More Liberty - Less Government

Socialism’s Promises Versus Its Realities

October 31, 2021November 7, 2021 George Noga

They promise Elysium, Xanadu and Zion; you get Venezuela, Cuba and North Korea.

Socialism’s Promises Versus Its Realities

By: George Noga – October 31, 2021

Happy Halloween! Imagine an entire nation going trick or treating hoping to get a treat of Utopia, but instead gets a trick of dystopia. Today there are only three truly socialist states: Venezuela, Cuba and North Korea; former socialist states include the USSR, China Vietnam, Yemen, Cambodia, Eastern Europe and several in Africa. China (today), Sweden and the Nordic nations have market economies and are not socialist.

Why do so many people desire socialism despite its dismal record? Socialists make high falutin, seductive promises such as: “from each according to his ability; to each according to his need”. They appeal to a basic human egalitarian ideal that the world somehow would be better if everyone held hands, sang Kumbaya and shared equally. Many intellectuals believe their ideas are superior but they must have control over others to achieve their goals. Another path to socialism is incrementalism and this is the great danger now facing America; we are slouching toward socialism.

Almost everyone understands that socialism fails to deliver the goods, while capitalism delivers a veritable cornucopia. Yet America is moving closer and closer to socialism. It’s like taking increasing doses of a potent drug we know eventually will kill us but that delivers a momentary high. Americans – especially the young – are beguiled by the Siren song of collectivism and its flirtatious promises. Therefore, it is altogether fitting that we examine socialism’s myriad promises and compare them to the results.

The Promises Versus the Realities of Socialism

They (socialists) promise you liberty; they give you the Berlin Wall and closed borders with watchtowers, mine fields, razor wire, and vicious dogs. They promise equality; they give you equal squalor and poverty. They promise a clean environment; they give you a toxic wasteland. They promise modernity; they give you Chernobyl and Aeroflot. They promise a classless society; they give you elites with dachas living in decadent luxury. They promise freedom; they give you Gulags, Stasi and the KGB.

They promise Apple, Google and Disney; they give you lines, shortages and shoddy goods. They promise peace; they give you war. They promise hope; they give you nihilism. They promise a Volkswagen; they give you a Trabant. They promise Eden, they give you hell on earth. They promise plentitude; they give you rationing. They promise Utopia; they give you dystopia. They promise truth; they give you Pravda.

They promise Elysium, Xanadu, Valhalla and Zion; they give you North Korea, Cuba, Venezuela and the USSR. They promise comradeship; they give you the secret police. They promise freedom; they give you totalitarianism. They promise progress; they give you stagnation. They promise fulfillment of eternal dreams; they give you nightmares. They promise hope; they give you lives of quiet desperation. They promise a new social order; instead, they give you a smorgasbord of virulent social pathologies.

They promise Sweden; they give you Angola. They promise pristine intentions; they give you devastating results. They promise education; they give you propaganda, reeducation camps and little red books. They promise Singapore; they give you Yemen. They promise technology; they give you antiquated products. They promise the arts; they give you censored and banned books, movies, radio, TV and internet. They promise justice; they give you show trials, preordained verdicts and persecution.

They promise butter; they give you guns. They promise a treat; they give you a trick. They promise a workers’ paradise; they give you nations held captive to keep workers from escaping paradise. They promise morality but are the embodiment of evil in the world. They promise good government; they give you kleptocracy, oligarchy and cronyism. They promise elections but they murder or imprison opponents and journalists. They promise abundance; they give you starvation amidst plenty. They promise a better life; they give you death, killing 100+ million of their own people.

Socialists promise the moon; instead, they give you a phantasmagoria of lies, terror, slaughter, misery, poverty, injustice, death, desperation and social pathology.

Our next post about elections in America is titled: Run Forest Run

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Communism: The God That Failed

October 30, 2021October 30, 2021 George Noga

Communism fails because it is opposed to and irreconcilable with human nature.

Communism: The God That Failed

By: George Noga – October 24, 2021

On this day in 1917 communists took over the government of Russia to the rapture of collectivists everywhere. They now would have the chance to demonstrate, once and for all, socialism’s superiority. It would, they believed, be the fulfillment of mankind’s eternal dreams of paradise on earth. Man has worshipped at the altar of collectivism and longed for Utopia since the days of Elysium, Xanadu, Zion and Valhalla.

But despite having every opportunity to make communism work, it collapsed in less than 75 years. This should not have come as a surprise, as all collectivist schemes have failed always and everywhere. The pattern follows a preordained script: collectivists make high-minded and exalted promises, but end up delivering a phantasmagoria of terror, slaughter and poverty. In the end, it is all lies; it is the god that failed!

The Trabant could go from zero to 60 mph in the same day.

We have tried many approaches to contrast socialism with free market capitalism. This year, on the anniversary of communism, we try yet another approach. We present three examples that showcase the failure of socialism better than any academic tome.

The Trabant

The best car ever produced by commies was the Trabant. I saw one once in a museum; it looked more like a lawn mower than a car. It had a two-stroke, two-cylinder engine and went from zero to 60 in the same day. It had 26 horsepower and a top speed of 60 mph. (Note: some riding lawnmowers have 24 horsepower). The gas gauge was a dipstick and oil had to be mixed in with the gas in precisely the correct proportion. Because it had no fuel pump, the gas tank was located atop the engine for gravity flow. Despite all its deficiencies, the waiting time from order to delivery was 12-15 years.

Contrast the East German manufactured Trabant with cars manufactured in West Germany such as Mercedes-Benz, Audi, BMW and Volkswagen. All of these cars are available with a stunning array of options and can be delivered in less than one hour from being ordered. Communists promise you a Mercedes but give you a Trabant.

The Sears Catalog

There is an old commie joke wherein the chief soviet economist (oxymoron) bursts into the office of the head commie and says, “We have conquered the entire world except for New Zealand.” The head commie asks why they had not conquered New Zealand; the economist replies, “We must have one place where there are real prices.” This story is funny because it is true. Soviet commies had no way to know what things cost or what prices should be charged. So, instead of looking to New Zealand, they turned to Sears catalogs to set prices for consumer goods – as did the Chicoms.

Computer Technology

The East German communists possessed the most advanced computer technology in the Soviet bloc. Their computer scientists were subject to extreme security measures by the Stasi to safeguard their technology and to keep it from falling into the hands of enemies. They were proud that their technology was so superior. After the Berlin Wall fell, the top commie computer scientist visited West Berlin. He was flabbergasted to find far more advanced (100 times faster and better) computers for sale to ordinary citizens at ridiculously low prices. The strict secrecy was imposed not because commie computer technology was so advanced, but because it was so far behind.

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The enduring legacy of communism, and all collectivist schemes, is that it never can work because it is unalterably opposed to and unreconcilable with human nature. It fails not because it was implemented improperly, but because it was implemented faithfully. Instead of Utopia, the communists wrought gulags, death, destruction and misery on a monumental scale. Understanding the difference between communism and capitalism is as simple as the difference between a Mercedes-Benz and a Trabant.

Answers to Numeration Problems from Last Week

For those of you who missed last week’s posting about numeration, you may wish to visit our website at www.mllg.us to take the quiz before your read the answers.

Problem #1: The correct answer is (f); each answer from (a) to (d) is correct.

(a) The stock decreased by 20% as $10 is 20% of $50

(b) Since the 20% decease happened in 6 months, the annual rate of decrease is 40%

(d) If you bought another 100 shares at $40, you now own 200 shares that cost $9,000. If the stock went to $45 (a 12.5% increase) the 200 shares would be worth $9,000.

Problem #2: The correct answer is (d). This is all about knowing which denominator is correct. It is helpful (but not necessary) to assume there are 10 slices. You ate 6 slices and your spouse ate 4. You ate 2 more slices than your spouse’s 4 – or 50% more – not 20%, 33% or 40%. Your spouse ate 2 slices less than your 6 slices, or one-third less.

Problem #3: The correct answer is (d). Dividing $90 by (1-.35) is the same as dividing $90 by .65, the result of which is $138.46. You can confirm this is correct by working the problem in reverse. Multiply $138.46 by 35% to get $48.46. Then subtract $48.46 from $138.46 to get $90 – the correct result.

Our next post contrasts the promises versus the results of communism.

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Just How Numerate Are You?

October 18, 2021October 18, 2021 George Noga

Asked if he wanted his pizza cut into 6 or 8 slices, Yogi said, “Just 6; I’m not very hungry”.

Just How Numerate Are You?

By: George Noga – October 17, 2021

American students lag far behind the rest of the world in math. This has consequences far beyond the classroom as it turns our children into future victims – unfortunately, along with many adults as well. If you didn’t immediately grasp the point in the Yogi Berra pizza story in the preheader above, you could very well be a victim in waiting. Full disclosure: I was a math major, CPA and once worked as a financial analyst.

This story is unbelievable, but true. A McDonalds competitor (A&W) aggressively marketed its one-third pound burger at the same price as McDonald’s Quarter Pounder. In blind taste tests, consumers preferred the A&W burger; nonetheless, they were not selling. Perplexed, A&W hired a leading market research firm to conduct focus groups. The answer turned out to be simple but shocking: most people surveyed believed that 1/4 pound was bigger than 1/3 pound. After all, 4 is bigger than 3, isn’t it?

There are many common misunderstandings about numbers that harm consumers; the most ubiquitous and most damaging involves interest. Consumers are bombarded with promotions advertising “interest free“. This is highly deceitful. Whenever credit is extended, someone somewhere is incurring interest and you are bearing the cost. There is no such thing as no interest or interest-free; it is an economic impossibility!.

Some mortgage finance companies advertise “no closing costs“, another impossibility. Closing costs, often many thousands of dollars, don’t magically disappear, nor does some beneficent philanthropist pay them. The closing costs simply are buried in other parts of the transaction, most likely in the interest rate. By charging an above the market interest rate, a finance company can recover many thousands in closing costs. The closing costs are not free; you are still paying every last dollar of them.

You receive an unsolicited stock recommendation from a broker and the stock goes up. Soon you receive a second stock pick and it also goes up. You receive two more of these recommendations, both of which are profitable. The broker now has been right four out of four times and when he contacts you to open an account, you eagerly oblige and then promptly lose money. What happened? The broker started out with 1,600 prospects, advising 800 to buy and 800 to sell. By continuing this process, the broker is assured of having 100 prospects for whom he has been right four times in a row.

It is rare but possible that some advertised sales are genuine and products actually sell for less than before. Typically however, “sales” are legerdemain, prestidigitation and maskirovka. It works like this. A business wishes to sell a product for say $80 but establishes a phantom price of $100. The business then serially promotes a variety of specials such as low or no interest, no payments for one year, price discounts and free add-ons – each of which is calculated to result in an effective price of $80. The ways of doing this – and hoodwinking potential buyers – are limited only by the imagination.

Test Your Numeration Skills

We close with three problems for readers who wish to test their quantitative knowledge. These are at middle school level and involve simple percentages. We will publish the answers along with explanations in next week’s posting. Good luck.

Problem #1: You buy 100 shares of ABC company for $50 per share. Six months later you sell it for $40 per share. Which of the following is the most accurate?

(a) Your stock deceased 20%.

(b) Your stock decreased at the rate of 40%

(d) If you buy 100 more shares now, you break even if the stock goes up 12.5%

(e) Only (a) and (b) are true

(f) All are true except (e)

Problem #2: You and your spouse share a 12-inch pizza. You eat 60% and your spouse eats 40%. Which of the following is/are true?

(a) You ate exactly 20% more than your spouse

(b) You ate exactly 33% (one-third) more than your spouse

(d) Your spouse ate exactly 33% (one-third) less than you

(e) Both (b) and (d) are true

(f) None of the above is correct

Problem #3: You desire to establish a price for your product that will enable you to have a gross margin of 35%, i.e. 35% of the sale price needs to be available to cover overhead and profit. It costs you $90 to make the product; what price must you charge?

(a) There is insufficient data provided to compute that answer

(b) The price should be $125 to cover the $90 cost and have $35 left over

(d) The price should be determined by dividing $90 by (1- .35)

(e) The price should be computed by dividing $90 by (1.35)

(f) None of the above is correct

Our next post observes the anniversary of Red October.

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Christopher Who?

October 15, 2021October 15, 2021 George Noga

It’s not about Columbus; it never was. It’s all about weaponizing history.

Christopher Who?

By: George Noga – October 10, 2021

Over the years, certain posts have become reader favorites and are forwarded en masse to friends and relatives. Our July Fourth, Columbus Day, Thanksgiving and Christmas posts fall squarely into that category. Rather than disappoint, we present this post for Columbus Day 2021; it contains new material and perspectives while continuing tradition. You may read our 2019 and 2020 Columbus Day posts at: www.mllg.us.

In much of the USA, Columbus Day is a victim of cancel culture. Instead, Americans, and especially children, are force fed progressive claptrap that Columbus and all of western civilization (including you) are hateful, evil and geocidal, while all indigenous peoples are peace loving and noble. This is standard bilge by progressives, who seek to weaponize history to riddle Americans with guilt – especially on holidays.

The following states (or parts thereof) now call it Indigenous Peoples Day or Native Americans Day: AK, CA, DC, HI, IL, LA, ME, MA, MI, MN, MT, NV, NJ, NM, ND, OH, OK, OR, RI, SD, VT, VA, WA and WI. In Colorado, Columbus Day is now Mother Cabrini Day in honor of Frances Cabrini, who started schools and hospitals. Canada abolished Columbus Day entirely, replacing it with First Nations Peoples Day.

Were Europeans or Americans Guilty of Genocide?

Progressives like to blame Europeans and Americans for genocide and massacres. Most native deaths post-Columbus resulted from infectious diseases brought from Europe, many of which originated in and migrated from Asia. The bubonic plague (and Coronavirus) originated in China, yet no one accuses them of genocide. There is not one record extant that shows any European or American government had a policy of genocide. What transpired following Columbus’s discovery of America was the same as what happened throughout human history when any aboriginal people encountered a more technologically advanced society. It is disingenuous to condemn western civilization for innate human behavior unchanged since men lived in trees.

Why was Iraq, with a casualty ratio of 11 to 1, a battle and Wounded Knee, with a ratio of 3 to 1, a massacre? It all depends on who writes the history.

It also is a myth that aboriginals were noble and peace-loving. If that were true, how could a handful of Europeans subjugate enormous populations and territories? Columbus allied with the Arawaks against the Caribs, who were vicious cannibals. Cortez, with only 500 conquistadores, subjugated the Aztecs with the help of 50,000 natives terrorized by the Aztec’s ritual human sacrifice and enslavement. It s much the same with Pizarro, who had but 180 men when he landed in Peru. Yes, Europeans committed many brutal acts, but it is manifestly dishonest to focus only on those while ignoring or excusing equal (or even worse) savagery by indigenous peoples.

Wounded Knee – Battle or Massacre?

In recent years, Wounded Knee has become the latte-left’s poster child for massacres. Like many Americans, I once accepted the progressive and media narrative that Wounded Knee was a massacre. Once, while driving in South Dakota, I planned to visit Wounded Knee. I stopped at a convenience store and asked for directions to the “Wounded Knee Battlefield“. My interlocutor, who happened to be a native American, glared at me and in a spittle-flecked voice made clear there was no battlefield and that it was a massacre. After that encounter I resolved to learn more about Wounded Knee.

Following are the facts. At Wounded Knee, the Miniconjou Sioux suffered 197 casualties (146 killed, 51 wounded); the US Cavalry had 54 casualties (25 killed, 39 wounded). The ratio of casualties was three Sioux to one cavalry. The cavalry cared for the wounded Sioux and transported them a great distance to receive treatment.

In the Iraq war 50,000 Iraqis died to 4,421 Americans – a ratio of 11 to 1. At Agincourt, Henry V lost 400 men to 6,000 French – a ratio of 15 to 1. In the 331 BC battle of Gaugamela, the Persians under Darius III had 40,000 killed to 500 Macedonians under Alexander the Great – a ratio of 80 to 1. History is chock full of battles with even higher ratios, yet no one ever refers to them as massacres. Whether Wounded Knee was a battle or a massacre depends, more than anything, on who writes the history.

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The circus engulfing Columbus Day is nothing more than progressive Svengalis seeking to brainwash your children to despise America and all of western civilization.

To our readers in Colorado, happy Mother Cabrini Day; to our Latino readers, happy Dia de la Raza and to everyone else, we wish you a happy Columbus Day 2021!

Our next post challenges readers to see how numerate they really are.

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Ludwig von Mises 140th Birthday – Part II – Wisdom From the Greatest Social Thinker of Our Time

October 3, 2021October 3, 2021 George Noga

“Freedom is indivisible; once it is restricted, a decline begins which is difficult to stop.”

Ludwig von Mises 140th Birthday – Part II

Wisdom From the Greatest Social Thinker of Our Time

By: George Noga – October 3, 2021

Ludwig Heinrich Elder von Mises, born in 1881, was an Austrian School economist, historian, logician and sociologist. He wrote and lectured extensively on the societal virtues of classical liberalism and is best known for his work on human choice and action. He is revered today because his body of work has proven accurate about the success of free market capitalism and the failure of collectivism. He was a mentor to Friedrich Hayek, author of The Road to Serfdom. Von Mises died in 1973 at age 92. Note: please visit our website at www.mllg.us to read last week’s Part I on von Mises.

The legacy of von Mises is kept alive today by the Ludwig von Mises Institute, located at Auburn University. It maintains a website with a blog, books and publications, podcasts and a graduate program in Austrian economics. The institute also publishes a free daily (M-F) newsletter chock full of articles applying von Mises’ teachings to today’s issues. You can subscribe to the newsletter at https://mises.org. This is one of a very few publications I look at each day. It can be a bit wonkish – but give it a try,

More Wisdom from Ludwig von Mises (lightly edited)

Socialism: “The champions of socialism call themselves progressives, but they want a system characterized by rigid observance of routine and resistance to every kind of improvement. They call themselves liberals but they are intent on abolishing liberty. They call themselves democrats but they yearn for dictatorship. They call themselves revolutionaries but they want to make government omnipotent. They promise the Garden of Eden but they plan to transform the world into a gigantic post office.”

Dictatorship: “Nobody ever recommended a dictatorship aiming at ends other than those he himself approved. He who advocates dictatorship always advocates the unrestricted rule of his own will.”

Marx and freedom: “The Marxian love of democratic institutions was a stratagem only, a pious fraud for the deception of the masses. Within a socialist community there is no room left for freedom.”

“Socialism is not what it pretends to be. It is not the pioneer of a better world, but the spoiler of civilization; it does not build, it destroys.”

Status of workers: “In Lenin’s eyes workers were only workers and not also customers. He believed they were slaves under capitalism and their status did not change under socialism. Socialism substitutes the sovereignty of a dictator or a committee of dictators for the sovereignty of consumers. Workers are no longer men, they are pawns in the hands of the chief social engineer. Even freedom to rear progeny will be taken.”

Von Mises sampler: “If history teaches anything, it is that private property is linked inextricably with civilization. . . . . . Making undeveloped nations more prosperous cannot be solved by material aid. It is a spiritual and intellectual problem. . . . . All people, however fanatical they may be in their zeal to disparage capitalism, implicitly pay homage to it by clamoring for the products it turns out . . . . . Economic knowledge is an essential element to human civilization; it is the foundation on which all moral, intellectual and technological achievements have been built. If men disregard its teachings, they will stamp out society and the human race.”

Next up is our politically incorrect celebration of Columbus Day

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Ludwig von Mises 140th Birthday – Part I – Greatest Social Thinker of the 20th Century

October 1, 2021October 1, 2021 George Noga

“The issue is always the same: government or the market. There is no third way.”

Ludwig von Mises 140th Birthday – Part I

Greatest Social Thinker of the 20th Century

By: George Noga – September 26, 2021

This month marks the 140th birthday of Austrian economist Ludwig von Mises who died in 1973 at age 92. Von Mises was not only the best economist, but also the greatest social thinker, of the 20th century. We honor his birthday by presenting a small sample of his work in two posts. We have lightly edited for length and modernity.

Choosing between capitalism and socialism: “A man who chooses between drinking a glass of milk or a glass of cyanide does not choose between two beverages; he chooses between life and death. A society that chooses between capitalism and socialism does not choose between two social systems; it chooses between social cooperation and the disintegration of society. Socialism is not an alternative to capitalism.”

On human action: “All rational action is in the first place individual action. Only the individual thinks. Only the individual reasons. Only the individual acts.”

Sovereign consumer: “The common man is the sovereign consumer whose buying, or abstention from buying, determines the quality and quantity of what is produced, and who in earlier ages were serfs, slaves and paupers. They are the customers for whose favor businesses compete and who always are right. Wealth is only acquired by serving customers in a daily plebiscite in which every penny confers the right to vote.”

Totalitarianism: “You can’t fight totalitarianism by adopting totalitarian methods. Freedom can only be won by men committed to the principles of freedom. The first requisite for a better social order is unrestricted freedom of thought and speech.”

“Tyranny is the political corollary of socialism just as representative government is the political corollary of a market economy.”

Anti-capitalist mentality: “Capitalism raises living standards to unprecedented levels. A nation is more prosperous the fewer obstacles it puts in the way of of free enterprise. The bias and bigotry of public opinion manifests itself by attaching the epithet ‘capitalist’ exclusively to things abominable, but never to those of which all approve.”

Responsibility for society: “Everyone caries a part of society on his shoulders; no one is relieved of his share of responsibility by others. And no one can find a safe way out for himself if society is sweeping toward destruction. Therefore, everyone, in his own interests, must thrust himself vigorously into the intellectual battle.”

Liquor versus bibles: “It is not the fault of entrepreneurs if consumers prefer liquor to bibles and if governments prefer guns to butter. The entrepreneur does not make greater profits selling bad things versus good things. His profits are the greater the better he succeeds in providing consumers those things they ask for most intensely'”

Ludwig von Mises sampler of pithy quotes: “Every government intervention creates unintended consequences which lead to further interventions. . . . . . He who is unfit to serve his fellow citizens wants to rule them. . . . . . . Freedom is indivisible. As soon as one starts to restrict it, one enters upon a decline which it is difficult to stop. . . . . . The average man is both better informed and less corruptible in the decisions he makes as a consumer than as a voter. . . . . . Every socialist is a disguised dictator. . . . . . Worship of the state is the worship of force. . . . . . Every step which leads from capitalism toward planning is necessarily a step nearer to absolutism and dictatorship.”

Next week is the second part of our homage to Ludwig von Mises.

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A Smorgasbord of New Taxes

September 23, 2021September 23, 2021 George Noga

Trillions of dollars in new taxes are coming soon; here’s what to expect..

A Smorgasbord of New Taxes

By: George Noga – September 19, 2021

Hold on to your wallet! The House Ways and Means Committee has begun marking up the whopping $3.5 trillion (really $5+ trillion) infrastructure bill, expected to be enacted into law later this year via the reconciliation process. Not only will your taxes skyrocket, but some of the biggest increases may be retroactive to the beginning of this year. Following are some of the tax increases democrats are seriously considering.

Increasing the top marginal income tax rate to 39.6%
Raising the corporate tax rate to 28% – a 33% increase
Eliminating the step up in basis at death – more on this infra
Doubling the capital gains tax to 43.4%
Capping Section 1031 like-kind exchanges
A plethora of new taxes on energy companies
Border tax on carbon – raising prices of many imported goods
Taxing carried interest for the first time ever
Removing all caps from the payroll tax
Taxing unrealized capital gains each year
Applying the payroll tax to investment income

New taxes will be paid by ordinary Americans

President Biden vowed not to increase taxes for Americans earning less than $400,000. The naked truth is that the trillions in higher taxes will be paid by the middle class. Economists universally agree the burden of corporate taxes falls on shareholders, employees and consumers and not on companies. In August, the Joint Committee on Taxation estimated the middle class would pay 98.4% of the increased corporate taxes.

Indeed, nearly all the tax increases listed supra will be paid by the middle class. When asked why he robbed banks, Willie Sutton replied, “Because that’s where the money is.” And so it is with taxation in America. Progressives must rob – err tax – the middle class because that’s where the money is. They demagogue the wealthy in order to beguile ordinary Americans into accepting what they would not otherwise tolerate.

Progressives prefer class warfare to raising revenue

The main objective of taxation is to raise revenue and in an efficient manner. Biden has proposed doubling the capital gains tax rate to 43.4%. This would be an effective rate above 50% when adding state taxes. The CBO estimates the revenue-maximizing rate for the capital gains tax is 28% – most economists believe it is 20% to 24%. The CBO found for each 1 percentage point tax increase, there is a 1.2 point decrease in sales of assets subject to the tax. Raising the tax to 43.4% costs the government money; instead of raising revenue, the tax is hemorrhaging tax dollars. There is only one logical explanation: democrat ideology prefers class warfare that divides Americans.

The capital gains tax is arguably the unfairest tax of all because: (1) it often is double taxation such as gains previously taxed at the corporate level; (2) most gains result from inflation and are not indexed; (3) gains and losses are asymmetrical; loss deductions are limited to $3,000 per year whereas gains are unlimited; (4) it is a tax on investment that harms productivity and wage growth; and (5) taxpayers holding onto assets too long results in misallocation of resources damaging the entire economy.

The estate tax is back – and with a terrible vengeance

Just when you believed estates of less than $11.7 million were safe, democrats have found a back door to tax estate assets above $1 million – and it is a cruel and virulent tax. Democrats accomplish this by eliminating the step-up in basis at death for all gains in excess of $1 million and then taxing them as a capital gain in the year of death.

Consider the example of a farmer who bought land in 1950 for $250,000 and then dies in 2022 with the land valued at $4 million. The farmer’s heirs would be required to pay capital gains tax on $2,750,000 (the sale price of $4 million less the original basis of $250,000 and less the $1 million exemption) at 43.4%, or a tax of $1.2 million. Based on BLS data, $250,000 in 1950 would be $3 million in 2022 when adjusted for inflation. Perniciously, the entire tax of $1.2 million is attributable to phantom income from inflation. This tax will devastate family-owned farms, ranches and businesses.

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The Biden tax increases will fall on the middle class as they always must. Family businesses will become extinct. Social Security and Medicare will exhaust their reserves. The deficit will accelerate its death spiral. But those aren’t the worst things that will happen. The out-of-control national debt is (by far) the biggest threat to our national security, which is why we have a government in the first place.

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Next: The 140th birthday of the greatest social thinker of the 20th century.

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The best way to minimize inequality . . . Privatize Social Security Immediately

September 12, 2021September 12, 2021 George Noga

Private Social Security benefits everyone at all times – even when markets melt down.

The best way to minimize inequality . . .

Privatize Social Security Immediately

By: George Noga – September 12, 2021

With one stroke, government could virtually eliminate wealth inequality and most income inequality. Economists calculate the current Social Security program yields about 1% per year and when the beneficiary dies his/her heirs get absolutely nothing. In recent decades, private accounts invested in balanced index funds have returned 7% net of inflation; moreover, when the beneficiary dies the heirs inherit a fortune.

To illustrate, $100,000 compounded at 1% for 35 years results in

$140,000; compounded at 7%, it yields over one million dollars.

George W. Bush proposed privatization but progressives demagogued it mercilessly. Barack Obama said, “If Bush had his way, millions of Americans would have had their Social Security tied to the stock market; their nest eggs would have disappeared before their eyes.” Obama demonstrated his economic ignorance. Forbes magazine published a study by the American Enterprise Institute (AEI) written by a former commissioner of the Social Security Administration; the study proved that privatization is beneficial even if initiated right before the stock market plummets by 54% as in 2007-2009.

Under the Bush plan, only workers under age 55 were eligible for private accounts and no retiree could possibly have lost money. The absolute worst case in the AEI study was for a worker who started a private account in 1990 at age 53. That worker would have received benefits seven-tenths of one percent less that Social Security. However, the worker would still have come out way ahead because he owned the account. Even when markets melt down 54% at the worst possible time, private accounts are better.

American Birthright Accounts

The best plan is to replace Social Security with America Birthright Accounts or ABAs. We at MLLG invented the ABA concept and published it in in our posts of 5/20/18 and 6/17/18. These are easily available on our website: www.mllg.us. Following is a summary of American Birthright Accounts as we first proposed them three years ago.

Government creates a tax-free ABA at birth for every child born in America and funds it for $5,000. Each year until retirement, government adds $500. The account is professionally invested in a diversified portfolio of global index funds. Since 1930 markets have increased 7% yearly net of inflation and despite meltdowns. When the ABA beneficiary is age 65, the account exceeds $1 million and generates $6,000+ per month tax-free and in today’s dollars. A retired couple, both with ABAs, receives $150,000 per year tax-free and would have $2+ million to bequeath to heirs.

American Birthright Accounts make every American a millionaire

ABAs are affordable. There were 3.6 million births in the USA in 2020 – about 3.5 million net of early mortality. This equates to an annual cost of $17.5 billion for the initial $5,000 and $1.75 billion for the $500 per year. The average cost for the first 10 years is $25 billion per year; in year 11 the cost is $35 billion and increases by $1.75 billion every year thereafter. This is less than one-half of one percent of the budget.

Private Social Security and ABAs Minimize Inequality

Creating ABA accounts, or even privatizing Social Security, would go far in eliminating inequality in America. It would make all Americans stakeholders in our market economy. Private accounts succeed due to the power of markets whereas Social Security fails because of the evils of government. Progressives oppose making everyone rich because it would eliminate their dependence on government.

ABAs would cost $250 billion over the first 10 years and easily would fit into the infrastructure bills now proposed by progressives. It would cost a mere 5.5% of the $4.5 trillion and it would give an entirely new meaning to “Born in the USA“.

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Our next post is about all the new taxes in your future – thanks to Biden.

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MLLG Labor Day 2021 Special Posting . . . Capitalism Contains a Self-Destruct Gene

September 5, 2021September 5, 2021 George Noga

The cardinal rule for parasites is never to kill the host.

MLLG Labor Day 2021 Special Posting . . .

Capitalism Contains a Self-Destruct Gene

By: George Noga – September 5, 2021

Labor Day rightfully honors labor, but there also should be a day set aside to honor capital, which greatly enhances the productivity and value of labor. Throughout history, man’s labors have resulted only in grinding poverty, but when capital alloys with labor great wealth is produced. Unfortunately, capitalism is self-destructing.

Karl Marx 170 years ago wrote that capitalism contained the seeds of its own destruction. He thought competition would become destructive and exploited workers would rise up to create a classless society. Marx was right about capitalism but for the wrong reason. A century ago, economist Joseph Schumpeter also posited capitalism would self destruct. Schumpeter believed the success of capitalism contained the seeds of its ultimate destruction. Schumpeter was right and for the right reason.

Schumpeter: “Capitalism cannot survive . . . its very success undermines the institutions which protect it and creates conditions in which it cannot survive.”

Not only has Schumpeter been proven right, his rationale was accurate. He reasoned that: (1) capitalism would create enormous wealth; (2) the wealth thusly created would enable many more people to become educated; (3) it would spawn a large intellectual class that made its living attacking the system of private property and freedom necessary for its own existence; and (4) people educated by such progressives would vote for liberal welfare states, leading to the demise of capitalism. BINGO!

Just how bad is it? Nearly half of US adults now say they prefer socialism to capitalism. A poll asked if respondents had a favorable view of capitalism or socialism. A majority of Democrats favored socialism; in fact, Democrats in every age group, gender and race preferred socialism. Millennials preferred socialism by nearly a 50% margin and 60% said they would rather live under socialism than capitalism. Perhaps those folks should spend their next vacation in Venezuela, Cuba or North Korea.

Capitalism has created a cornucopia of wealth; extreme poverty is nearly eradicated and every metric of human well being is improving. However, the demise of capitalism will usher in a dark age and destroy all those blessings along with our liberty. When Schumpeter’s prediction reaches fruition, it will drag the entire planet into a lengthy and unspeakable Orwellian torpor where all men lead lives of quiet desperation. Nowhere is it written that liberty must survive. Of the 120 billion humans that have trod this earth since time began, fewer than 1% have lived their lives in liberty.

We have written often about whether or not the success of capitalism truly sows the seeds of its own destruction. Up until now, we have not answered that question. With much regret, we now must conclude that capitalism will indeed be destroyed by its own success. Somewhere, Joseph Schumpeter must be thinking that he told us so.

The cardinal rule of parasites is never to kill the host – but that is precisely what is happening today as progressive parasites are murdering their capitalist hosts.

Our next post is about the privatization of Social Security.

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30th Anniversary of School Choice in America – Part V Welcome to This Failed Government School

August 29, 2021August 31, 2021 George Noga

This post is a letter public school principals should be required to send annually to all parents.

30th Anniversary of School Choice in America – Part V

Welcome to This Failed Government School

By: George Noga – August 29, 2021

Dear Parents:

As principal of the government school your child will attend, there are some hard truths I must tell you. This school has failed for many years, but it never will close. Most of our teachers graduated in the bottom deciles of their class; they are marking time until their mega-pensions begin; however, a few harbor delusions of adequacy.

I can’t fire bad teachers due to the public sector unions which exert Herculean efforts defending the worst teachers, even those who pose an imminent danger to your child. I can however get a few placed in rubber rooms where they draw full pay and benefits for doing nothing, but at least they can do no further harm. If there should be a pandemic or other emergency, we will immediately shut down the school and hold your child hostage until we shake down and extort everything we possibly can.

Our unionized teachers bargain for work rules at your child’s expense; that’s why our school day begins at zero dark thirty, even though that is detrimental to learning. Always remember that government schools are a jobs program for adults; your child is an afterthought. Our teachers and staff are anti-competitive government workers who oppose pay based on merit or results; they are overpaid for what they produce. Our problem is not just a few bad apples, but that the barrel contains mostly bad apples.

Regardless of your family’s religion or values, we indoctrinate your child in a secular religion that is pro-government, anti-business and politically correct. We scare the bejesus out of your child about the environment and climate change. We teach your child Critical Race Theory, i.e. America is a racist country and the only thing that matters is your child’s race. We teach America was founded in 1619 when slavery was introduced. We encourage your child to question the gender that was assigned at birth.

Perish any thought about escaping this failed school; you have no choice. Your family must be low-income because no children of affluent families (who have choices) will attend this school. School choice may be the civil rights issue of our time, but our teachers will stand in the schoolhouse door if necessary to stop your child from escaping. We are unaccountable to parents, but live in constant fear that if you had a free choice your child would escape the clutches of our government monopoly.

Most students at this school are minority. Even though we know it is systemic racism, we force children of color to attend this failed government school. We throw poor black and brown kids under the school bus with an assist from the NAACP, public sector unions and the Democratic Party. These groups each made a devil’s bargain with teachers unions. They support public sector unions over your child in exchange for campaign funding and votes – despite the great harm this inflicts on your child.

By the time your child leaves this school, he/she will be several grade levels behind. It is not about money. We spend nearly as much per pupil as the most elite private schools in our area, but the spending is wasted on a gaggle of administrators and union inflated salaries. We are lucky if half the money ever sees the inside of a classroom. We have a constant police presence and metal detectors reminiscent of prisons. Nonetheless, we cannot promise your child will be safe here. To the contrary, violence is endemic and our school is a petri dish for every possible dysfunction and social pathology. It is good if your child plays sports as we value that above education.

Graduation is a testament to perseverance, not learning. Your child won’t be able to attend college – even community college – without extensive remedial work. Your child will be ill prepared for any desirable job. Any awards or honors your child receives at this school are cruel hoaxes intended to beguile you into believing learning actually is taking place. Even if your child becomes our valedictorian, don’t get your hopes up. None of the past several valedictorians here was accepted at any university.

I did not sugarcoat what you and your child can expect here. If you ever have any complaints, I will listen politely but nothing will change because I am not accountable to you. Welcome to this failed government school.

Next: Capitalism’s success has sown the seeds of its own destruction

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