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VIDEO: President Trump’s remarks on ending America’s overreliance on foreign supply chains

President Trump is taking further action under the Defense Production Act to end America’s overreliance on foreign supply chains.

WATCH: President Trump’s remarks begin at the 52:00 mark:

The Administration has used the Defense Production Act more than 30 times to date, helping to secure critical supplies of ventilators, personal protective equipment, testing supplies, pharmaceutical products, and more during the global Coronavirus pandemic.

Now, the Administration is providing a $765 million loan to Kodak to support the launch of Kodak Pharmaceuticals, which will boost America’s domestic production of much-needed drugs. Once fully operational, Kodak Pharmaceuticals will manufacture up to 25 percent of active pharmaceutical ingredients for certain generic medicines.

“This is not about China or India or any one country,” White House Director of Trade and Manufacturing Policy Peter Navarro says. “It’s about America losing its pharmaceutical supply chains to the sweat shops, pollution havens, and tax havens around the world that cheat America out of its pharmaceutical independence.”

READ MORE: Kodak Shifts Into Drug Production With Help of U.S. Loan


Several Coronavirus vaccines reach late-stage trials

Operation Warp Speed, one of President Trump’s most important responses to the Coronavirus, is a historic partnership between the federal government, scientific community, and private sector to develop a safe COVID-19 vaccine in record time. Its goal is to produce 300 million doses of vaccine and have initial doses ready by January.

The once-in-a-generation effort is already achieving incredible results.

Clinical trials are showing promising early data, and manufacturing is already ramping up in preparation. Several vaccine candidates, including ones from AstraZeneca, Moderna, and Pfizer, are either in or about to begin late-stage trials.

Yesterday, President Trump toured a Fujifilm Diosynth Biotechnologies plant in North Carolina, where he gave reporters an update about progress toward a vaccine.

“Not only is Operation Warp Speed accelerating the development of a vaccine—we’re also directing a colossal industrial mobilization to ensure its rapid delivery,” he said. “Nothing has happened like this since the end of World War II.”

Rather than rely on government command-and-control schemes to fight the Coronavirus, the Trump Administration is marshalling America’s scientific genius across the public, private, and nonprofit sectors. The FDA has authorized more than 185 tests under emergency authorities, including at least 30 antibody tests.

As a result of all these efforts, a number of promising therapies for the Coronavirus, such as Remdesivir, have been identified and are already in use.

“The United States has now conducted more than 51 million tests”

LEARN MORE: A once-in-a-generation effort to develop a vaccine

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PODCAST: Author Argues African Americans Gained Ground Under Trump’s Leadership

President Donald Trump’s policies are helping minority communities across America. Today, Horace Cooper, senior fellow at the National Center for Public Policy Research and co-chairman of Project 21, joins the show to discuss his new book “How Trump Is Making Black America Great Again: The Untold Story of Black Advancement in the Era of Trump.” Cooper explains why he believes African Americans are advancing under Trump’s leadership.

We also cover these stories:

  • The Supreme Court decides 7-2 that the Little Sisters of the Poor won’t be forced to provide abortion-inducing drugs or birth control to employees as part of the Catholic order’s health care plan.
  • The Supreme Court rules in favor of Catholic schools in a case balancing religious freedom with employment law.
  • Alexander Vindman, a central witness in Democrats’ effort to remove Trump, announces his retirement.

“The Daily Signal Podcast” is available on Ricochet, Apple PodcastsPippaGoogle Play, and Stitcher. All of our podcasts can be found at DailySignal.com/podcasts. If you like what you hear, please leave a review. You can also leave us a message at 202-608-6205 or write us at letters@dailysignal.com. Enjoy the show!

Virginia Allen: I am joined by Horace Cooper, senior fellow at the National Center [for Public Policy Research], Project 21 co-chair, and the author of “How Trump is Making Black America Great Again: The Untold Story of Black Advancement in the Era of Trump.” Mr. Cooper, welcome to the show.


In these trying times, we must turn to the greatest document in the history of the world to promise freedom and opportunity to its citizens for guidance. Find out more now >>


Horace Cooper: Hey, it’s great to be on today.

Allen: Well, congratulations on the book, it just released and we’re so excited to talk about it today, learn a little bit more about it. Can you begin by just telling us why you chose to write it?

Cooper: Sure. One of the things that led me to write the book has been, I travel across the country, I speak to a lot of groups, I do a lot of media, and I’m always asked this question about how either the Republican Party, or now President [Donald] Trump in particular, how could anyone embrace or support or be enthusiastic about who the president is, Donald Trump, or, at the time, when Republicans controlled the House of Representatives, when I started this book.

In all instances I was asked this question, “Isn’t it true that black people have to fear from conservatives? Isn’t it true that only liberals and progressives have anything positive to offer for black America?” And I wanted to write this book so I could show with data, with actual data, what’s truly going on in America. And that in fact, there is a lot for people to really, really be excited about.

Allen: So the book is titled “How Trump is Making Black America Great Again: The Untold Story of Black Advancement in the Era of Trump.” You mentioned data, can we get into a little bit of just those ways that the black community has advanced under Trump’s leadership?

Cooper: One of the first things that I want to let everyone know here is, and part of what’s important, what we see today in 2020 is, in many instances, a representation for most people of the reality that they know. And they pay little attention to 10 years ago, they pay almost no attention to 30 years ago, and it is inconceivable to understand or comprehend a hundred years ago.

Here’s the truth—and this is why I really think it’s helpful to look at the data—a hundred years ago, 1920 black America actually was doing an amazing level of achievement. Black America had a higher employment rate than the rest of the country, black Americans were represented in federal prisons at the lowest level of any race group.

In fact, black men and women were married at either the same or higher rates than the rest of the American population. And children were growing up in households where their parents, if they were black, were as likely or more likely to be married.

We don’t think of that today because the numbers are so divergent. There were more black millionaires in the 1920s than there were in the 1970s, even though the population of America had exploded by the time of the 1970s.

So one of the things that I wanted to point out with the data today is how improved black America is over where black America was in just 10 years ago and even 30 years ago. Black America unemployment is skyrocketing in contrast.

Allen: What happened that we went from black America being so successful and having stable homes and jobs to then this real downward slope that now we’re seeing President Trump helped to pull that community out of?

Cooper: Yes. So that’s the great question and that’s the question that often goes unanswered. And the reason it goes unanswered is many people erroneously conclude that whatever’s happening today or whatever happened in the last 10 years is the way that it’s always been.

We had policies under Warren Harding and Calvin Coolidge that said it was not the job of government to solve every problem, it was the responsibility of the individual. They supported free enterprise, they supported very, very limited regulation on the part of government. And … if you apply yourself, if you try, you will be amazed at the kinds of things that can be accomplished.

What Donald Trump did was very, very similar to those policies that led to the period that we call the Roaring ’20s. He pulled government back in terms of regulation, he pulled government back in terms of taxation. He made it possible, as I point out, we had a record in 17, 18, 19 of the number of new small businesses that black Americans created.

What you have to have happen is an environment where you are making policies that are great for the country. And when they’re great for the country, it turns out the least among us benefit even better. And that’s the real story of my book is that black Americans actually have done better in almost every single category than other groups in America. And certainly better than the average American.

Allen: You talk about something called MAGAnomics in the book. Can you explain what that is?

Cooper: Sure. MAGAnomics is the idea that it’s not government’s job to promote the interest of international corporations, it’s not the job of government to see to it that every type of foreigner who is interested in coming to America gets the opportunity to do so.

Now, that’s not the same thing as saying, “You can’t come.” But it is saying that’s not going to be the priority.

Black Americans have been the biggest losers with the advance to push for international workforces, particularly from Latin and South America.

We’ve seen unbelievable amounts of job undercutting and one of the reasons that that can happen is, if you’re in the country unlawfully or you’ve overstayed your visa, you are able to negotiate with your employer to opt out of Social Security, to opt out of Medicare, to opt out of all of the kinds of things. [You] even can opt out of the minimum wage, you’re working illegally. Therefore, it’s easy to have the conversation and get the ability to be such a low-priced worker.

That means that if you are a moderate- to low-skilled black American or white American, you’re displaced by people who can completely and totally underbid you. And over the last 10 to 15 years, there has been a major push to encourage those kind of workers who are not here lawfully.

MAGAnomics says that we’re going to focus on Americans, we’re going to focus on those who are citizens, and we’re going to make it easier for citizens to be able to work. Your taxes are going to be lower, the cost of you having your job is going to be lower for the employer because we’re going to lessen the regulatory burden.

And we’re going to put barriers up so that the only foreign workers who can come to America will do so in a lawful way and they will do so with the support that the government has always intended, that either sponsors or employers are supposed to provide. And that has had huge, huge benefits for black America.

Allen: Wow. So in other words, kind of the narrative that we so often hear from the left is kind of like, open borders will be better for everyone. But also there’s so much talk of various programs that will lift up minority communities, but you can’t have it all.

Cooper: Right, let me give you another example, by the way. It’s federal law that if you’re in the country unlawfully, that federal taxpayer services are not supposed to be provided to you except in emergencies and a few other rare areas. But most local and state jurisdictions, they pick and choose whether or not they’re going to use their dollars.

So you have 65 schools in a particular community or jurisdiction. If you bring in people who are not supposed to be in the country lawfully, they are overwhelmingly less likely [to] speak English fluently and so they’re going to need additional services.

There is a huge differential in terms of the type of social services, whether it’s alcohol or drug abuse, whether there’s domestic violence in a given household. All kinds of services are having to be provided. And many of the Latin America and other foreign or international visitors who’ve overstayed their visa unlawfully are using those local resources.

What does that mean in practical terms? That means that in your classroom, instead of there being an advanced math class that you would be able to take, scarce resources are redirected for foreign language conversion efforts to help advance the ability of people who don’t speak the English language.

That means that if you presently don’t have health care and you’re going to a community-provided clinic for assistance, well, you look around and sizable numbers of the people that are sharing that clinic with you are people who are non-residents.

So you’re not seeing an explosion in resources for education locally, you’re not seeing an explosion in resources for health and other related social services. What you’re seeing is black Americans and other working-class people of all races having to compete for those scarce resources.

And let me give you the last part, the hammer is that most of these jurisdictions charge a regressive tax. So unlike the progressive tax at the federal level, which can exempt largely its impact from those who are working class and lower income, the regressive tax hits the working class the hardest.

So you actually, as a poor person, whether black or brown or white, you get to pay for the privilege of providing lower-quality education for yourself, your child, and for the foreigners who were competing with you.

MAGAnomics says we’re going to shift the priority so that the resources that are available actually do benefit Americans as the federal law intends.

Allen: You talk about how many people, specifically white liberals, are shocked when they learn that you’re a conservative, you’re from the South, you’re African American. Can you just share a little bit of your own story of how you developed the political views that you have and became a conservative?

Cooper: So, I am a part of an impact family. My mother and father were part of a tradition in the state of Texas and in the South generally, where certain types of values mattered and that meant that my mother and father were married before I was born.

Now, because they came from a much more lower-income circumstance in rural Texas, they didn’t go off to college before we were born, they had to wait until after we were born. Why, though, did that happen? I say it’s my grandmother, Virgi P. Johnson.

Virginia Johnson had an idea and that idea was that her nine children were going be independent and self-sufficient. Seven of the nine not only were college graduates, but like my mother and several of her sisters, they got master’s degrees and Ph.D.s.

They understood, based on the experience, a summer I spent with my grandmother where she explained that even though she grew up in the midst of Jim Crow segregation, … it did not mean that she couldn’t provide for herself. And she bragged that she never relied on social services, never received food stamps, and encouraged us to be like that. Focus on your education, focus on your skill development, make sure that you can become independent.

Now, when we would stay with my grandmother, we lived in rural Texas and she had indoor plumbing, but she didn’t have a washer and a dryer, she didn’t have a dishwasher. That meant that when I was 5, 6, 7, or 8, all those kinds of tasks that normally we have appliances that help us out with, that was our job and she trained us.

I’ll give you a quick story, we had to hand wash clothes outside and we would do it early in the morning and it was cool because summers are very hot in Texas.

But the washboard that she used was too big for us as little kids. So she made a deal with us, if we agreed to do some extra chores, we could earn the money so that we could buy our own washboards that were smaller in size. We did extra chores and got the smaller washboard, which made it possible for us to wash even more.

That is counterproductive to what you see in many communities where people are shirking, people are trying to get away from work, people are trying to get away from responsibility.

My grandmother got us up at 5 a.m., sometimes earlier, I’m a morning person because of that. My grandmother saw to it that by the time I was 3, that we started reading, my brother and I. We need the ability in many of our communities to have this kind of attitude and this mindset.

I grew up where it was taken for granted that you were going to hit your books, I grew up where it was taken for granted that you’re going to stay on the right side of the law.

I never had to have “the talk,” instead I had the, “You’re going to be home on time, you’re going to be respectful in the classroom, and you’re actually going to be the kind of person that will amount to something,” as my grandma would say.

Allen: Wow, your grandmother sounds like an incredible lady, my goodness. What an honor to have that influence in your life. And those things that she obviously taught her children and her grandchildren so well, those are the exact principles that it’s so evident our nation is in need of today.

How do we further that narrative of empowerment that your grandmother obviously instilled in you? And really pull back from this victim mentality and mob rule and just this really, really negative narrative that we’re seeing played out right now by the left?

Cooper: So, my grandmother had this benefit, if she didn’t do it right, no one was going to do it for her. We have the detriment now, if you don’t do it right, don’t worry, someone is going to do it for you.

Getting up early can be hard, working long hours outside also can be hard. I got to see my grandmother save up and pay cash for a house that she lived in until she died when I was in junior high. No mortgage, she never ever had a mortgage, paid cash.

We don’t hear that mindset, instead we live in a society where, all too often, if you’re having a difficulty, if you’re having a challenge, well, you’ve got an idea, there’s a government program for that. Well, my grandmother had a different idea, apply yourself, strive, work at it, and you will be amazed at what you can accomplish.

One of my biggest regrets, I hadn’t many, but one of my biggest regrets about the Obama administration was his failure to accept the role as a model.

There are many black kids who [attend] struggling schools, many of those schools don’t work well. They’re overrun by unions more interested in featherbedding themselves than ensuring those children achieve.

But what [President Barack Obama] could have said to young people, black, white, or brown, “Apply yourself, try, make the effort. America is such an amazing place, even with whatever struggles I have had, I ultimately was able to become president of the United States. If I can do that, you can too.”

Now that would have been more aligned with the kind of opportunity to model that my grandmother was able to do and that would have given true hope to people.

Instead he castigated America, he said America wasn’t fair. He said that America wasn’t interested in giving black America a shot. And it was like a lottery land or something that we had a black American who happened to be president. Not that we are the exceptional, amazing country on the planet where that’s possible.

Name a European country, name a Latin America country or a South American country where they have one member of their minority, a black man or woman, as their prime minister or president. You keep looking because you are not going to find it.

America is that kind of a place and that would have been an amazing example for him to repeat over and over again. Even with his bad economic policies, by encouraging people to strive and achieve, he could have had a positive effect.

Allen: Mr. Cooper, I want to give you just a moment to share a little bit about Project 21 and the work that you’re doing there.

Cooper: Project 21 is actually now 25 years old, I’m a founding member and I only recently became a co-chair.

Project 21 is made up of black Americans who recognized during the riots in the wake of the Rodney King trial—during those riots we were informed by the media in an airy way, the same way we are today, that the rioting, the looting, the violence, the mayhem are legitimate out workings of the frustrations that black Americans feel.

And we looked around, I talked to many professionals, I talked to many middle-class educated black Americans and asked, “Is that your idea of how people achieve change or express angst?”

So Project 21 was founded so that we could provide the other perspective, the other view that families matter, that the private sector is far more important than the government sector. That people need to have initiative and be motivated with the kinds of community organizations like the Boy Scouts, … [the] Future Farmers of America, like I had when I was a kid, that help our communities develop and be better.

We need more of that and so Project 21 tries as much as it can and as often as it can to be able to do that. There are good policies that are great for our country and they’re great for minorities. That’s the purpose of my book, that’s the story of my life. If you help the least among us, the best way to do that is to help all of us.

Allen: And how can our listeners follow your work and the work of Project 21?

Cooper: Sure. You can check us out at www.nationalcenter.org, at the National Center for Public Policy Research, or you can follow us on Twitter, @project21news. I’m on track right now to do 420 radio and TV appearances this year, so I’m sure a quick search of Google you can find me or many of the other members of Project 21.

Allen: Wow, you have a busy year. That’s impressive. Well, for all of our listeners, you can purchase the book “How Trump is Making Black America Great Again” on Amazon, Barnes & Noble, I even found it at Target. So be sure to look it up, great read. Mr. Cooper, thank you so much for your time.

Cooper: Thanks for having me today.

COMMENTARY BY

Virginia Allen is a news producer for The Daily Signal. She is the co-host of The Daily Signal Podcast and Problematic Women. Send an email to Virginia. Twitter: .


A Note for our Readers:

This is a critical year in the history of our country. With the country polarized and divided on a number of issues and with roughly half of the country clamoring for increased government control—over health care, socialism, increased regulations, and open borders—we must turn to America’s founding for the answers on how best to proceed into the future.

The Heritage Foundation has compiled input from more than 100 constitutional scholars and legal experts into the country’s most thorough and compelling review of the freedoms promised to us within the United States Constitution into a free digital guide called Heritage’s Guide to the Constitution.

They’re making this guide available to all readers of The Daily Signal for free today!

GET ACCESS NOW! >>


EDITORS NOTE: This Daily Signal column is republished with permission. ©All rights reserved.

ECONOMY: June Jobs Report SHATTERS Expectations

America added 4.8 million jobs in June—the largest monthly increase ever recorded, according to today’s report from the Bureau of Labor Statistics.

With 7.5 million jobs added over the past two months, America’s economic comeback from the Coronavirus is taking off well ahead of schedule.

President Trump: Today’s report is “spectacular news” for America

“There’s not been anything like this—record setting,” President Trump said at a press briefing this morning. “We’ve implemented an aggressive strategy to vanquish and kill the virus, and protect Americans at the highest risk, while allowing those at lower risk to return safely to work. That’s what’s happening.”

After May and June ranked as the two largest monthly jobs gains in history, an estimated one-third of all job losses from March and April have now been recovered.

“Our work won’t be done until every single American who lost their job because of COVID gets back to work,” Treasury Secretary Steven Mnuchin said today.

June’s job gains were spread broadly across American industries, with the hard-hit leisure and hospitality sector seeing the biggest turnaround:

  • 2.1 million leisure & hospitality jobs
  • 740,000 retail jobs
  • 568,000 education & healthcare jobs
  • 357,000 service jobs
  • 356,000 manufacturing jobs

The Great American Comeback is reducing unemployment for a number of historically marginalized groups, too. African-American workers saw historic gains with more than 400,000 jobs added last month. Hispanic-American employment is up by 1.5 million, and the unemployment rate for women fell even quicker than the rate for men.

On top of that, “workers with a high school education or less made the biggest strides of all,” President Trump said.

There is more work to do in the months ahead as we rebuild the strongest economy on Earth together. The incredible, expectations-busting jobs reports in May and June, however, should give every American hope that we’re heading toward a bright future.

President Trump: Stock market is soaring with best gains in 20 years

READA Record 4.8 Million Jobs Created in June


President Trump hosts ‘Spirit of America’ showcase!

President Trump welcomed small business leaders to the White House today to spotlight their incredible work as America reopens from the Coronavirus pandemic.

“The small businesses represented in this room continue a great and noble American heritage,” he said. “You’re entrepreneurs, artisans, creators, craftsman who forge your own path, made your own products, and provide good-paying jobs for our citizens.”

Eighty percent of U.S. small businesses are now open, and new business applications have doubled since March. Thanks to President Trump’s Paycheck Protection Program, many American workers have stayed on the payroll during the pandemic, lifting incomes and helping to spark a quicker economic comeback.

President Trump: 80% of small businesses are now open

©All rights reserved.

Trump’s Tax Plan Is Brilliant Politics and Even Better Economics by Jeffrey A. Tucker

Donald Trump’s tax plan seems to mark a new chapter in his presidency, from floundering around with strange and sometimes scary policies (bombings, border closings, saber rattling) to focusing on what actually matters and what can actually make the difference for the American people and the American economy.

Under Trump’s plan, taxes on corporate profits go from 35% to 15%. They should be zero (like the Bahamas), but this is a good start. Taxes on capital gains go from 23.8% to 20%. Again, it should be zero (as with New Zealand), but it is a start. Rates for all individuals are lowered to three: 10%, 25%, and 35%. The standard deduction for individuals is doubled (politically brilliant). The estate tax and the alternative minimum tax is gone. Popular deductions for charitable giving and mortgage interest are preserved. The hare-brained idea of a “border adjustment tax” is toast.

All of this is wonderful, but the shining light of this plan is the dramatic reduction in taxes on corporate profits. The economics of this are based on a simple but profoundly true insight. Economic growth is the key to a good society. This is where good jobs come from. This is how technology improves. This is what gives everyone a brighter outlook on life. If you can imagine that your tomorrow will be more prosperous and flourishing than today, your life seems to be on track.

Tax Capital, Wreck Prosperity

Where does economic growth come from? For decades dating back perhaps a hundred-plus years, people imagined that it could come from government programs and policy manipulation. Surely there are some levers somewhere in the center of power that can cause this thing we call economic growth. We just need solid experts with power, resources, and intelligence to manage the system.

This turns out to be entirely wrong. It hasn’t worked. Since 2008, government has tried to mastermind an economic recovery. It has floundered. We are coming up on a full decade of this nonsense with economic growth barely crawling along. We are surviving, not thriving, and income growth, capital formation, and entrepreneurial opportunity restricted and punished at every turn.

The Trump tax plan is rooted in a much better idea. Economic growth must come from the private sector. It must come from investment in private capital. The owners of this capital who are doing well and earn profits should be allowed to keep them and invest them. This creates new job opportunities. It allows for more complex production strategies. It expands the division of labor.

The crucial institution here is capital. Sorry, anti-capitalists. It’s just true. Capital can be defined as the produced goods for production, not consumption. It is making things for the purpose of making other things. Think about it. Without capital, you can still have markets, creativity, hard work, enterprise. But so long as you have an absence of capital, you are forever floundering around just working to make and sell things for consumption. This is called living hand to mouth.Without capital, and the private ownership of capital, and security over your property rights, you can’t have economic growth. You can’t have complex production. You can’t raise wages. You can’t live a better life. Every tax on capital, capital formation, capital accumulation, and business profit reduces the security of property rights over capital. This is a sure way to attack economic growth at its source.

And this is precisely what American policy has done. The rest of the world has been wising up about this, reducing taxes on capital for the last 15 years. But the US has languished in the mythology of the past, regarding capital not as a font of prosperity but rather a fund of stagnant resources to be pillaged by planners in government. It is not surprising that this strategy results in slow growth and even permanent recession.

What This Can Do for Growth

I have no regression to present to you but this much I can say out of experience and intuition. If this tax plan goes through, the entire class of entrepreneurs, investors, and merchants will receiving a loud signal: this country is safe for you to realize your dreams and make the dreams of others come true.It wouldn’t surprise me to see GDP growth go from an anemic 1-2% to reach 4% and higher in one year. There is so much pent-up energy in this country. This tax cut will unleash it. And think what it means for the next recession or financial crisis. It prepares the entire country to weather such an event better than we otherwise would.

The beauty of unleashing the power of private capital is that the brilliant results will always be surprising. We don’t know what kind of experimentation in investment and business expansion this will create. This is the nature of a capitalist economy rooted in the freedom of enterprise. It defies our every expectation. No model can forecast with precision the range of results here. We only know that good things will come.

Now, of course, the opponents will talk of the deficit and the national debt. What about the lost revenue? The problem is that every revenue forecast is based on a static model. But an economy rooted in capital formation is not a static one. It is entirely possible that new profits and business expansion will produce even more revenue, even if it is taxed at a lower rate.If you want to cut the deficit, there is only one way: cut spending. I see no evidence that either party wants to do this. Too bad. This should change. But it is both economically stupid and morally unsound to attempt to balance the budget on the backs of taxpayers. Letting people keep more of what they earn is the right thing to do, regardless of government’s fiscal problems.

In the meantime, these pious incantations of the word “deficit, deficit, deficit,” should be seen for what they are: excuses to continue to loot people of their just earnings.

The Politics of It

Already the opponents of this plan are kvetching in the predictable way. This is a tax cut for the rich! Well, yes, and that’s good. Rich capitalists  – sorry for yet another hard truth – are society’s benefactors.

But you know why this line of attack isn’t going to work this time? Take a look at the standard deduction change. It is doubled. Not a single middle-class taxpayer is unaware of what this means. This is because they are profoundly aware of how the tax system works. If you take the standard deduction from $6,200 to $15,000, that means people are going to keep far more of their own money. There is not a single taxpayer in this country who will not welcome that.

This is why it strikes me as crazy for Democrats to inveigh against this plan. Doing so only cements their reputation as the party of pillage. Do they really want the United States to be outcompeted by every other nation in the OECD? What they should do is rally behind this, forgetting all the ridiculous pieties about the deficit and the rich and so on. Do they favor the interests of the American people are not?It’s also fantastic politics to retain the deductions for charitable giving and mortgage interest. These are popular for a reason. They are two of the only ways that average people can save on their tax bill. It always pained me when the GOP would propose a “flat tax” that eliminated these provisions. People are very aware: taking away an existing tax break is a terrible foreshadowing of bad things to come. So this Trump plan dispenses with all that. Good.

As for compliance costs of the current system, the elimination of the Alternative Minimum Tax will do worlds of good.

What I love most about this plan is its real-world economic foundation. It embraces a truth that so many want to avoid. If you want jobs, rising wages, and economic growth, you have to stop the war on capital. You have to go the other way. You need to celebrate capital and allow rewards to flow to those who are driving forward economic progress.

It’s a simple but brilliant point. Finally, we’ve got a tax proposal that embraces it.

Jeffrey A. Tucker

Jeffrey A. Tucker

Jeffrey Tucker is Director of Content for the Foundation for Economic Education. He is also Chief Liberty Officer and founder of Liberty.me, Distinguished Honorary Member of Mises Brazil, research fellow at the Acton Institute, policy adviser of the Heartland Institute, founder of the CryptoCurrency Conference, member of the editorial board of the Molinari Review, an advisor to the blockchain application builder Factom, and author of five books. He has written 150 introductions to books and many thousands of articles appearing in the scholarly and popular press.

It Wasn’t Broke, so they Shouldn’t Have Fixed It

The United States of America used to be a nation where things got done.  No matter what the challenge, everything from natural disasters to overcoming negative civic and political issues, the normal inclination was to start over and get it right.  If something was working just fine, usually common sense dictated it was to be left alone, at least until a superior method of operation was developed.

Take the United States of America for example.  She was founded upon superior values and principles.  Some of which included the supreme right of sovereign individuals to live according to their own God or self-directed path.  For the first time in human history, the United states was comprised of a set of economic principles and personal liberties that obliterated the worldwide concepts of government domination, or an equally abusive caste system.  Those dominated by cradle to grave government or a monarchy simply existed from day to day and were under the strain of not having enough to eat. That was only one of many problems people suffered with no way out.

Venezuela is a nation that at one time was fairly prosperous and the citizenry usually had more than enough to eat.  But in more recent years, cruel communist dictators with no respect toward individual rights have enacted brutal economic, property, religious, healthcare, agricultural, education and media controls brought that onetime prosperous to a screeching halt.  In fact, Venezuela has not only been halted, but in actuality, she is hurtling backwards.  People have been rioting in the streets, seeking the last vestiges of food supplies to raid do to abusive government induced starvation.

Venezuela is a perfect text book case of what the United States should not be doing.

America the beautiful has been generally blessed with a system of market based economic principles that favored equal opportunity for those willing to work for it.  Unfortunately, in more recent decades, the already difficult job of creating opportunities and benefiting for your labor has been hampered by brutal government intrusions via regulations. So now they make it impossible for America to win on the world economic stage.

Either purposely or through sheer ignorance, America’s course of direction has steadily drifted from a free market economy based upon reward for effort, into punishment for trying.  At every turn, small business owners are treated by government like they are criminals for simply attempting to be successful.  Many local and state governments throughout the union are horrendously hard on small business owners.  They often enact unfairly high taxes or fees on everything from waste baskets, to needed equipment.

Even the big boys are being choked out of the American economy.  Eaton Corporation of Cleveland recently announced a world headquarters more to Ireland.  Carrier, the giant air conditioning manufacturer will soon leave business friendly Indiana and move to Mexico.  The reason being, the highest corporate tax rate on earth and regulations that are much to oppressive.

The government goal of forcing equal results through redistribution of wealth and artificial increases in the minimum wage will continue to cause reductions in the number of entry level jobs.  Unfortunately, those are most needed by both teenagers just starting out and lower skilled older adults.  These efforts to fix what was not broken help drastically affected America.  She evolved from being the world’s manufacturing floor and most innovative economy into an increasingly undesirable place to conduct business activities.

As a result of fixing what was not broken, America is now broken financially, morally, economically, militarily, educationally and racially.  She can only be truly repaired now, by a concerted effort reestablish the enormously successful principles the Founding Fathers enacted long ago. They include a firm recognition of the unalienable God given rights of Life, Liberty, and the Pursuit of Happiness and or Property.  There also has to be an immediate working plan to reduce the enormous economic and Constitution violating federal government.

For the good of the future of our republic and to truly fix America, now that she has been broken, the importance of real education must not be overlooked.  What is taught to one generation dictates what direction the nation takes in the next.  Our current broken state can be fixed with a genuine return to high quality education, critical thinking, and true American history.

Last but not least, America’s first president George Washington along with the majority of the Founding Fathers had an unyielding faith in the God who shed his grace upon the United States.  They left warnings of the negative consequences we are witnessing today, if our republic turned away from the ways of God.  However, I firmly believe that if America (We the People) wisely seeks God’s forgiveness and repent of her wayward ways, she will once again be the glorious shining city on a hill nation under God, Indivisible with Liberty and Justice for all.

RELATED ARTICLE: How Washington Politicians Wasted Billions Trying to ‘Invest in Our Future’

How the Democrats Destroyed Detroit, Milwaukee, Newark and St. Louis

Discover the Networks has updated its profiles of those cities under long term Democratic leadership. The updated profiles are of the cities of Detroit, Milwaukee, Newark and St. Louis.

Here are excerpts from each updated profile with a link to the full analysis of failed leadership in each city:

Detroit’s Decline Under Democratic Leadership

Detroit, now synonymous with failure and decline, was once the emblem of American progress and prosperity. As the late biographer and scholar Matthew Josephson observed in the 1920s: “Nowhere in the world may the trend of the new industrial cycle be perceived more clearly than in Detroit. In this sense it is the most modern city in the world, the city of tomorrow.” University of Michigan historian Jeffrey Mirel puts it this way: “Throughout the 1920s, Detroit was the shining star of the new era, the very center of the American economic universe, where capitalism and technology combined to produce the greatest goods for the greatest numbers.”

Read the full profile.

Milwaukee’s Decline Under Democratic Leadership

The city of Milwaukee was once a prosperous, thriving metropolis. For years it was the world’s foremost beer-producing city, and home to four of the largest breweries on earth (Schlitz, Blatz, Pabst, and Miller). Almost every major American brewery, in fact, had at least one factory in Milwaukee. These employed thousands of local residents in jobs that formed the foundation of the city’s middle class. Other major corporations in the city during the first half of the twentieth century included the A. F. Gallun & Sons leather tanning company; the machinery manufacturer Allis-Chalmers; the heavy-mining equipment producer Bucyrus Erie Company; the Falk Corporation, producer of industrial power transmission products; the electrical component maker Cutler-Hammer; and the A.O. Smith Corporation, a major manufacturer of automotive frames.

Politically, Milwaukee has not had a Republican mayor since 1908.

Read the full profile.

Newark’s Decline Under Democratic Leadership

The city of Newark, New Jersey has been led exclusively by Democrat mayors for the past 81 years. The entrenched power of the Democratic Party is reflected in the near-unanimous support its candidates receive from Newark voters in political elections on every level. For example, in the 2009 gubernatorial race, Newark voters cast 90.2% of their ballots for Democrat Jon Corzine, vs. just 8.3% for Republican Chris Christie, the ultimate statewide winner. Similarly, in the 2004 presidential election Democrat John Kerry received 85.9% of the vote in Newark, far outpacing Republican George W. Bush’s 12.8%. And in the 2008 presidential election, Democrat Barack Obama captured 90.8% of the Newark vote, vs. 7.0% for Republican John McCain.

Read the full profile.

St. Louis’s Decline Under Democratic Leadership

During World War II, St. Louis, Missouri was a bustling place replete with factories that produced such necessities as ammunition, uniforms and footwear, K-rations, chemicals and medicines, and even aircraft. Soon after the war, in 1949, began an era of Democratic rule that continues in the city to this day. Indeed it has been 65 years since a Republican was elected as mayor of St. Louis. This entrenched Democratic dominance is reflected in the fact that in each of the past three U.S. presidential elections, voters in St. Louis cast between 80 and 84 percent of their ballots for the Democrat candidate.

Between 1940 and 1970, St. Louis was one of the major destinations for the millions of blacks who migrated away from the rural South to take advantage of newly opened job opportunities in Northern cities. During this 30-year period St. Louis’s black population nearly tripled, fromapproximately 108,000 to more than 317,000. By 1970 it was a majority-black city—a fact that, in light of the overwhelming degree to which African Americans identify as Democrats, would have immense political implications for the city and its future.

Read the full profile.

These profiles show the failures of policies embraced by the Democratic Party over time. They are a harbinger of things to come in other cities and towns.

2016 Is the Year of Inequality – And Prosperity by Chelsea German

This past weekend, the Economist uploaded a short video to its Facebook page called, “The year of the 1 percent.” The video shows a graph superimposed over the Earth seen from space, while a voice narrates, “2016 is set to be a more unequal world than ever before. For the first time, the richest 1 percent of the population will enjoy a greater share of global wealth than the other 99 percent.”

The Economist’s graph reminded me of another graph, which also shows two lines that eventually cross but tells a very different story. Despite population growth, there are fewer people living in extreme poverty today than ever before:

How can both graphs be accurate? Poverty can decline even as inequality rises, as long as the total amount of wealth in the world is growing.

To ignore this is to fall prey to the “fixed pie fallacy.” Throughout most of human history, global wealth hardly changed. But thanks to trade and industrialization, wealth has skyrocketed, especially since the 1900s, and continues to climb.

At the same time, technological advances have also increased human wellbeing in ways not captured by looking at GDP alone.

Because the pie is growing, focusing solely on inequality, like the Economist’s video does, makes little sense. Most of us would rather have a relatively small slice of a gigantic pie than the biggest slice of a microscopic pie.

In other words, most of us would rather be wealthier in absolute terms, regardless of our relative position. This is why many of us, if given the choice, would choose to be an ordinary person today, instead of a member of the upper crust a century ago or a 17th century king.

Cross-posted from HumanProgress.org.

Chelsea GermanChelsea German

Chelsea German works at the Cato Institute as a Researcher and Managing Editor of HumanProgress.org.

Why We Need to Make Mistakes: Innovation Is Better than Efficiency by Sandy Ikeda

“I think it is only because capitalism has proved so enormously more efficient than alternative methods that is has survived at all,” Milton Friedman told economist Randall E. Parker for Parker’s 2002 book, Reflections on the Great Depression.

But I think innovation, not efficiency, is capitalism’s greatest strength. I’m not saying that the free market can’t be both efficient and innovative, but it does offer people a strong incentive to abandon the pursuit of efficiency in favor of innovation.

What Is Efficiency?

In its simplest form, economic efficiency is about given ends and given means. Economic efficiency requires that you know what end, among all possible ends, is the most worthwhile for you to pursue and what means to use, among all available means, to attain that end. You’re being efficient when you’re getting the highest possible benefit from an activity at the lowest possible cost. That’s a pretty heavy requirement.

Being inefficient, then, implies that for a given end, the benefit you get from that end is less than the cost of the means you use to achieve it. Or, as my great professor, Israel Kirzner, puts it, If you want to go uptown, don’t take the downtown train.

What Is Innovation?

Innovation means doing something significantly novel. It could be doing an existing process in a brand new way, such as being the first to use a GPS tracking system in your fleet of taxis. Or, innovation could mean doing something that no one has ever done before, such as using smartphone technology to match car owners with spare time to carless people who need to get somewhere in a hurry, à la Uber.

Innovation, unlike efficiency, entails discovering novel means to achieve a given end, or discovering an entirely new end. And unlike efficiency, in which you already know about all possible ends and means, innovation takes place onlywhen you lack knowledge of all means, all ends, or both.

Sometimes we mistakenly say someone is efficient when she discovers a new way to get from home to work. But that’s not efficiency; that’s innovation. And a person who copies her in order to reduce his commute time is not an innovator — but he is being efficient. The difference hinges on whether you’re creating new knowledge.

Where’s the Conflict?

Starting a business that hasn’t been tried before involves a lot of trial and error. Most of the time the trials, no matter how well thought out, turn out to contain errors. The errors may lie in the means you use or in the particular end you’re pursuing.

In most cases, it takes quite a few trials and many, many errors before you hit on an outcome that has a high enough value and low enough costs to make the enterprise profitable.) Is that process of trial and error, of experimentation, an example of economic efficiency? It is not.

If you begin with an accurate idea both of the value of an end and of all the possible ways of achieving that end, then you don’t need to experiment. Spending resources on trial and error would be wasteful. It’s then a matter of execution, which isn’t easy, but the real heavy lifting in the market process, both from the suppliers’ and the consumers’ sides, is done by trying out new things — and often failing.

Experimentation is messy and apparently wasteful, whether in science or in business. You do it precisely because you’re not sure how to answer a particular question, or because you’re not even sure what the right question is. There are so many failures. But in a world where our knowledge is imperfect, which is the world we actually live in, most of what we have to do in everyday life is to innovate — to discover things we didn’t know we didn’t know — rather than trying to be efficient. Being willing to suffer failure is the only way to make discoveries and to introduce innovations into the world.

Strictly speaking, then, if you want to innovate, being messy is unavoidable, and messiness is not efficient. Yet, if you want to increase efficiency, you can’t be messy. Innovation and efficiency usually trade off for each other because if you’re focused on doing the same thing better and better, you’re taking time and energy away from trying to do something new.

Dynamic Efficiency?

Some have tried to describe this process of innovation as “dynamic efficiency.” It may be quibbling over words, but I think trying to salvage the concept of efficiency in this way confuses more than it clarifies. To combine efficiency and innovation is to misunderstand the essential meanings of those words.

What would it mean to innovate efficiently? I suppose it would mean something like “innovating at least cost.” But how is it possible to know, before you’ve actually created a successful innovation, whether you’ve done it at least cost? You might look back and say, “Gee, I wouldn’t have run experiments A, B, and C if only I’d known that D would give me the answer!” But the only way to know that D is the right answer is to first discover, through experimentation and failure, that A, B, and C are the wrong answers.

Both efficiency and innovation best take place in a free market. But the greatest rewards to buyers and sellers come not from efficiency, but from innovation.

Sandy IkedaSandy Ikeda

Sandy Ikeda is a professor of economics at Purchase College, SUNY, and the author of The Dynamics of the Mixed Economy: Toward a Theory of Interventionism. He is a member of the FEE Faculty Network.

What Are Your Odds of Making It to the 1%? by Chelsea German

Your odds of “making it to the top” might be better than you think, although it’s tough to stay on top once you get there.

According to research from Cornell University, over 50 percent of Americans find themselves among the top 10 percent of income-earners for at least one year during their working lives. Over 11 percent of Americans will be counted among the top 1 percent of income-earners (i.e., people making at minimum $332,000) for at least one year.

How is this possible? Simple: the rate of turnover in these groups is extremely high.

Just how high? Some 94 percent of Americans who reach “top 1 percent” income status will enjoy it for only a single year. Approximately 99 percent will lose their “top 1 percent” status within a decade.

Now consider the top 400 U.S. income-earners — a far more exclusive club than the top 1 percent. Between 1992 and 2013, 72 percent of the top 400 retained that title for no more than a year. Over 97 percent retained it for no more than a decade.

HumanProgress.org advisory board member Mark Perry put it well in his recent blog post on this subject:

Whenever we hear commentary about the top or bottom income quintiles, or the top or bottom X% of Americans by income (or the Top 400 taxpayers), a common assumption is that those are static, closed, private clubs with very little dynamic turnover. …

But economic reality is very different — people move up and down the income quintiles and percentile groups throughout their careers and lives.

What if we look at economic mobility in terms of accumulated wealth, instead of just annual income (as the latter tends to fluctuate more)?

The Forbes 400 lists the wealthiest Americans by total estimated net worth, regardless of their income during any given year. Over 71 percent of Forbes 400 listees — and their heirs — lost their top 400 status between 1982 and 2014.

So, the next time you find yourself discussing the very richest Americans, whether by wealth or income, keep in mind the extraordinarily high rate of turnover among them.

And even if you never become one of the 11.1 percent of Americans who fleetingly find themselves in the “top 1 percent” of US income-earners, you’re still quite possibly part of the global top 1 percent.

Cross-posted from HumanProgress.org.

Chelsea German

Chelsea German

Chelsea German works at the Cato Institute as a Researcher and Managing Editor of HumanProgress.org.

Government Caused the ‘Great Stagnation’ by Peter J. Boettke

Tyler Cowen caused quite a stir with his e-book, The Great Stagnation. In properly assessing his work it is important to state explicitly what his argument actually is. Median real income has stagnated since 1980, and the reason is that the rate of technological advance has slowed. Moreover, the technological advances that have taken place with such rapidity in recent history have improved well-being, but not in ways that are easily measured in real income statistics.

Critics of Cowen more often than not miss the mark when they focus on the wild improvements in our real income due to quality improvements (e.g., cars that routinely go over 100,000 miles) and lower real prices (e.g., the amount of time required to acquire the inferior version of yesterday’s similar commodities).

Cowen does not deny this. Nor does Cowen deny that millions of people were made better off with the collapse of communism, the relative freeing of the economies in China and India, and the integration into the global economy of the peoples of Africa and Latin America. Readers of The Great Stagnation should be continually reminded that they are reading the author of In Praise of Commercial Culture and Creative Destruction. Cowen is a cultural optimist, a champion of the free trade in ideas, goods, services and all artifacts of mankind. But he is also an economic realist in the age of economic illusion.

What do I mean by the economics of illusion? Government policies since WWII have created an illusion that irresponsible fiscal policy, the manipulation of money and credit, and expansion of the regulation of the economy is consistent with rising standards of living. This was made possible because of the “low hanging” technological fruit that Cowen identifies as being plucked in the 19th and early 20th centuries in the US, and in spite of the policies government pursued.

An accumulated economic surplus was created by the age of innovation, which the age of economic illusion spent down. We are now coming to the end of that accumulated surplus and thus the full weight of government inefficiencies are starting to be felt throughout the economy. Our politicians promised too much, our government spends too much, in an apparent chase after the promises made, and our population has become too accustomed to both government guarantees and government largess.

Adam Smith long ago argued that the power of self-interest expressed in the market was so strong that it could overcome hundreds of impertinent restrictions that government puts in the way. But there is some tipping point at which that ability to overcome will be thwarted, and the power of the market will be overcome by the tyranny of politics. Milton Friedman used that language to talk about the 1970s; we would do well to resurrect that language to talk about today.

Cowen’s work is a subversive track in radical libertarianism because he identifies that government growth (both measured in terms of scale and scope) was possible only because of the rate of technological improvements made in the late 19th and early 20th century.

We realized the gains from trade (Smithian growth), we realized the gains from innovation (Schumpeterian growth), and we fought off (in the West, at least) totalitarian government (Stupidity). As long as Smithian growth and Schumpeterian growth outpace Stupidity, tomorrow’s trough will still be higher than today’s peak. It will appear that we can afford more Stupidity than we can actually can because the power of self-interest expressed through the market offsets its negative consequences.

But if and when Stupidity is allowed to outpace the Smithian gains from trade and the Schumpeterian gains from innovation, then we will first stagnate and then enter a period of economic backwardness — unless we curtail Stupidity, explore new trading opportunities, or discover new and better technologies.

In Cowen’s narrative, the rate of discovery had slowed, all the new trading opportunities had been exploited, and yet government continued to grow both in terms of scale and scope. And when he examines the 3 sectors in the US economy — government services, education, and health care — he finds little improvement since 1980 in the production and distribution of the services. In fact, there is evidence that performance has gotten worse over time, especially as government’s role in health care and education has expanded.

The Great Stagnation is a condemnation of government growth over the 20th century. It was made possible only by the amazing technological progress of the late 19th and early 20th century. But as the rate of technological innovation slowed, the costs of government growth became more evident. The problem, however, is that so many have gotten used to the economics of illusion that they cannot stand the reality staring them in the face.

This is where we stand in our current debt ceiling debate. Government is too big, too bloated. Washington faces a spending problem, not a revenue problem. But too many within the economy depend on the government transfers to live and to work. Yet the economy is not growing at a rate that can afford the illusion. Where are we to go from here?

Cowen’s work makes us think seriously about that question. How can the economic realist confront the economics of illusion? And Cowen has presented the basic dilemma in a way that the central message of economic realism is not only available for libertarians to see (if they would just look, or listen carefully to his podcast at EconTalk), but for anyone who is willing to read and think critically about our current political and economic situation.

The Great Stagnation signals the end of the economics of illusion and — let’s hope — paves the way for a new age of economic realism.

This post first appeared at Coordination Problem.

Peter J. BoettkePeter J. Boettke

Peter Boettke is a Professor of Economics and Philosophy at George Mason University and director of the F.A. Hayek Program for Advanced Study in Philosophy, Politics, and Economics at the Mercatus Center. He is a member of the FEE Faculty Network.

RELATED ARTICLE: 5 Reasons Why America Is Headed to a Budget Crisis

‘Could this be the year Europe dies’ as economic conditions drive a billion Africans North?

Klaus Schwab the founder of the World Economic Forum convening in Davos, Switzerland this week has a very scary prediction for the future of Europe.

Learn more here at American Resistance 2016!

See our complete ‘Invasion of Europe’ archive by clicking here.

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King Canute vs. the Climate Planners by Jeffrey A. Tucker

“With a small hammer you can achieve great things.”

Oh really?

This claim comes from French foreign minister Laurent Fabius as he banged his gavel at the close of the Paris climate summit. To the cheers of bureaucrats and cronies the world over, Fabius announced the deal that the press has been crowing about for days, the one in which “humanity” has united to stop increases in global temperature through the transfer of trillions of dollars from the rich to the poor, combined with the eventual (coercive) elimination of fossil fuels.

And thus did he bang his gavel. To his way of thinking, and that of the thousands gathered, that’s all you have to do to control the global climate, cause the world to stop relying on fossil fuels, and dramatically change the structure of all global industry, and do so with absolute conviction that benefits will outweigh the costs.

One bang of a gavel to dismantle industrial civilization by force, replace it with a vague and imagined new way of doing things, and have taxpayers pay for it.

Markets Yawn

Interestingly, the news on the Paris agreement had no notable impact on global markets at all. No prices rose or fell, no stocks soared or collapsed, and no futures responded with confidence that governments would win this one. The climate deal didn’t even make the business pages.

Investors and speculators are perhaps acculturated to ignoring such grand pronouncements. “The Paris climate conference delivered more of the same — lots of promises and lots of issues still left unresolved,” the US Chamber of Commerce said in a statement. And maybe that’s the right way to think, given that the world is ever less controlled by pieces of paper issued by government.

Still, breathless journalists wrote about the “historic agreement” and government officials paraded around as planet savers. Meanwhile, the oil price continues to fall even as demand rises, and the Energy Information Administration announced the discovery of more reserves than anyone believed possible. As for alternatives to fossil fuels, they are coming about through private sector innovation, not through government programs, and successful only when adopted voluntarily by consumers.

It’s a heck of a time to announce a new global central plan affecting the way 7 billion people use energy for the next century. Anyone schooled in the liberal tradition, or even slightly familiar with Hayek’s warning against the pretensions of the “scientific” government elites, shakes his or her head in knowing despair.

The entire scene looks like the apotheosis of the planning mentally — complete with five-year plans to monitor how well governments are doing in controlling the climate for the whole world and do so in a way that affects temperature 10-100 years from now.

King Canute?

The scene prompted many commentators to compare these people celebrating in Paris to King Canute, who ruled Denmark, England, and Norway a millennium ago. According to popular legend, as a way of demonstrating his awesome power, he rolled his throne up to the sea and commanded it to stop rising.

It didn’t work. Still, the image appears in many works of art. Even Lego offers a King Canute scene from its historical set.

Historians have challenged the point of the story. The only account with have of this incident, if it occurred at all, is from Henry of Huntingdon. He reports that after the sea rose despite his command, the King declared: “Let all men know how empty and worthless is the power of kings, for there is none worthy of the name, but He whom heaven, earth, and sea obey by eternal laws.”

He did and said this, say modern experts, to demonstrate to his courtiers and flatterers that he is not as wonderful and powerful as they were proclaiming him to be. Instead of subservience to his own person, he was urging all citizens to save their adoration for God.

His point was that power — even the absolute power of kings — has limits. During his rule, King Canute was enormously popular and evidently benefitted from the common tendency of people to credit authority for the achievements of the spontaneous evolution of the social order itself. His sea trick, if it happened at all, was designed to show people that he is not the man they thought he was.

The Pretensions of the Planners

Lacking a Canute to give us a wake-up call, we might revisit the extraordinary speech F.A. Hayek gave when he received his Nobel Prize. He was speaking before scientists of the world, having been awarded one of the most prestigious awards on the planet.

Rather than flattering the scientific establishment, particularly as it existed in economics, he went to the heart of what he considered the greatest intellectual danger that was arising at the time. He blew apart the planning mindset, the presumption that humankind can do anything if only the right people are given enough power and resources.

If the planning elite possessed omniscience of all facts, flawless understanding of cause and effect, perfect foresight to know all relevant changes that could affect the future, and the ability to control all variables, perhaps their pretensions would be justified.

But this is not the case. Hayek called the assumption the harshest possible word: “charlatanism.”

In the climate case, consider that we can’t know with certainty whether, to what extent, and how climate change (especially not 50-100 years from now) will affect life on earth. We don’t know the precise causal factors and their weight relative to the noise in our models, much less the kinds of coercive solutions to apply and whether they have been applied correctly and with what outcomes, much less the costs and benefits of attempting such a far-flung policy.

We can’t know any of that before or after such possible solutions have been applied. Science requires a process and unrelenting trial and error, learning and experimentation, the humility to admit error and the driving passion to discover truth.

In other words, science requires freedom, not central planning. The idea that any panel of global experts, working with appointed diplomats and bureaucrats, can have the requisite knowledge to make such grand and final decisions for the globe is outlandish and contrary to pretty much everything we know.

Throw the reality of politics into the mix and matters get worse. Fear over climate change (the ultimate market failure “problem”) is the last best hope for those who long to control the world by force. The entire nightmare scenario of rising tides and flooded cities — one that posits that our high standard of living is causing the world to heat up and burn — is just the latest excuse. That fact remains whether or not everything they claim is all true or all nonsense.

Pretensions Everywhere

Hayek explains further: “To act on the belief that we possess the knowledge and the power which enable us to shape the processes of society entirely to our liking, knowledge which in fact we do not possess, is likely to make us do much harm.”

Why? Because planning overrides the spontaneous discovery process that is an inherent part of the market structures.

We are only beginning to understand on how subtle a communication system the functioning of an advanced industrial society is based — a communications system which we call the market and which turns out to be a more efficient mechanism for digesting dispersed information than any that man has deliberately designed.

He went further. The planning fallacy doesn’t just affect economics. It is a tendency we see in all intellectual realms, including climatology and its use by governments to justify the desire to manage the world from on high.

Hayek’s conclusion is so epic that it deserves to be quoted in full.

If man is not to do more harm than good in his efforts to improve the social order, he will have to learn that in this, as in all other fields where essential complexity of an organized kind prevails, he cannot acquire the full knowledge which would make mastery of the events possible.

He will therefore have to use what knowledge he can achieve, not to shape the results as the craftsman shapes his handiwork, but rather to cultivate a growth by providing the appropriate environment, in the manner in which the gardener does this for his plants.

There is danger in the exuberant feeling of ever growing power which the advance of the physical sciences has engendered and which tempts man to try, “dizzy with success”, to use a characteristic phrase of early communism, to subject not only our natural but also our human environment to the control of a human will.

The recognition of the insuperable limits to his knowledge ought indeed to teach the student of society a lesson of humility which should guard him against becoming an accomplice in men’s fatal striving to control society — a striving which makes him not only a tyrant over his fellows, but which may well make him the destroyer of a civilization which no brain has designed but which has grown from the free efforts of millions of individuals.

Or we could just quote King Canute after the tides failed to respect his edict: “Let all men know how empty and worthless is the power of kings, for there is none worthy of the name.”

Jeffrey A. TuckerJeffrey A. Tucker

Jeffrey Tucker is Director of Digital Development at FEE, CLO of the startup Liberty.me, and editor at Laissez Faire Books. Author of five books, he speaks at FEE summer seminars and other events. His latest book is Bit by Bit: How P2P Is Freeing the World.  Follow on Twitter and Like on Facebook.

‘Capitalism’ Is the Wrong Word by Steven Horwitz

We Shouldn’t Use a Term Coined by the System’s Enemies!

Wouldn’t it be nice if we could simply invent new terms to replace the words that seem to cause more heat than light? For example, I have written before of my qualms about using the word capitalism to describe the free-market economy. The word was coined by capitalism’s enemies to describe the system that they rejected.

Red Plenty, a marvelous book by Francis Spufford, offers an important perspective on our discussion of terms. The book is a must-read for fans of free markets. It combines elements from the actual history of the use of mathematics to try to plan the Soviet economy, fictional dialogue and some fictional characters, and Spufford’s excellent understanding of the economics of capitalism and socialism to create an incredibly readable account of the attempt to engineer a world of abundance in the former Soviet Union.

In the senior seminar I teach, we recently read a section of the book that deals with how the Soviet planning process actually worked. That section got me thinking about the terms capitalism and socialism again. The term capitalism suggests a system built around capital and its interests, while the word socialism suggests one built around society and its interests. Notice how these connotations beg some questions from the start.

Is it really true, for example, that capitalism is centered around capital and its interests? Is it really capitalists who benefit the most from capitalism? And on the other side: have existing socialist economies ever served the interests of society as a whole? Could socialism, in theory, do so? Do both of these names make assumptions about each of the two types of economies that reflect the biases of capitalism’s critics and socialism’s defenders?

Of course, capital does play a crucial role in capitalism. The private ownership of capital (the means of production) is a defining characteristic of a free-market economy, especially in comparison to socialism. And the ability to engage in economic calculation provided by the money prices of the market is crucial for the owners of capital to know how best to deploy it. So in those senses, capitalism is about capital.

But notice that nowhere in the previous paragraph is it claimed that the primary beneficiaries of capitalism are the capitalists! What is missing is an answer to the question of why the capitalists continually have to figure out how best to deploy their capital. The answer is because they are constantly trying to provide what consumers want using the least valuable resources possible.

Sure, the capitalists reap profits by doing so. But those profits result from the mutually beneficial exchanges capitalists have with consumers.

The main beneficiaries from capitalism are not the capitalists, but all of us in our role as consumers. Competition among the owners of private capital is all about responding to consumers’ wants. And consumers benefit from this arrangement through more, better, and cheaper goods. If we want a name for the free-market economy that indicates who its primary beneficiaries are, we should reappropriate the term consumerism.

But “consumerism” is only half of the story. It’s easy enough to show through the standard arguments that socialism doesn’t work for the benefit of society as a whole. We know from the socialist-calculation debate that eliminating the market altogether in favor of planning can’t work. But what about all of those countries, like the Soviet Union, that claimed to be planning their economies?

As we see in Red Plenty, the truth was that central planning served as a kind of myth around which economic activity could be oriented. Everyone acted as if there were a plan, but the actual way resources got allocated and shuffled around was much more complicated. In Red Plenty, we meet two characters who help us see this.

First is Cherkuskin, the middleman who trades on relationships and friendships to help producers get the goods they need to meet their centrally planned targets. Cherkuskin is the personification of what Ayn Rand called “the aristocracy of pull.” His power comes from whom he knows and what he can get them to do for you. When producers don’t have enough to fulfill their quotas because of the inability of the plan to allocate rationally or to respond to unexpected change, the Cherkuskins come into play and move resources around to help them — and to profit handsomely in the process. Underneath “the plan” was the black market that did a great deal to ensure that Soviet-style economies were minimally functional.

The other character is Maksim Maksimovich Mokhov, a high-ranking bureaucrat in the planning agency. Faced with the news of the destruction of a crucial machine, Mokhov has to figure out how to rebalance the plan given that one factory will either need a new machine or fail to produce the output that other factories need. Spufford gives us terrific imagery of Mokhov sliding around on his wheeled chair, abacus in hand, going from file to file using technology primitive by even the 1962 standard of that chapter of the book, attempting to reallocate resources with the flick of an eraser and the scratch of a pencil.

Both Cherkuskin and Mokhov are, functionally, substitutes for what the price system does under capitalism, and inferior substitutes at that.

But what’s most interesting is that neither of them cares one whit about the consumer. Cherkuskin is all about making sure that producers get what they need to fulfill the plan, never pausing to consider what the costs were for consumers. Mokhov describes consumers as a “shortage sink” because they are the end of the line, and if they don’t get what they want, no one else relies on them for further output. It was more important to balance out production than to worry if consumers got exactly what they needed.

What Spufford so nicely illustrates here is how real-world socialism, and not capitalism, put the needs of “capital” first and the wants of consumers last. In a world where producing more stuff, regardless of its value, was the path to plenty, ensuring that production continued according to the plan and that producers got what they needed were the central tasks. And the black market middlemen like Cherkuskin could make a real ruble or two doing so.

But unlike the profits of market capitalists, Cherkuskin’s rubles came at the expense of the consumer rather than reflecting mutual benefit. A system where consumers are just the folks who are expected to absorb the errors of the plan is hardly one geared to the interests of society as a whole. And a system where capital is ultimately the servant of consumers is misleadingly named if we call it capitalism.

It’s a difficult battle to get people to change the names they’ve long used for free markets and (supposedly) planned economies. Even if we don’t win that battle, it’s still important for us to point out how the terms capitalism and socialism really do give a false impression of how markets and planning work. If we want to know who really benefits from markets, a quick look around the abundance that is the typical American household will answer that question quite clearly.

Steven HorwitzSteven Horwitz

Steven Horwitz is the Charles A. Dana Professor of Economics at St. Lawrence University and the author of Hayek’s Modern Family: Classical Liberalism and the Evolution of Social Institutions.

He is a member of the FEE Faculty Network.

Adam Smith’s Wealth of Nations and the FairTax by Rep. Dave Brat (VA-7)

Adam Smith, the father of economics, published An Inquiry into the Nature and Causes of the Wealth of Nations nearly 240 years ago[i]. Soon after, an extraordinary flourishing of innovation and human well-being took off and transformed the globe. According to economist Deirdre McCloskey, the average American today is roughly 30 to 100 times better off than our ancestors in 1800[ii], the point when humanity began to escape crushing poverty. Notwithstanding modern prosperity, however, human nature hasn’t changed much. Smith’s insights remain relevant.

The Wealth of Nations considers taxation in Book V, Chapter 2: “Of the Sources of the General or Public Revenue of the Society.” In the prior chapter, “Of the Expenses of the Sovereign or Commonwealth,” he describes the primary functions of the national government. Some—like defense—need to be paid for by general revenue, while others—like transportation infrastructure—can be built and maintained with fees paid by users.

Revenue policy should fund the necessary expenses of the government. Not to benefit this or that industry. Not to advance social objectives. Certainly not to suppress political speech.

Smith set out four goals for evaluating tax options. First, tax contributions should be proportionate to abilities. Second, the rules should be certain and not arbitrary. Third, taxes should be levied when and how its payment is most convenient. Fourth, collection should minimize administrative overhead.

He then evaluated possible tax bases using those principles: rents of land and houses, profits, wealth, wages, head taxes, and consumption. He concluded that the ideal tax bases are residential property and consumption, particularly on luxury goods.

What does Adam Smith have to do with the FairTax? Everything. Setting aside property taxes—a state and local issue—consider how his principles relate to a consumption tax like the FairTax.

Is it proportionate to abilities? Yes. Those who earn more also consume more, thus contributing proportionately more to the general revenue. Savings—which our current tax system discourages but the FairTax would not—provide no current consumption benefits. They are deferred consumption, which in the meantime enables others to borrow to finance education, infrastructure, factories, and much more while also reducing the trade deficit.

Is the FairTax certain and not arbitrary? Yes. Everyone pays the same, known rate on consumption.

Is it convenient to pay? Yes. Merchants include the tax in the prices of final goods and services, which consumers pay all at once. Businesses simply remit the revenue to the government from time to time.

The FairTax also minimizes administrative overhead. The U.S. has around six million businesses.[iii] Not all would collect revenue under the FairTax, since many don’t sell directly to consumers. Current tax law requires the processing of six million business returns, 150 million individual and household tax returns[iv] (some overlap), and various trust, foundation, and other returns that are processed today, all under a complex, burdensome, and unFairTax code.

A broad-based consumption tax like the FairTax has other benefits. It eliminates the bureaucratic discretion that enabled the illegal and corrupt targeting of political speech, as the Richmond Tea Party experienced first-hand. Less taxation on productive activities yields greater physical and human capital investment by businesses and individuals, which makes workers more productive, boosting their compensation and standards of living while also increasing returns to saving.

It eliminates a major source of favor trading between Congress and big businesses. The concentrated interests of businesses associations create enormous pressure for Congress to provide tax preferences. The FairTax dramatically reduces the ability of political insiders to manipulate the tax system.

After nearly a decade of poor economic performance, we need comprehensive, pro-growth, simplifying tax reform like the FairTax. That’s why I’m a proud cosponsor of H.R. 25. To fully restore the American Dream, however, we must also pursue major regulatory and spending reforms.

We can have even more of the market-tested innovations that improve our lives and that would have astounded Adam Smith and our ancestors. Smart policy reforms—like the FairTax—can clear the path.

[i] http://www.econlib.org/library/Smith/smWN.html

[ii] https://www.aei.org/publication/perhaps-the-most-powerful-defense-of-market-capitalism-you-will-ever-read/

[iii] http://www.census.gov/content/dam/Census/library/publications/2015/econ/g12-susb.pdf, Appendix Table 1, pp. 7.

[iv] https://www.irs.gov/uac/SOI-Tax-Stats—Individual-Statistical-Tables-by-Size-of-Adjusted-Gross-Income, “All Returns: Selected Income and Tax Items: 2013”

ABOUT CONGRESSMAN DAVE BRAT

Congressman Dave Brat represents Virginia’s 7th congressional district, serving since 2014 when he won a special election. Brat is a member of the House Budget Committee, Education and the Workforce Committee, and Small Business Committee. He has a Ph.D. in economics, formerly was a professor of economics and chairman of the economics department at Randolph Macon College, and previously worked for the World Bank and Arthur Andersen.

EDITORS NOTE: To learn more about the FairTax please click here.

Bernie Sanders and the Fixed Pie Fallacy by Chelsea German

“The rich are getting richer and the poor are getting poorer.” Senator Bernie Sanders first said those words in 1974 and has been repeating them ever since.

Senator Sanders is not alone in his belief. Three out of four Americans agree with the statement, “Today it’s really true that the rich just get richer while the poor get poorer.”

Senator Sanders is half right: the rich are getting richer. However, his assertion that the poor are becoming poorer is incorrect. The poor are becoming richer as well.

Economist Gary Burtless of the Brookings Institute showed that between 1979 and 2010, the real (inflation-adjusted) after-tax income of the top 1% of U.S. income-earners grew by an impressive 202%.

He also showed that the real after-tax income of the bottom fifth of income-earners grew by 49%. All groups made real income gains. While the rich are making gains at a faster pace, both the rich and the poor are in fact becoming richer.

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In addition to these measurable real income gains, decreases in prices have given the poor increased purchasing power, helping to raise living standards for the worst off in society. As a result of falling prices such as for groceries and material goods, along with gains in real income, Americans have more income left after basic expenses.

Technology has also become cheaper, improving our lives in unexpected ways. For example, consider the spread of cell phones. There was a time when only the wealthiest Americans could afford one. Today, over 98% of Americans have a cellular subscription, and the rise of smart phones has made these devices more useful than ever.

Unfortunately, progress has been uneven. In those areas of the economy where competition is hobbled, such as education, housing, and healthcare, prices continue to increase.

Still, the percentage of the population classified as living in relative poverty has decreased over time. Why then do three quarters of Americans, including Senator Sanders, believe that the poor are “getting poorer?”

A simple logical error underlies Sanders’ belief. If we assume that wealth is a fixed pie, then the more slices the rich get, the fewer are left over for the poor. In other words, people can only better themselves at the expense of others. In the world of the fixed pie, if we observe the rich becoming richer, then it must be because other people are becoming poorer.

Fortunately, in the real world, the pie is not fixed. US GDP is growing, and it’s growing faster than the population.

Poverty remains a pressing issue, but Senator Sanders is incorrect when he says that the poor are becoming poorer. In the words of HumanProgress.org advisory board member Professor Deirdre McCloskey,

The rich got richer, true. But millions more have gas heating, cars, smallpox vaccinations, indoor plumbing, cheap travelrights for womenlower child mortalityadequate nutrition, taller bodies, doubled life expectancyschooling for their kids, newspapers, a vote, a shot at university, and respect.

This post first appeared at HumanProgress.org.

Chelsea German

Chelsea German

Chelsea German works at the Cato Institute as a Researcher and Managing Editor of HumanProgress.org.