken in response to some endangered-species claim.

An Associated Press report describes Bundy’s battle this way: “The current showdown pits rancher Cliven Bundy’s claims of ancestral rights to graze his cows on open range against federal claims that the cattle are trespassing on arid and fragile habitat of the endangered desert tortoise.”

Bundy’s story has been percolating for decades—leaving people to question why now. The pundits are, perhaps, missing the real motive. To discover it, you have to dig deep under the surface of the story, below the surface of the earth. I posit: it is all about oil and gas.

On April 10, the Natural News Network posted this: “BLM fracking racket exposed! Armed siege and cattle theft from Bundy ranch really about fracking leases.” It states: “a Natural News investigation has found that BLM is actually in the business of raking in millions of dollars by leasing Nevada lands to energy companies that engage in fracking operations.”

This set off alarms in my head; it didn’t add up. I know that oil-and-gas development and ranching can happily coexist. Caren Cowan, executive director of the New Mexico Cattle Growers Association, told me: “The ranching and oil-and-gas communities are the backbone of America. They are the folks who allow the rest of the nation to pursue their hearts’ desire secure in the knowledge that they will have food and energy available in abundant supply. These natural resource users have worked arm-in-arm for nearly a century on the same land. They are constantly developing and employing technologies for ever better outcomes.”

The Bureau of Land Management (BLM) wouldn’t be enduring the humiliating press it has received, as a result of kicking Bundy off of land his family has ranched for generations and taking away his prior usage rights, just to open up the land for oil-and-gas—the two can both be there.

The Natural News “investigation” includes a map from the Nevada Bureau of Mines and Geology that shows “significant exploratory drilling being conducted in precisely the same area where the Bundy family has been running cattle since the 1870s.” It continues: “What’s also clear is that oil has been found in nearby areas.”

Nevada is not a top-of-mind state when one thinks about oil and gas. Alan Coyner, administrator for the Nevada Division of Minerals, describes his state: “We are not a major oil-producing state. We’re not the Saudi Arabia of the U.S. like we are for gold and geothermal production.”

The Las Vegas Review Journal reports: “When it comes to oil, Nevada is largely undiscovered country…. fewer than 1,000 wells have been drilled in the state, and only about 70 are now in production, churning out modest amounts of low-grade petroleum generally used for tar or asphalt. Since an all-time high of 4 million barrels in 1990, oil production in Nevada has plummeted to fewer than 400,000 barrels a year. More oil is pumped from the ground in one day in North Dakota—where the fracking boom has added more than 2,000 new wells in recent years—than Nevada produced in 2012.”

But Nevada could soon join the ranks of the states that are experiencing an economic boom and job creation due to oil-and-gas development. And, that has got to have the environmental groups, which are hell-bent on stopping it, in panic mode. Until now, their efforts in Nevada have been focused on blocking big solar development.

A year ago, the BLM held an oil-and-gas lease sale in Reno. At the sale, 29 federal land leases, totaling about 56 square miles, were auctioned off, bringing in $1.27 million. One of the winning bidders is Houston-based Noble Energy, which plans to drill as many as 20 exploratory wells and could start drilling by the end of the year. Commenting on its acreage, Susan Cunningham, Noble senior vice president, said: “We’re thrilled with the possibilities of this under-explored petroleum system.”

The parcels made available in April 2013 will be developed using hydraulic fracturing, about which Coyner quipped: “If the Silver State’s first big shale play pays off, it could touch off a fracking rush in Nevada.” Despite the fact that fracking has been done safely and successfully for more than 65 years in America, the Center for Biological Diversity’s (CBD) Nevada-based senior scientist, Ron Mrowka, told the Las Vegas Review Journal: “Fracking is not a good thing. We don’t feel there is a safe way to do it.”

The BLM made the leases available after someone, or some company, nominated the parcels, and the process to get them ready for auction can easily take a year or longer. One year before the April 2013 sale, CBD filed a “60-day notice of intent to sue” the BLM for its failure to protect the desert tortoise in the Gold Butte area—where Bundy cattle have grazed for more than a century.

Because agencies like the BLM are often staffed by environmental sympathizers, it is possible that CBD was alerted to the pending potential oil-and-gas boom when the April 2013 parcels were nominated—triggering the notice of intent to sue in an attempt to lock up as much land as possible before the “fracking rush” could begin.

deserttortoiseA March 25, 2014, CBD press release—which reportedly served as the impetus for the current showdown—states: “Tortoises suffer while BLM allows trespass cattle to eat for free in Nevada desert.” It points out that the Clark County Multiple Species Habitat Conservation Plan purchased and then retired grazing leases to protect the endangered tortoise.

Once Bundy’s cattle are kicked off the land to protect the tortoise, the precedent will be set to use the tortoise to block any oil-and-gas development in the area—after all environmentalists hate cattle only slightly less than they hate oil and gas. Admittedly, the April 13 leases are not in the same area as Bundy’s cattle, however, Gold Butte does have some oil-and-gas exploration that CBD’s actions could nip in the bud.

Intellihub reports: “The BLM claims that they are seizing land to preserve it, for environmental protection. However, it is obvious that environmental protection is not their goal if they are selling large areas of land to fracking companies. Although the land that was sold last year is 300 and some miles away from the Bundy ranch, the aggressive tactics that have been used by federal agents in this situation are raising the suspicion that this is another BLM land grab that is destined for a private auction.”

The Natural News Network also sees that the tortoise is being used as a scapegoat: “Anyone who thinks this siege is about reptiles is kidding themselves.” It adds: “‘Endangered tortoises’ is merely the government cover story for confiscating land to turn it over to fracking companies for millions of dollars in energy leases.” The Network sees that it isn’t really about the critters; after all, hundreds of desert tortoises are being euthanized in Nevada.

Though the Intellihub and Natural News Network point to the “current showdown” as being about allowing oil-and-gas development, I believe that removing the cattle is really a Trojan horse. The tortoise protection will be used to block any more leasing.

On April 5, 2014, CBD sent out a triumphant press release announcing that the “long-awaited” roundup of cattle had begun.

What I am presenting is only a theory; I am just connecting some dots. But over-and-over, an endangered or threated species or habitat is used to block all kinds of economic development. A few weeks ago, I wrote about the lesser prairie chicken and the huge effort ($26 million) a variety of industries cooperatively engaged in to keep its habitat from being listed as threatened. The effort failed and the chicken’s habitat was listed. In my column on the topic, I predicted that these listings were likely to trigger another sage brush rebellion that will challenge federal land ownership. The Bundy showdown has brought the controversy front and center.

propertyrightsFor now, southern Nevada’s last rancher has won the week-long standoff that has been likened to Tienanmen Square. Reports state that “the BLM said it did so because it feared for the safety of employees and members of the public,” not because it has changed its position.

While this chapter may be closing, it may have opened the next chapter in the sagebrush rebellion. The Bundy standoff has pointed out the overreach of federal agencies and the use of threatened or endangered species to block economic activity.

About Marita Noon

Marita Noon

The author of Energy Freedom, Marita Noon serves as the executive director for Energy Makes America Great Inc. and the companion educational organization, the Citizens’ Alliance for Responsible Energy (CARE). Together they work to educate the public and influence policy makers regarding energy, its role in freedom, and the American way of life. Combining energy, news, politics, and, the environment through public events, speaking engagements, and media, the organizations’ combined efforts serve as America’s voice for energy.

Now Is The Time For Congress To Pass The FairTax by Rep. Ander Crenshaw (FL-4)

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With America’s April 15 tax filing day just a couple days behind us, I must reiterate my strong support for passage of the FairTax Act of 2013. American individuals and businesses spend roughly $265 billion and over 6 billion hours every year filing their tax returns.

This costly and complicated tax code has grown to over 3.8 million words and over 70,000 pages of burdensome regulations and loopholes. This amount of time and money can be better spent on growing the economy and creating jobs, and implementing the FairTax would help do just that.

Americans deserve to keep more of their paycheck in their wallets and bank accounts. The FairTax replaces the current federal tax code with a national sales tax on all goods and services sold in the United States. Federal income taxes, FICA payroll taxes, and the death tax would all be eliminated, and the Internal Revenue Service (IRS) would no longer be needed as the states would be in charge of collecting all revenue.

As Chairman of the House Financial Services and General Government Appropriations Subcommittee, my Subcommittee directly oversees the IRS budget. The IRS plays a critical role in our nation’s tax administration by providing services to help Americans comply with their tax obligations and pursuing those who are not paying their fair share.

However, the IRS is encumbered with the large task of processing over 237 million tax returns that result in the collection of $2.5 trillion in taxes and $373 billion in refunds annually for a price of over $11 billion annually in hard-earned taxpayer dollars. These are billions of dollars that Americans don’t need to be sending to Washington to fund big and costly government programs.

The FairTax protects the poor and treats everyone equally: no exemptions, no exclusions, no advantages.

People would be allowed to keep their entire paycheck and spend hard-earned dollars on ways that best suit them. In addition, consumers would see savings in the price of goods and services from no longer required hidden business taxes. And on the business side of the equation, labor costs are lowered by eliminating payroll taxes and allowing businesses to hire more workers.

A tax code that is simpler, fairer, and more competitive is what our country needs to spur economic growth. By adding the FairTax to the equation we give individuals, families, and businesses yet another tool to achieve economic peace of mind now and in the future.

In the end, citizens in Florida and across the country know best how to spend their money and deserve to keep more of it in their wallets and bank accounts. Congress needs to take action to make responsible fiscal policy changes that will help strengthen our Nation’s future. That means passing the FairTax sooner rather than later.

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FairTax Volunteer Spotlight – Tax Day

California volunteer State Director, Jim Donnell sent us a note about a Tax Day rally at the California State Capitol:

“The FairTax booth was a popular spot. We had over 90 people sign post cards to be sent off to their representatives in Congress urging them to support the FairTax. We handed out well over 100 FairTax fliers and handed out a bunch of FairTax pens. All in all we felt it was a very successful day. I also had an opportunity to speak to the crowd for about 10 minutes after which we had people lined up two and three deep wanting more information.

CA Tax DayHearty thanks to Jim and fellow FairTax volunteers John Depue, Frank Wagener, Kenneth Smith and Maxine Rodowicz for working so hard to make the event happen!The FairTax In the Media

Bi-partisanship and the tax code – Shreveport Times

…Obama, Speaker John Boehner and others all the way down on both sides of the aisle give the same talking points on the need for comprehensive tax reform. “We need to close loopholes.” “We need to make it more transparent.” “We need to simplify.”..

The Fair Tax Act is a bill currently in Congress that would do just that…

Well, if this is so good, why hasn’t Congress done it?

This goes back to the bi-partisan effort I started with. Those in leadership have too much invested in the tax code to let it go easily. They may bicker over many things, but even when their side is not in power, they can’t let it go hoping that they will have their turn again. The only two classes that truly exist are the political elite, and the rest of us. This is why “we the people” no matter our other issues or disagreements, must be non-partisan on this, and force them to do what is right.

Isn’t it time you got involved?

Town hall meeting focuses on tax reform – WHIZ News

A town hall meeting proposed the idea that the current tax system is flawed and a tax reform is needed.

The forum debated the difference between a flat tax and a fair tax. Speakers on both sides agreed that the forum will hopefully act as a way to change the tax system.

“This is a replacement for the system that’s already there, the federal income tax. What we propose to do under the fair tax is eliminate the income tax and eliminate the IRS and replace it with one simple retail sales tax,” said Steve Curtis, State Director with Americans for Fair Tax Ohio…

Curtis adds, “Our objective is to help people understand just how bad of a situation we’re in and give them an alternative.”

Understanding The FairTax Webinar

With April’s Additional Topic: The effect on seniors and retired people.

When: Thursday, April 24, 2014

Time: 8 pm Eastern, 7 pm Central, 6 pm Mountain, 5 pmPacific

Where: At your personal computer, anywhere!

Why: To provide a LIVE, interactive forum for people who cannot get to local meetings to learn about the FairTax and to present special topics that are frequently misunderstood or not generally discussed.

Who: Join Marc Manieri, Webinar Producer & Host from Orlando, Florida. Our webinars are vital to educating honest tax payers. We help build the knowledge base of those on the front lines as well as those wanting to know what the FairTax is about.

Join: To participate, register here and watch for the confirmation email. For more information contact Larry Walters at repeal_16@earthlink.net

RELATED STORY: IRS Caught in Bed With DOJ: New Documents Reveal Lerner Conspired with DOJ to Prosecute Conservative Groups

Urban Design and Social Complexity by SANDY IKEDA

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Urban planning always risks draining the life out of what it tries to control.

This week’s column is drawn from a lecture I gave earlier this year at the University of Southern California on the occasion of the retirement of urban economist Peter Gordon.

One of my heroes is the urbanist Jane Jacobs, who taught me to appreciate the importance for entrepreneurial development of how public spaces—places where you expect to encounter strangers—are designed. And I learned from her that the more precise and comprehensive your image of a city is, the less likely that the place you’re imagining really is a city.

Jacobs grasped as well as any Austrian economist that complex social orders such as cities aren’t deliberately created and that they can’t be. They arise largely unplanned from the interaction of many people and many minds. In much the same way that Ludwig von Mises and F. A. Hayek understood the limits of government planning and design in the macroeconomy, Jacobs understood the limits of government planning and the design of public spaces for a living city, and that if governments ignore those limits, bad consequences will follow.

Planning As Taxidermy

Austrians use the term “spontaneous order” to describe the complex patterns of social interaction that arise unplanned when many minds interact. Examples of spontaneous order include markets, money, language, culture, and living cities great and small. In her The Economy of Cities, Jacobs defines a living city as “a settlement that generates its economic growth from its own local economy.” Living cities are hotbeds of creativity and they drive economic development.

There is a phrase she uses in her great work, The Life and Death of Great American Cities, that captures her attitude: “A city cannot be a work of art.” As she goes on to explain:

Artists, whatever their medium, make selections from the abounding materials of life, and organize these selections into works that are under the control of the artist . . . the essence of the process is disciplined, highly discriminatory selectivity from life. In relation to the inclusiveness and the literally endless intricacy of life, art is arbitrary, symbolic and abstracted. . . . To approach a city, or even a city neighborhood, as if it were a larger architectural problem, capable of being given order by converting it into a disciplined work of art, is to make the mistake of attempting to substitute art for life. The results of such profound confusion between art and life are neither art nor life. They are taxidermy.

So the problem confronting an urban planner, and indeed government planning of any sort, is how to avoid draining the life out of the thing you’re trying to control.

The Trade-Off Between Planning and Complexity

Viewing cities as spontaneous orders and not as works of art helps to explain the trade-off between scale and order. In general, I believe the larger the scale of a project, the fewer the discoveries and subtle connections the people who use that space will be able to make.

Placing an apartment building in a commercial block will change the character of that block in unpredictable ways, but the surrounding urban environment can usually absorb the repercussions and the problems are relatively small. A block-sized mall, however, constrains much further how people can use that space and has a disproportionately larger impact on the neighborhood. And a mega-project that takes up many blocks severely limits the diversity and range of the social connections, as it challenges the planner to substitute her genius for the genius of many ordinary people using their own local knowledge to solve problems only they may be aware of. Making something bigger increasingly limits what people can do and whom they can bump into in the space that it occupies. Scaling up narrows the range of the informal contacts that drive creativity and discovery.

And for a given size or scale of a project, the more the planner tries to predetermine the kind of activities the people who use it can do in it, the less likely that her design will complement the spontaneous contact that generates and diffuses new ideas. That’s what made a lot of traditional downtowns so important. Over time the combination of diverse uses of public space (in the sense I mean here) brought people with different skills and tastes together in large numbers. Design can of course complement that informal contact to a point, but beyond a fairly low level, human design begins to substitute for it.

Of course, small is not always beautiful, and big is sometimes unavoidable. But that makes it even more important that planners appreciate how ramping up scale and intensifying design influences a complex social order.

Private Planning Is Much More Limited in Scale

And I’m not just talking about government projects. Private projects could, in principle, have the same “taxidermic” impact on urban vitality. But as long as a planner’s design is small compared to the surrounding space, the loss of complexity and intricacy isn’t severe. It’s usually when government somehow subsidizes private projects, softening up the budget constraint, that the scale becomes massive and the downside very steep. An example of this can be found about a mile from where I live in New York. Barclays Center, the new home of the NBA’s Brooklyn Nets, grew to an enormous size once the local and state governments offered eminent domain and other large subsidies. Building on a massive scale in an already dense urban environment is typically too expensive, even for a wealthy private developer, without such legal privileges.

A planner can’t build an entire city (or neighborhood even) because she can’t begin to design and construct the necessary diversity and social intricacy that happens spontaneously in a living city. And I don’t think she should even try to because it can irreparably damage, even kill, the living flesh of a city. What can government do? In the ordinary course of its activities a government can perhaps at best refrain from doing the things that would thwart the emergence of the invisible social infrastructure that gives rise to that diversity, development, and genuine liveliness.

The rest is mostly taxidermy.

ABOUT SANDY IKEDA

Sandy Ikeda is an associate professor of economics at Purchase College, SUNY, and the author of The Dynamics of the Mixed Economy: Toward a Theory of Interventionism. He will be speaking at the FEE summer seminars “People Aren’t Pawns” and “Are Markets Just?“

Retailers Head to Energy Boom States

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Here’s an example of how the benefits of the shale energy boom radiate beyond the oil and gas industry. The Wall Street Journal reports that Home Depot opened only one store [subscription required] this past fiscal year, and it was in Minot, North Dakota, near the Bakken shale formation.

Home Depot went there because energy production is driving economic growth:

“If you had said to me seven years ago, you’ll be opening a store in Minot, North Dakota, I would have asked, Why?” Chief Executive Frank Blake said in an interview. “One of the great stories of the U.S. is the shale oil development, and it’s happening in areas where we don’t have a lot of stores now.”

Michael Glazer, CEO of Stage Stores, wishes his company had stores in North Dakota right now. He told the newspaper:

There’s a correlation between the energy boom and county employment rates. And wherever energy comes in, jobs follow and people spend more at our stores.

Look at North Dakota. Local writer Rob Port of SayAnythingBlog.com reports that because of the oil boom, North Dakota’s unemployment rate is 2.6%, while the nation’s unemployment rate stands at 6.7%.

He also posted a map showing that every county in the state saw at least 14% per-capital personal income growth from 2007-2012.

SayAnythingBlog_governingpersonalincomes_map

For a larger view click on the map.

It’s no wonder Home Depot has expanded there.

Other major retailers see these trends as well:

Home Depot is among a number of retailers including Wal-Mart Stores Inc. and GameStop Corp. targeting oil and gas towns in North Dakota, Texas and Louisiana, in an otherwise dour environment for retail real estate.

Natural Gas Intelligence reports that cities in or near energy-rich areas are growing the fastest, according to a Census Department study:

Of the nation’s 10 fastest-growing metropolitan statistical areas, six were within or near the Great Plains and near to some of the country’s largest oil and gas fields, including Odessa, TX; Midland, TX; Fargo, ND; Bismarck, ND; Casper, WY and Austin-Round Rock, TX.

The same was true of micropolitan statistical areas, those ranging in size from 10,000 to 50,000 people, near oil and gas development. Seven of the fastest growing micro-areas were located in or near the Great Plains, with Williston, ND, ranked first in growth, followed by Dickinson, ND, and Andrews, TX.

Jobs and economic growth created by increased domestic energy production are drawing people to these cities. Businesses follow.

States that aren’t sitting on top of energy deposits also benefit from the shale energy boom, according to a 2012 report by IHS for the U.S. Chamber’s Institute for 21st Century Energy. For example:

Among non-producing states, fabricated metal manufacturing in Illinois, software and information technology in Massachusetts, and financial services and insurance in Connecticut are examples of central players in the US unconventional oil and gas supply chain.

The report noted, “By 2035, unconventional oil and gas will add almost $475 billion dollars to the economies of the lower 48 US states.”

As seen by what’s happening in North Dakota, this growth will also ripple outward into the broader economy.

Regulation Nation: Federal Bureaucracy is as Busy as Ever

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The shale energy boom may be taking place in North Dakota, Texas, Pennsylvania, and elsewhere. However, the Wall Street Journal editorial board notes that a less economically-helpful boom is happening in Washington, DC:

Washington set a new record in 2013 by issuing final rules consuming 26,417 pages in the Federal Register. While plenty of government employees deserve credit for this milestone, leadership matters. And by this measure President Obama has never been surpassed in the Oval Office.

The latest rule-making tally comes from the Competitive Enterprise Institute’s Wayne Crews, who on April 29 will publish his annual review of federal regulation in “Ten Thousand Commandments.” This is important work because politicians and the media treat regulation as a largely cost-free public good. Mr. Crews knows better.

Congress may be mired in gridlock, but the federal bureaucracy is busier than ever. In 2013 the Federal Register contained 3,659 “final” rules, which means they now must be obeyed, and 2,594 proposed rules on their way to becoming orders from political headquarters.

The Federal Register finished 2013 at 79,311 pages, the fourth highest total in history. That didn’t match President Obama’s 2010 all-time record of 81,405 pages. But Mr. Obama can console himself by noting that of the five highest Federal Register page counts, four have occurred on his watch. The other was 79,435 pages under President George W. Bush in 2008.

And the feds aren’t letting up. Mr. Crews reports that there are another 3,305 regulations moving through the pipeline on their way to being imposed. One hundred and ninety-one of those are “economically significant” rules, which are defined as having costs of at least $100 million a year. Keep in mind that the feds routinely low-ball their cost estimates so the public will continue to think regulation is free.

Federal agencies are hard at work writing more rules to implement Dodd-Frank, Obamacare, and environmental laws. “By far their greatest and most tragic cost has been slower economic growth, which has meant fewer jobs, lower incomes and diminished economic possibilities for tens of millions of Americans,” writes the editorial.

Our modern economy needs a revamped, transparent, balanced, and accountable regulatory system so businesses have more certainty to invest and hire workers.

My colleague Sheryll Poe put together this infographic to summarize the editorial.

[via memeorandum]

 

ALEC Report: Rich States, Poor States, 2014 Edition

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2014-economic-outlook-rankings1-248x353

Click on the image to download a free copy of Rich States, Poor States 2014 Edition.

The American Legislative Exchange Council (ALEC) has released its 2014 edition of Rich States, Poor States: State Economic Competitiveness Index.  Throughout the country, states are looking for ways to energize their economies and become more competitive. Each state confronts this task with a set of policy decisions unique to their own situation, but not all state policies lead to economic prosperity.

Using years of economic data and empirical evidence from each state, the authors identify which policies can lead a state to economic prosperity. Rich States, Poor States not only identifies these policies but also makes sound research-based conclusions about which states are poised to achieve greater economic prosperity and those that are stuck on the path to a lackluster economy.

The 2014 economic outlook ranking is a forward-looking measure of how each state can expect to perform economically based on 15 policy areas that have proven, over time, to be the best determinants of economic success.

Rich States, Poor States: ALEC-Laffer State Economic Competitiveness Index is an annual economic competitiveness study authored by economist Dr. Arthur Laffer, Stephen Moore, chief economist at the Heritage Foundation, and Jonathan Williams, Director of the Tax and Fiscal Policy Task Force at the American Legislative Exchange Council.

ABOUT THE AMERICAN LEGISLATIVE EXCHANGE COUNCIL

The American Legislative Exchange Council works to advance limited government, free markets, and federalism at the state level through a nonpartisan public-private partnership of America’s state legislators, members of the private sector and the general public.

2014 Economic Outlook Rank
  1. Utah
  2. South Dakota
  3. Indiana
  4. North Dakota
  5. Idaho
  6. North Carolina
  7. Arizona
  8. Nevada
  9. Georgia
  10. Wyoming
  11. Virginia
  12. Michigan
  13. Texas
  14. Mississippi
  15. Kansas
  16. Florida
  17. Wisconsin
  18. Alaska
  19. Tennessee
  20. Alabama
  21. Oklahoma
  22. Colorado
  23. Ohio
  24. Missouri
  25. Iowa
  26. Arkansas
  27. Delaware
  28. Massachusetts
  29. Louisiana
  30. West Virginia
  31. South Carolina
  32. New Hampshire
  33. Pennsylvania
  34. Maryland
  35. Nebraska
  36. Hawaii
  37. New Mexico
  38. Washington
  39. Kentucky
  40. Maine
  41. Rhode Island
  42. Oregon
  43. Montana
  44. Connecticut
  45. New Jersey
  46. Minnesota
  47. California
  48. Illinois
  49. Vermont
  50. New York
Economic Performance Rank
  1. Texas
  2. Utah
  3. Wyoming
  4. North Dakota
  5. Montana
  6. Washington
  7. Nevada
  8. Arizona
  9. Oklahoma
  10. Idaho
  11. Alaska
  12. North Carolina
  13. Oregon
  14. Virginia
  15. South Dakota
  16. Colorado
  17. Hawaii
  18. West Virginia
  19. Florida
  20. Nebraska
  21. Arkansas
  22. South Carolina
  23. New Mexico
  24. Iowa
  25. Tennessee
  26. Delaware
  27. Georgia
  28. Kentucky
  29. Louisiana
  30. Alabama
  31. Maryland
  32. Kansas
  33. Minnesota
  34. New Hampshire
  35. New York
  36. Vermont
  37. Pennsylvania
  38. Indiana
  39. Mississippi
  40. Missouri
  41. Massachusetts
  42. Maine
  43. California
  44. Wisconsin
  45. Connecticut
  46. Illinois
  47. Rhode Island
  48. New Jersey
  49. Ohio
  50. Michigan

Historical Rich States, Poor States

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CLICHES OF PROGRESSIVISM #1: Income Inequality Arises From Market Forces and Requires Government Intervention

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The Foundation for Economic Education (FEE) is proud to partner with Young America’s Foundation (YAF) to produce “Clichés of Progressivism,” a series of insightful commentaries covering topics of free enterprise, income inequality, and limited government.

Our society is inundated with half-truths and misconceptions about the economy in general and free enterprise in particular. The “Clichés of Progressivism” series is meant to equip students with the arguments necessary to inform debate and correct the record where bias and errors abound.

Leaders and experts who support free enterprise and who understand the importance of fiscal responsibility and entrepreneurship will author the pieces. A book will be released in 2015 featuring the best editorials in the series. The opinion editorials and columns will be published weekly on the websites of both YAF and FEE: www.yaf.org and www.FEE.org. 

See the index of the published chapters here.

#1 — Income Inequality Arises From Market Forces and Requires Government Intervention

Inequality is everywhere. In a rainforest, mahogany trees take up more water and sunlight than all the other plants and animals. In our economic ecosystems, entrepreneurs and investors control more of the assets than the rest of us do. No one worries about the mahogany trees, and yet there is terrible fretting about the wealthy. In the case of ecosystems and economies, however, there are very good reasons for an unequal distribution of resources.

The sources of some forms of inequality are better than others. For example, inequality produced by crony capitalism—or what Barron’s editor Gene Epstein refers to as “crapitalism”—is surely undesirable. Therefore, it’s important for us to make a distinction between economic entrepreneurs and political entrepreneurs: The former create value for society; the latter have figured out how to transfer resources from others into their own coffers, usually by lobbying for subsidies, special favors or anticompetitive laws. If we can ever disentangle the crapitalists from the true entrepreneurs, we can see the difference between makers and takers. And inequality that follows from honest entrepreneurship, far from indicating that something is wrong, indicates an overall flourishing. In a system where everyone is made better off through creative activity and exchange, some people are going to get wealthy. It’s a natural feature of the system—a system that rewards entrepreneurs and investors for being good stewards of capital. Of course, when people are not good stewards of capital, they fail. In other words, people who make bad investments or who don’t serve customers well aren’t going to stay rich long.

Whenever we hear someone lamenting inequality, we should immediately ask, “So what?” Some of the smartest (and even some of the richest) people in America confuse concerns about the poor with concerns about the assets the wealthy control. It’s rooted in that old zero-sum thinking—the idea that if a poor guy doesn’t have it, it’s because the wealthy guy does. But one person is only better off at the expense of another under crapitalism, not under conditions of honest entrepreneurship and free exchange.

Unless someone has made lots of money hiring lawyers and lobbyists instead of researchers and developers, wealthy people got rich by creating a whole lot of value for a whole lot of people. Thus, the absence of super-wealthy people would actually be a bad sign for the rest of us—especially the poor. Indeed, it would indicate one of two things: Either very little value had been created (fewer good things in our lives, like iPhones and chocolate truffles) or the government had engaged in radical redistribution, removing significant incentives for people to be value creators and stewards of capital at all.

When resources are sitting in investments or in bank accounts, they are not idle. In other words, most rich people don’t stuff their millions under mattresses or take baths in gold coins. In conditions of economic stability, these resources are constantly working in the economy. In more stable conditions, a portion finds its way to a creative restaurateur in South Carolina in the form of a loan. Another portion is being used by arbitrageurs who help stabilize commodity prices. Another portion is being loaned to a nurse so she can buy her first home. Under normal circumstances, these are all good things. But when too many resources get intercepted by Uncle Sam before they get to the nodes in these economic networks, they will be squandered in the federal bureaucracy—a vortex where prosperity goes to die.

We should also remember that, due to our equal markets, most of us live like kings. Differences in assets are not the same as differences in living standards, although people tend to fetishize the former. Economist Don Boudreaux reminds us that Bill Gates’s wealth may be about 70,000 times greater than his own. But does Bill Gates ingest 70,000 times more calories than Professor Boudreaux? Are Bill Gates’ meals 70,000 times tastier? Are his children educated 70,000 times better? Can he travel to Europe or to Asia 70,000 times faster or more safely? Will Gates live 70,000 times longer? Today, even the poorest segment in America live better than almost anyone in the eighteenth century and better than two-thirds of the world’s population.

When we hear people fretting about inequality, we should ask ourselves: Are they genuinely concerned for the poor or are they indignant about the rich? Here’s how to tell the difference: Whenever someone grumbles about “the gap,” ask her if she’d be willing for the rich to be even richer if it meant improved conditions for the absolute poorest among us. If she says “no,” she’s admitting that her concern is really with what the wealthy have, not what the poor lack. If her answer is “yes,” then the so-called “gap” is irrelevant. You can then go on to talk about legitimate concerns, like how best to improve the conditions of the poor without paying them to be wards of the State. In other words, the meaningful conversation we should be having is about absolute poverty, not relative poverty.

In so many of the discussions about income inequality, there is a basic emotional dynamic at work. Someone sees they have less than another, and they feel envious. Perhaps they see they have more than another, and they feel guilty. Or they see that someone has more than someone else, and they feel indignation. Envy, guilt, and indignation. Are these the kinds of emotions that should drive social policy? When we begin to understand the origins of wealth—honest entrepreneurs and stewards of capital in an inherently unequal ecosystem—we can learn to leave our more primitive emotions behind.

 

Max Borders
Editor & Director of Content
The Freeman

Summary

  • Economic inequality, like the personality traits that make up each individual, is a defining characteristic of humanity.
  • When economic inequality arises naturally in the marketplace, it largely reflects the ability of individuals to serve others; when it arises from political connections, it’s unfair and corrupt.
  • Allowing economic inequality to occur, so long as it doesn’t derive from politics (or fraud from the Bernie Madoffs of the world), inevitably raises the standard of living for society as a whole
  • Concern for “the poor” is often a way to disguise envy or disdain for “the rich.”
  • For more information, see http://tinyurl.com/ohwvrx9.

ABOUT MAX BORDERS

Max Borders is the editor of The Freeman and director of content for FEE. He is also co-founder of the event experience Voice & Exit and author of Superwealth: Why we should stop worrying about the gap between rich and poor.

RELATED ARTICLE: Scientific American: The Myth of Income Inequality by Michael Shermer

EDITORS NOTE:  The features photo is courtesy of FEE and Shutterstock.