Opinion from a Libertarian ViewPoint

Posts Tagged ‘private sector’

Do We Want Real Tax Cuts? How About Cutting Government Spending?

Posted by M. C. on September 1, 2022

Government is not a wealth generator, as it relies on its sources of funding on the private sector. If government could generate wealth, then obviously it would not need to tax the private sector.

We conclude that it is not possible to have a effective tax cuts without a cut in government outlays. A so-called tax cut while government spending continues to increase is just an illusion.

Frank Shostak

According to many economic commentators, an effective way to generate economic growth is through the lowering of taxes. The lowering of taxes, it is held, will place more money in consumers’ pockets, thereby setting in motion an economic growth. This way of thinking is based on the belief that a given dollar increase in consumer spending will lift the economy’s gross domestic product (GDP) by a multiple of the increase in consumer expenditure.

Assume that out of an additional dollar received individuals spend $0.9 and save $0.1. Also assume that consumers have increased their expenditure by $100 million. Because of this, retailers’ revenue rises by $100 million. Retailers in response to the increase in their income consume 90 percent of the $100 million—i.e., they raise expenditure on goods and services by $90 million. The recipients of these $90 million in turn spend 90 percent of the $90 million—i.e., $81 million. Then the recipients of the $81 million spend 90 percent of this sum, which is $72.9 million and so on. Note that the key in this way of thinking is that expenditure by one person becomes the income of another person. At each stage in the spending chain, people spend 90 percent of the additional income they receive. This process eventually ends, so it is held, with total output higher by $1 billion (10*$100 million) than it was before consumers had increased their initial expenditure by $100 million.

Observe that the more that is being spent from each dollar, the greater the multiplier is and therefore the impact of the initial spending on overall output will be larger. For instance, if people change their habits and spend 95 percent from each dollar the multiplier will become 20. Conversely, if they decide to spend only 80 percent and save 20 percent then the multiplier will be 5. All this means that the less that is being saved the larger is the impact of an increase in overall demand on overall output.

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How To Fix College Admissions – LewRockwell

Posted by M. C. on April 27, 2020

We do not want government run newspapers or television stations. They should function as checks and balances against an overweening public sector, e.g., totalitarianism. But exactly the same principle applies to higher education. None of these institutions can accomplish this role under the thumb of government.


First we separate all institutions of higher learning into two categories. In one, we include those that are purely private, which accept no direct subsidies from government whatsoever; in the other, all the rest.

Into the first classification we place Hillsdale College, Michigan; Grove City College, Pennsylvania; University of San Francisco, California; Christendom College, Virginia; Pensacola Christian College, Florida; Patrick Henry College, Virginia; Wyoming Catholic College, Wyoming; Gutenberg College, Oregon; Yeshiva Toras Chaim Talmudic Seminary of Denver, Colorado; Biola University, California; Bob Jones University, South Carolina, Goldsboro Christian Schools, North Carolina. There may be a few more, but not too many.

What should be our perspective on the admissions policies of universities in this first, private category? They may do exactly as they please. We live, hopefully, in a free country, and freedom means the right to inaugurate your own policies, provided, only, that you do not violate the rights of others. No one has any right to be enrolled in any of these places without the permission of their owners. That would constitute trespass. High up on the list of liberty is freedom of association. These colleges should admit whoever they choose, with no non-discrimination requirements imposed upon them at all. They may use SAT and ACT to their heart’s content. Or not.

What of the remaining 99.99% of universities in the country which are directly subsidized, or owned outright, by the state? While private persons and schools should be free to discriminate, the same does not apply to government or quasi governmental institutions. They should not be allowed to discriminate on any basis whatsoever. For example, the controversial ACT and SAT tests should be forbidden to them as admission criteria.  These discriminate, mainly, between people with high and low IQs. It is intolerable for a state or state-related institution to make such an invidious distinction. After all, the government does not impose intelligence tests on those it admits to its buses, trains, libraries, parks, hospitals, museums, art galleries, concert halls, zoos, sports arenas, beaches, etc. In some countries, the government owns the airlines; in Canada, PetroCan owned a string of gas stations. No intelligence requirement was obligatory for service from these state institutions either.

This non-discrimination policy should apply not only to admissions, but also to grading. Enrolling students who can hardly read, write or do math will not suffice, for with any such system they will soon fail out. Other public institutions, see above, have no such grading systems, which would remove the intellectually non-gifted after a while. There is simply no justification for doing so in education either. This is NOT satire. I am very serious about this. These recommendations follow, logically, from the premise that it is and should be unlawful for government to discriminate against the intellectually challenged.

Of course, this would spell the ruination of these public universities. At present, the following US institutions are highly ranked in terms of prestige: University of California , Los Angeles; University of Michigan, Ann Arbor; University of North Carolina , Chapel Hill; University of Virginia; Georgia Institute of Technology; University of Texas, Austin; University of Florida; University of Georgia; University of California, Berkeley; Indiana University.  So are these ostensibly “private” ones: Harvard, Yale, Princeton, Columbia, Chicago, Stanford, Duke, Hopkins. Many of these are highly ranked in world compilations. Were freedom instituted, none of this would be true any longer. Smart students would no longer enroll due to the intellectual diversity of open admission. Accomplished professors would go elsewhere.

Would that be a detriment to this modest proposal? Of course not. If these universities wished to retain the prestige they presently justifiably enjoy, they will have to eschew all direct government grants (the relation between the state and their students is entirely a different matter, and an irrelevant one). But this is precisely the goal of the freedom philosophy. The desiderata is not only separation of church and state, but, also, separation of education and state. We do not want government run newspapers or television stations. They should function as checks and balances against an overweening public sector, e.g., totalitarianism. But exactly the same principle applies to higher education. None of these institutions can accomplish this role under the thumb of government.

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Private Sector Truck Drivers Are Nepal’s Lifeline to Clean Water| Mises Institute

Posted by M. C. on February 10, 2020

When demand is high and supply is low, high prices and profits attract providers. “Let’s face it: the private sector came in because the public sector failed,” Dipak Gyawali, a political economist and former water minister told the NYT. “And until you clean up government’s act, nothing will change.

The difference? Tanker men are delivering, the state is not.

Increasing numbers of Americans are losing sleep about the climate and agitating that healthcare is a human right. Residents of Flint, Michigan, and Newark, New Jersey, want government to provide clean water, and again the rallying cry is that water is a human right.

But the water disasters in Flint and Newark are miniscule compared to what’s going on in Nepal. In a massive story, the New York Times documents the trials and tribulations of people in Kathmandu, who have given up on their government providing water.

Nepal doesn’t qualify as anyone’s Galt’s Gulch, but, with government failing to deliver something as vital to life as water, entrepreneurs have stepped in.

The government’s proposed solution to these grave water shortages, the Melamchi project, has turned into a four-decade-long fiasco of almost unrivaled incompetence. First proposed in the 1970s and begun in 2000, this scheme to divert a mountain river from the Himalayas has been so delayed that the water it will bring—170 million liters a day in its first phase—is already insufficient to cover half of Kathmandu’s needs. It’s not a good plan, anyway, experts say. The pipeline network is so riddled with holes that “you could have Lake Baikal on the other end and it still wouldn’t be enough,” Mr. Gyawali said.

The result is four hundred competing water delivery trucks, in some cases running nineteen hours continuously in order to satisfy demand. Meanwhile the government has thrown up its hands:

The pressure is so weak that many households capture no more than 250 liters on each occasion. For these people and the roughly 30 percent of residents who receive nothing at all, tankers tide them over until the next pipeline flow. Officials recognize it’s a crisis, but say the solution is out of their hands.

Of course there is plenty of complaining. When demand is high and supply is low, high prices and profits attract providers. “Let’s face it: the private sector came in because the public sector failed,” Dipak Gyawali, a political economist and former water minister told the NYT. “And until you clean up government’s act, nothing will change. The tankers are just a symptom.”

Krishna Hari Thapa has been delivering water for a decade and says that “the number of tankers at his spring has increased from around 30 to over 80 a day.” Although the spring water has been reduced to a trickle, he won’t stop. “The money is too good,” writes the NYT’s Peter Schwartzstein. Besides, as Mr. Thapa says, “Where else would people get water?”

Mr. Schwartzstein tries his best to make the tanker men the enemy, from the article’s title, “Merchants of Thirst,” to quoting landlady Dharaman Lama, who claims,

They’re all thieves, rotten thieves, who should be hanged. It’s disgusting what they do to us.

What the truck men do is invest capital, work hard, and supply something vital. “The city depends on us,” said Maheswar Dahal, a businessman who owns six trucks in Kathmandu’s Jorpati district.

There would be disaster if we didn’t do our work.

So where the state has failed, private enterprise has stepped into the breach. Profits will make that happen. High cost makes customers more careful with how much they use. Nobody is wasting water in Kathmandu. “Before, I didn’t think about how often I could shower or when I can clean the house,” said Laxmi Magar, a housewife and mother of six. “But now that water is so expensive I watch every drop.”

Tanker water costs ten times more than government-supplied pipeline water, according to a World Resources Institute study. In Mumbai, the cost is fifty-two times more, according to Schwartzstein. Water seems like something you would always buy in bulk; however, for some that’s not possible. During the dry season, as you would expect, “The tankers raise their rates accordingly,” writes Schwartzstein. “And because many of these areas have narrow, tuk-tuk-wide streets sprawled across steep hills that often turn to mush in the monsoon, the bigger trucks can’t get through, meaning residents have to buy in smaller sums from middlemen at grossly inflated prices.”

Does the tanker business have a future? Likely, it will boom in Southeast Asia and beyond. Schwartzstein explains,

The urban population of South Asia alone is projected to almost triple to 1.2 billion by 2050, and as infrastructure decays and cities continue to sprawl into areas that aren’t served at all, tankers are well-placed to absorb some of the shortfall. Up to 1.9 billion city dwellers might experience seasonal water shortages by midcentury, according to the World Bank.

A water delivery boom seems unlikely as you pour a glass of aqua from your first-world tap. But, water shortages are not new, and tanker men (and presumably women) have come to the rescue before:

When severe drought emptied Cape Town’s reservoirs in 2017 and 2018, wealthy residents sidestepped restrictions by buying extra water from informal operators. When Chennai, one of India’s largest cities, almost ran dry amid weak rains this summer, over 5000 private tankers ferried in water from outside. As these shocks intensify and affect more cities, the tanker men look set for boom times.

Sunita Suwal told the Times, “The state fails us. The tanker men rob us. They all just want to make money from us. Really, what’s the difference?”

The difference? Tanker men are delivering, the state is not.

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Posted in Uncategorized | Tagged: , , , | Leave a Comment » Paul Krugman’s Bad Nightmare

Posted by M. C. on November 23, 2019

By Robert Wenzel

Paul Krugman is positively terrible when it comes to tax cuts.

He is the perfect example of someone a technician who thinks in terms of what is best for the state.

He recently posted this tweet:

The lead paragraphs of Krugman’s referenced article read:

The verdict is in on President Trump’s 2017 corporate tax cut: It didn’t work.

The tax cut’s backers said reducing the corporate tax rate from 35 percent to 21 percent would increase the average household income by $4,000, raise economic growth above 3 percent and even pay for itself by generating more tax revenue. As the Wall Street Journal’s Greg Ip noted in a recent column, “Nearly two years later, none of those things have happened, and there is scant sign that they will.”

But there are only two ways that the tax cuts didn’t work. That is if you think that either at least a matching increase in tax revenue should have occurred but didn’t or that income increases should have occurred but didn’t.

This is an extremely shallow way to look at tax cuts, and Krugman should feel embarrassed that as a Nobel Prize winner he is promoting such shallow thinking.

First, let me point out that immediately after the Trump tax cuts were made, I suspected that the cuts would not result in a greater gain in tax revenue (SEE: Laughing at the Laffer Curve: The Trump Tax Reform Con). But this doesn’t mean the tax cuts were a bad thing. Money put back in the private sector is always a good thing.

As Murray Rothbard explained about tax cuts:

All business spending is investment because it goes toward increasing the production of goods that will eventually be sold to consumers. But government spending is simply consumer spending for the benefit of the income, and for the whims and values, of government’s politicians and bureaucrats. Taxation and government spending siphon social resources away from productive consumers who earn the money they receive, and
away from their private consumption and saving, and toward consumption expenditure by unproductive politicians, bureaucrats, and their followers and subsidies.

In other words, since tax cuts result in less money collected by the government that is a plus. It means there is more money in the hands of the private sector: consumers and businesses.

And if household incomes didn’t go up but households, because of the tax cuts, were able to keep more money to spend, then it was an all-around positive that resulted in an increase in the general standard of living.

Of course, to the degree the government attempts to borrow money to make up for the revenue deficit that is a bad thing. When government revenues decline, government spending should also be cut.

But Krugman’s reaction of the horror, that revenue fell, is just his bad nightmare as a statist technocrat, who measures everything from the perspective of “how much did the government squeeze out of the people today?”  For the rest of us, a tax cut is a wonderful thing.


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Want to Make Money? Work for the Government

Posted by M. C. on May 8, 2019

When did you last go to the government for a service you truly wanted or needed? Not forced through regulation?

You may need a passport but that is because government mandates its existence, that you apply, supply documentation and pay for it.

Government – Paying its employees well for the privilege of making life more expensive and difficult for those who are useful, productive and/or just want to be left alone.

By Terence P. Jeffrey

Which class of full-time, year-round American workers has the highest median earnings? Is it the class that works for private-sector employers? Is it the class that works for the government? Or is it the entrepreneurial class, those of whom employ themselves?

According to the Census Bureau Personal Income Table 07 (PINC-07), the competition isn’t close. When it comes to making money in the modern United States of America, government workers win.

Among Americans who actually earn income by working, they are the upper class.

In 2017, according to PINC-07, there were 115,704,000 Americans who worked full-time (at least 35 hours per week) and year-round (at least 50 weeks in the year). The table divides these workers into three general classes: “private wage and salary workers,” “government wage and salary workers” and “self-employed workers.”

Of the full-time year-round workers, 88,296,000 were private-sector employees; 17,617,000 were government employees; and 9,750,000 were self-employed. (Another 42,000 were classified as “unpaid family workers.”)

The overall median earnings for all of these full-time year-round workers in 2017 were $48,500.

Workers in private industry, however, made less than the overall median. Their median earnings were $46,797.

The self-employed did a little better than the national rate. Their median earnings were $50,383.

But government workers did the best. Their median earnings were $53,435.

That was 14.2 percent better than private-sector workers and 6.1 percent better than the self-employed…

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The Shutdown Shows Us How Unreliable and Harmful Government Can Really Be | Mises Wire

Posted by M. C. on February 2, 2019

They document some of the problems due to the government shutdown. However, long wait times at airport security, problems providing food stamps, difficulties with affordable housing contracts expirations, meeting payrolls, etc., etc., do not disprove that “government is the problem.”

To illustrate this, remember that there are many things the government does that it has no business doing. Say one of them was creating a bureaucracy that had the power to decide on issuing “free speech” permits, which they sold to those approved to speak on particular public issues (you might think that could never happen, especially given the First Amendment, but it is not so different from the effects of the fairness doctrine for broadcast radio before the Reagan administration eliminated it) or that administered the civil asset forfeiture abuses of their citizens. Neither advances our general welfare. Neither comports with the logic or core documents of America’s founding. Yet people would adapt to the rules they were faced with, and their expectations would come to incorporate them. If at that point, a government shutdown shut off funding to those bureaucracies, those disappointed expectations would cause people difficulties. Complaints on that score, however, do not demonstrate that such government functions will be considered more valuable than before as a result.

Crowding Out the Private Sector

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Posted in Uncategorized | Tagged: , , | 1 Comment » The Government Shutdown and The Fallacy of the “Public Sector”

Posted by M. C. on January 22, 2019

Below is a reprint of a Murray Rothbard essay particularly relevant at this time of the partial government shutdown. It was originally appeared in the New Individualist Review (Summer, 1961)

The Fallacy of the “Public Sector”
By Murray N. Rothbard

We have heard a great deal in recent years of the “public sector,” and solemn discussions abound through the land on whether or not the public sector should be increased vis-à-vis the “private sector.” The very terminology is redolent of pure science, and indeed it emerges from the supposedly scientific, if rather grubby, world of “national-income statistics.” But the concept is hardly wertfrei; in fact, it is fraught with grave, and questionable, implications.

In the first place, we may ask, “public sector” of what? Of something called the “national product.” But note the hidden assumptions: that the national product is something like a pie, consisting of several “sectors,” and that these sectors, public and private alike, are added to make the product of the economy as a whole. In this way, the assumption is smuggled into the analysis that the public and private sectors are equally productive, equally important, and on an equal footing altogether, and that “our” deciding on the proportions of public to private sector is about as innocuous as any individual’s decision on whether to eat cake or ice cream. The State is considered to be an amiable service agency, somewhat akin to the corner grocer, or rather to the neighborhood lodge, in which “we” get together to decide how much “our government” should do for (or to) us. Even those neoclassical economists who tend to favor the free market and free society often regard the State as a generally inefficient, but still amiable, organ of social service, mechanically registering “our” values and decisions.
One would not think it difficult for scholars and laymen alike to grasp the fact that government is not like the Rotarians or the Elks; that it differs profoundly from all other organs and institutions in society; namely, that it lives and acquires its revenues by coercion and not by voluntary payment. The late Joseph Schumpeter was never more astute than when he wrote, “The theory which construes taxes on the analogy of club dues or of the purchase of the services of, say, a doctor only proves how far removed this part of the social sciences is from scientific habits of mind.”1…

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Furloughed Federal Employees are Still Paid More Than You | Mises Wire

Posted by M. C. on January 15, 2019

Federal civilian workers with no more than a high school education earned 34 percent more, on average, than similar workers in the private sector.

Whether its CNBC, or The New York Times, or NPR, the mainstream media is clearly committed to using the current partial government shutdown to portray federal workers as beleaguered victims of the American political system.

But, in all cases I’ve encountered, these reports neglect to mention that on average, civilian federal workers make 17 percent more than similar workers in the private sector, according to a 2017-2018 report by the Congressional Budget Office. That’s total compensation, so we’re including both wages and benefits.

Considering that a year is 52 weeks long, an average federal worker would need to be completely without any income for nearly 9 weeks in order to just be reduced to equal standing with a similar private-sector worker. (17 percent of 52 weeks is 8.84 weeks.)


Source: Congressional Budget Office.

As of this writing, the current shutdown has only lasted three weeks, which means all those furloughed workers profiled in national news stories are likely still coming out ahead of their private-sector colleagues. Read the rest of this entry »

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