Red Clay Citizen

Do You Want Fries With That EITC?

From today's Finance Committee meeting comes approval of HB2642. The bill slightly increases the size of the state's Earned Income Tax Credit (EITC). The state tax credit will be in addition to the federal credit eligible people already receive. To be eligible, you must be below certain income thresholds, based on filing status and number of dependents.

According to Representative William Wainwright (D - Craven), the increase in the EITC will "help families make ends meet." Really?

According to analysis presented by the bill's sponsors, this new law will increase the average recipient's benefit by $24 - per year. That's right, $2 a month. Those ends better be awfully close together if 2 bucks a month will make them meet. All told, the newly increased EITC will provide the average recipient with less than $7 per month - many of these recipients will be families. Seven bucks a month may get you a super-sized value meal at McDonalds - but making ends meet? Please.

Further, the maximum benefit estimated for a family of four is estimated to be $20 a month. Whoopee! Take the family to Golden Corral - kids eat free on Tuesdays!

So what will this minuscule benefit cost North Carolina taxpayers - about $70 million a year. Not one word in that committee meeting was dedicated to the thousands of jobs that could be created if that $70 million were left in the hands of entrepreneurs around the state. But who can think of creating jobs when you are an omnipotent state legislator who can "do something" to help poor people "make ends meet?" Why bother yourself with such trivial details like cost-benefit analysis when you can pat yourself on the back and convince yourself you are a good person because you "helped" people.

Even more maddening was the discussion that the EITC is needed to offset the high burden that state and local taxes and fees place on poor people. Why not just lower those taxes instead? For example, last year lawmakers extended the 1/4 cent "temporary" sales tax - a tax that will extract $258 million from consumers, and hit the poor the hardest. But allowing people to keep more of their money in the first place erodes the amount of money Raleigh politicians control, and therefore chips away at their power.

Of course, lawmakers will always opt to increase dependency on government programs rather than promoting financial independence in the private marketplace. They've figured out that the more folks that are dependent on you, the more votes you will get.

$22K? How would you spend it?

A beautiful piece in the N&O that will get you thinking about our "social safety net" -- such as it is.
-Max Borders

Government Doesn't Create Jobs

...it creates poverty.

According to (yet another) editorial in the Raleigh News & Observer, government should do what it can to help the poor.

The Good Book famously says that we'll always have the poor, and no sense arguing with so authoritative a source. But a just society that has the financial power should do all it can to reduce the number of people in poverty's grip.

So what can the government do? Get out of the way.

Not a dime in welfare benefits or any other program exists without being parasitic on the free actions of individuals in the marketplace -- which is also the source of economic growth. Therefore, government must not only learn it's place, but not kill the goose that lays the golden eggs.

It must also not create incentives for poor people to remain in subsistence poverty. There will be less upward mobility if being poor is easy (i.e. subsidized). There is also no justice in the persistent notion that the "just society" must mean government action. A society is nothing more than an agglomeration of individual actors. And, by the way, those that read the "Good Book" realize that moral responsibility for charity is a personal. It doesn't not fall on you from Heaven on tax day. So let's get beyond this idea that bureaucrats should take from A to give to B in the name of justice. No one will get to Heaven by moral proxies in Raleigh or Washington.

Remember, every dime the government spends on this program or that is a dime you can't spend on the causes you think are most worthy. THEY say compulsory compassion via government monopoly. I say personal passion for social entreneurship in a dynamic market for doing good. Sadly, who's right comes down to who has the bigger guns.
-Max Borders

Beneath the Surface of "Inequality" Data

In yesterday's Wall Street Journal, American University economics professor Brad Schiller takes a closer look at some recent Census Bureau data regarding income inequality. Perhaps the left's most beloved go-to cliche is about the "rich getting richer while the poor get poorer." At first blush, the recently released Census Bureau seemed to provide fodder to their griping:

"Two observations grabbed the headlines. First, the data indicate that the top-earning 20% of households get half of all the income generated in the country, while the lowest-earning 20% of households get a meager 3.4%. That disparity has widened over time: In 1970, their respective shares were 43.3% and 4.1%. These income-share numbers buttress the popular notion that the 'rich are getting richer while the poor are getting poorer.'"

Of course, most so-called "progressives" are good at merely reading the headlines while being strongly averse to engaging in critical thinking. Schiller provides some sound analysis of the data to tell us that this supposed "growing inequality" is actually not what it appears:

"Demographic changes in the size and composition of U.S. households have distorted the statistics in important ways.

First, we can easily dismiss the notion that the poor are getting poorer. All the Census Bureau tells us is that the share of the pie consumed by the poor has been shrinking (to 3.4% in 2006 from 4.1% in 1970). But the "pie" has grown enormously. This year's real GDP of $14 trillion is three times that of 1970. So the absolute size of the slice received by the bottom 20% has increased to $476 billion from $181 billion. Allowing for population growth shows that the average income of people at the bottom of the income distribution has risen 36%.

The "typical" household, however, keeps changing. Since 1970 there has been a dramatic rise in divorced, never-married and single-person households. Back in 1970, the married Ozzie and Harriet family was the norm: 71% of all U.S. households were two-parent families. Now the ratio is only 51%. In the process of this social revolution, the average household size has shrunk to 2.57 persons from 3.14 -- a drop of 18%. The meaning? Even a "stagnant" average household income implies a higher standard of living for the average household member."

And lastly, what of this nonsense that only the "rich" have enjoyed economic gains in the last several years?

"The increase in nominal GDP since 2000 amounts to over $4 trillion annually. If you assume that all that money went to the wealthiest 10% of U.S. households, that bonanza would come to a whopping $350,000 per household. Yet according to the Census Bureau, the top 10% of households has an average income of $200,000 or so. The implied bonanza is so absurd that the notion that only the rich have gained from the economic growth can be dismissed out of hand. Clearly, there is a lot of economic advancement across a broad swath of population. Dramatic changes in household composition, household size and immigration tend to obscure this reality."

It's easy for politicians and pundits to spout class warfare rhetoric to advance their cause. Closer scrutiny, along with a little critical thinking and common sense, typically expose such rhetoric to be intellectually lazy at best, and intentionally misleading at worst.

NORTH CAROLINA EDUCATION LOTTERY TO HELP FIGHT RECESSION

For Release: IMMEDIATE 

Contact: (877) 9NC-PLAY

         

EDUCATION LOTTERY TO HELP FIGHT RECESSION ANNOUNCES "INSTANT TAX REBATE" SCRATCH-OFF

RALEIGH - The North Carolina Education Lottery (NCEL) is going to help keep the economy from going into a recession. The North Carolina Education Lottery is introducing a new “INSTANT TAX REBATE” scratch-off game in conjunction with the issuing of “Tax Rebate” checks from the federal government.

The federal tax rebates in North Carolina will total billions of dollars and we need to insure that money is not wasted on frivolous spending but goes to supporting education. Since education is the ultimate economic development tool, this will spur the economy in North Carolina and help keep the country out of a recession.

This instant scratch-off ticket will have over $350 million in total cash prizes, which is a spectacular average of over $100 prize payout per household!

If we can convince half of the households in North Carolina to spend half their federal tax rebate on this game we estimate that the NCEL will gross over $1 billion. If the federal government would do the right thing and give a rebate to poor people and lower income families, who don't pay taxes, it would make our job easier as they are our target demographic (we also target mathematical illiterates and people not in full possession of their senses). If this would happen the Sky's the limit for potential sales!

The $300 million “INSTANT TAX REBATE” game is a $10 ticket with top prizes of $10 million. Players who scratch their way to win the $10 million prizes will be paid in installments of $500,000 over 20 years. There are also over 500,000 prizes between $50 and $500 and over 5,000 prizes from $1,000 to $50,000.

These tickets will be available in stores and check cashing centers when government tax rebate checks start arriving in lottery ticket consumers mailboxes!

# # #

                              THIS IS A PARODY!

Subsidized Poverty and "the Children"

Progressive Pulse has another "children" post that, I suppose, is designed to divine more crocodile tears for North Carolinia's poor population. Gregg Flynn concludes - based on the recent poverty stats taken by the Census Bureau (see our statewide map here) - that:

Statistics can be obfuscating but what is clear is that in North Carolina at least 287,894 school age children plus 138,820 children under 5  live in poverty and that the distribution of these children and the resources to meet their needs are uneven across the state.

Hmmm. Statistics aren't the only thing that can be obfuscating, apparently.

And how about the fact that poverty statistics don't really determine the "distribution...[of] resources to meet their needs" at all. In other words, you may live below the poverty line - which means your income is low enough to meet the poverty criterion - but that is not indicative of how much you may or may not be receiving in non-monetary government benefits including food stamps, subsidized housing, Medicare, Medicaid, free or reduced lunch, etc. etc. (all that stuff that helps children "meet their needs"). These data do not include localized cost-of-living adjustments, either. For all we know, total benefits per capita could be higher for these counties than in years past.

Indeed, after the Welfare Reform Act of 1996, the poverty rate went down (again, measured mostly by income) -- because more people had incentives to work rather than stay on government benefits. According to the Manhattan Institute:

Child poverty showed a rapid decline in the late 1990s. The decline was especially dramatic for black and Hispanic children, among whom the poverty rate dropped by close to one-third between 1993 and 2002, and did not increase significantly during the recession years of 2001–2002.

The fact that the decline in child poverty overlapped large national economic gains in the mid- to late 1990s has been used by welfare reform critics to bolster the argument that declines in child poverty after 1996 were due to broader economic factors and not welfare reform. However, this criticism does not explain why child poverty declined in such a sustained and dramatic fashion, since it had been impervious to improvements in the economy for more than the two decades prior to the mid-1990s.

What's worse about this latest "children" post is that Flynn doesn't address the very grave possibility that those government benefits that meet the needs of the poor could be the very perverse incentives dragging down the poverty averages. As entitlements creep upward, people have less incentive to earn more -- i.e. to get more income (which is how poverty is measured) -- because they'll lose those overall benefits. This is called a wage trap. And believe me, benefits for the poor have been creeping back up since 1996 -- particularly in N.C. So we should expect the poverty rate also to go up, too, due to the wage trap. It's a vicious circle.

(I don't suppose that Flynn would like to hear that poverty is also calculated not only by income, but by the number of people per family household -- a factor that would change rapidly due to the continued influx of illegal immigrants, who tend to live many to a family and who tend also to be poor.)

I don't expect the people over at the Pulse to burden themselves with tough, counterintuitive economic concepts like wage traps. I expect them to emote, to demand radical redistributions of wealth, and to put up sad, grainy, black-and-white pics of children from the dustbowl era. But I do expect RCC readers to know better when they run across such fallacies ad misericordiam and uncontextualized numbers.

-Max Borders

Free Markets Save Lives

This article reminds us of why free markets are so important.

"Wealthy populations live longer and are healthier than poor populations because higher incomes open the door to literally thousands of opportunities to improve health and safety that are not available to the poor"

At the extreme end of the spectrum is Sub-Saharan Africa, a region plagued by poverty, famine, disease and very short life spans.

"Most Sub-Saharan Africans do not have access to childhood vaccines, bed nets or clean water.  This lack of resources reduces life expectancy to a level far below that of rich countries.  Princeton University economist Angus Deaton says poverty is the leading cause of mortality in developing countries."

The best remedy for this tragic situation is a healthy dose of economic growth and wealth creation.

"World Bank economist Lant Pritchett and former U.S. Treasury Secretary Lawrence H. Summers studied the relationship between income and health worldwide and found that infant mortality falls as income rises.  According to their research, a developing country would avert one death per 1,000 live births if the average income were raised 1 percent.  In 2005, for example, over 30,000 infant deaths would have been prevented in Sub-Saharan Africa if incomes were raised by about $5 per person per year."

Of course, the best way to spur such life-saving economic growth is not via government intervention and large welfare programs as the left would have you believe, but from greater economic liberty.

"Not one Sub-Saharan African country ranks in the top quartile of economically free countries.  Decades of political corruption, government-controlled monopolies, high inflation, excessive regulation of businesses, and stringent import and export restrictions have led to Africa’s current economic state.  Adopting economically freer policies would increase the rate of economic growth in African countries and thus raise incomes."

Even the redistributionists at the World Bank have begun to recognize this.

"Huge developmental gains would be possible for some of the world’s poorest countries if their governments reform restrictive tax policies that make it impossible for ordinary firms to operate legally, a World Bank report argues today."

Unfortunately, it is hard to be optimistic about a region where the nations tax their businesses at twice the rate of profit.

Progressive "Realism"

Here we have a leftish type at NC Policy Watch demanding more aid so that low income can afford to pay for heating -- what with energy being so costly.

Here we have a leftish type at NC Policy Watch writing in support of measures that will increase energy rates.

Just like with affordable housing and open space, it's another example of how environmental silliness works at odds with concern for the poor. That's the eat-cake/have-cake logic of the left. I guess we MFs just don't understand all the nuances of the Rube Goldberg-style government they're trying to build.
-Max Borders

Freedom vs. Compulsion

Sheldon Richman has this outstanding piece today regarding the concept of freedom vs. compulsion. In it he criticizes comments made by former Bush speechwriter and policy adviser Micheal Gerson. Many of his points will be hard for so-called progressives to swallow (and some of you "compassionate conservatives").

To the point of how best to allocate resources in a society and enable it to achieve the greatest "common good:"

"Some people may find it an unpleasant choice, but choose they must: freedom or compulsion? There is no third way."

Richman then contrasts the very visible hand of government to the role of the "invisible hand" first espoused by Adam Smith and followed up by economists such as Mises and Hayek:

"These men did nothing if not demonstrate that the self-regulating market process yields general social benefits, the common good if you will, without having an overarching goal or intention. When governments have tried to impose a goal on the political-economic system, the effort has always come to grief.

The historical record backs up the economists. Although the market has never been allowed to operate free of mercantilist privilege and other sorts of government intervention, it would be hard to dispute that societies which became substantially market-oriented achieved a general prosperity unprecedented in history."

Richman concludes with this masterfully written critique of Gerson - but you could also substitute "progressives" or "modern-day liberals" - that counters the mindset of so many that it is up to government to "do something" to help those in need:

"Gerson doesn't seem to realize that he can have it both ways. He can have free markets with full individual freedom and compassion toward those who suffer. If Gerson thinks free people would be incapable of caring for those who can't care for themselves -- or unwilling to -- that says more about him than it does about us. He should stop using his low opinion of mankind as an excuse to violate our freedom."

Poverty and the Public Schools

Hood gives the N&O and Comrade Schofield a lesson in statistics and common sense on the issue of schoolchildren and poverty (after bad reporting by the N&O Schofield stumbles clumsily into this post).

-Max Borders

Coverage Isn't Out of Reach

So writes Max in his op-ed than runs in today's News & Observer about the SCHIP expansion bill.

Read it here.

You Made Your Bed

Hooker Odom doesn't like that private facilities prostitute themselves to get money from the public coffers (no pun) and that their executives make big bucks. But such is the nature of a system in which there is no check on facilities that get to ding the state willy-nilly every time they "serve" a poor person at the taxpayers' expense. Can you say "block grant"?
-Max Borders

Save the Children: Promote Globalization & Capitalism

Rich Lowry at National Review writes about the good news just released by a United Nations Children's Fund report, which finds that deaths of young children worldwide have hit an all-time low. This coincides with research by the World Bank "reporting global poverty rates had fallen as part of an extraordinary worldwide economic boom."

According to the World Bank, developing countries have averaged 3.9 percent growth since 2000, contributing “to rapidly falling poverty rates in all developing regions over the past few years.” In 1990, 1.25 billion people lived on less than $1 a day. In 2004, less than a billion did, even though world population increased 20 percent in the interim.

Furthermore:

China and India have led the way in growth, with the fastest- and second-fastest-growing major economies in the world. Thus, what have been sinks of human misery on a vast scale for centuries are becoming more livable. China accounted for almost all the recent drop in people living on less than $1 a day, experiencing a decline of 300 million since 1990. India has seen its mortality rate for children under the age of 5 decline from 123 per 1,000 in 1990 to 74 in 2005.

Basically, economic growth can save millions of lives. Of course, India and China have liberalized their economy over the last couple of decades - leading to such tremendous advances. The best way for people to "lift themselves out of poverty" is not more government programs, but an infusion of capitalism. According to the World Bank report, such economic growth in emerging countries can be attributed to:

“further integration into world markets, better functioning internal markets and rising demand for many commodities.”

Take note all you anti-globalists and anti-capitalists: the cure to international poverty is the very medicine you despise.

Healthcare: Coletti Spells it Out for the Demogogues

This is an excellent piece on some of the issues in healthcare reform. Those who blindly blame greedy corporations for our healthcare woes never look to the actual source of all the pathologies -- the government.

Coletti doesn't go as far as to accuse the left of trying to destroy healthcare markets with regulation. For the record, I do. Lemme borrow from an upcoming piece I wrote:

I believe the majority party actually knows about these pathologies. In fact, I believe they are making concerted efforts at the state and federal levels to exacerbate these problems in the name of consumer protection and insuring children. Whether through expanding children’s Medicaid into the middle class (which drives up premiums), increasing the number of state mandates (which drives up premiums), or limiting competition through keeping the tax code intact (which drives up premiums), the party in power is using regulation to crank down the government vise in anticipation of a final outcry from Americans who are tired of paying these rates and who have no idea why it’s happening. And with that outcry, they will then be able to sell America a single-payer system like Castro’s.

Charlotte Observer Fawns Over Dubious Study

The Charlotte Observer crafts another pitch for government growth and redistribution around this highly dubious study from the Annie E. Casey Foundation. Among the more dubious bits the Observer gloms onto?

"But more commitment of resources and attention are needed to address dire problems afflicting the state's children. More infants die before their first birthday in North Carolina than in almost any other state -- nearly 9 of every 1,000 births. The state ranks 46th. North Carolina has a higher percentage of low-birth weight babies than the nationwide average." -Max Borders

Hmmm. How do we know that low birth-weight isn't a result of increased heroics in delivering and saving premies? That's a good thing right? How do we know that this stat has to do with poverty? And if it does, could low birthweight be a result of drug dependence and not tie directly to poverty?  This article suggests that these problems have to do with how much money government spends. But there are states in the study who spend far less per capita on 'anti-poverty' measures and yet score better than NC on these metrics.

Here, the Observer lauds the socialism of Emperor Easley:

"Such legislation and hard work could bear fruit on another front soon. Last week, Gov. Mike Easley signed into law a new state budget that will make affordable health insurance available to nearly 40,000 uninsured children. The N.C. Kid's Care program broadens the income level to help children in families between 200 percent and 300 percent of the poverty line. Help is based on need, and families participate in paying the costs through deductibles, co-payments and premiums subsidized on a sliding scale." 

Subsidizing socialized medicine for the middle class. That's brilliant. I suggest here that many poor people could afford healthcare for their kids without more socialized Medicine. What Kids' Care does is make healthcare more expensive for everyone as younger, healthier people are removed from the private market. -Max Borders

Minimum Wage Blues

Congress, in exchange for caving on war funding, must have struck a deal to get in their economically unsound minimum wage legislation that is sure to hit to small businesses particularly hard. I have argued elsewhere that this type of intervention in the economy is a bad idea for a number of reasons. Congressional lefties clearly don't understand the nuances of labor supply and demand -- clouded as they are by meaningless concepts such as "living wage." Alas, here we have another blow against the margins of businesses already plagued by the price of healthcare they've been saddled with the responsibility for providing due to our skewed tax code. Sigh. No joy watching these government circuses in our state and in Washington trying to fix and plan our economy like 'intelligent designers.'

Expanding SCHIP

The Democratically dominated N.C. General Assembly is keen to expand the SCHIP part of Medicaid (families with children).

A good compromise may be found here.

Speaking of Poverty

Food for thought for our 'progressive' friends, from Arnold Kling. The moral? Unrestricted capitalism is by far the best poverty alleviation tool. This suggests to me that the term 'progressive' is being woefully misapplied these days.