Blog Archives

A tribute to Michael Ramirez cartoons

Here are some of my favourites:

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The golden rules

Dan Mitchell has come up with simple but effective rules which should be adhered to by every single nation on this planet.

Firstly, his golden rule:

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Good fiscal policy exists when the private sector grows faster than the public sector, while fiscal ruin is inevitable if government spending grows faster than the productive part of the economy.

Secondly, Mitchell’s law:

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This term, which I am modestly calling Mitchell’s Law, describes what happens when government intervention (Fannie and Freddie, for example, or Medicare and Medicaid) causes problems in a particular market (a housing bubble or a third-party payer crisis), which leads the politicians to impose more misguided intervention (bailouts or Obamacare).

Falling out of the global race

I have been reading updates of David Cameron’s visit to China over the past few days and I can’t help thinking that the whole trip should never have happened in the first place.

Firstly, what is the point in the prime minister visiting a country that we can’t sign a free trade deal with (Our ties to the EU mean we are no longer able to control critical and important things such as this). Instead he has to ask them to hurry up their planned free trade deal with the EU instead which has caused unrest among EU officials here and here.

Secondly, on his trip he wanted to prove that the UK is still part of the global race. To take part in the global race you have to structure your economy to ensure that it doesn’t have a trade deficit, and that it is competitive on tax rates to attract people and businesses over to the UK. Yet he is another prime minister on a long list of backbone-less politicians. This is what the telegraph had to say about the current government:

If anyone is to make the case for difficult supply side reform, it ought to be Mr Cameron, with responsibility delegated to individual departments, rather than dictated by the Treasury as part of some Soviet-style five-year plan. In any case, beyond lip service, we’ve so far seen precious little of it. The Coalition has dabbled in education, planning, welfare and tax reform, but none of it has been transformational, while on energy policy, the Government seems to have steamed off in the other direction entirely.

What about red tape?

Any exploration of supply-side reform starts with the well-tested notion that the best thing government can do for business and the economy is simply to stay out of the way. Michael Fallon, minister for business and enterprise, has been heroically leading the unglamorous charge against red tape, but new obligations keep mounting, most recently with the start of pension auto enrolment, adding a further 3pc to labour costs.

Public spending?

Sure enough, public spending is slowly – very slowly – being brought back into line with revenues, but too much of the burden of this adjustment has been put on to rising taxes and not enough on a smaller state. Forging ahead with HS2 in the belief this will expand the economy’s potential flies in the face of the basic principle, backed by much economic research, that money ploughed back into the economy through tax cuts is likely to be far more helpful to growth than tax-funded government investment. Examples of public policy that promote self-reliance, as opposed to further discouraging it, remain all too thin on the ground.

The UK’s attitude for growth after world war two was “export or die” and “We must sell the things we like to buy the things we need”. Now it is “cut little bits here and there until growth resumes, then spend more”.

Nothing is solved by government spending, full stop.

Don’t laff, this is serious!

The laffer curve. The libertarians most powerful tool. It explains how increasing tax rates by too much can lead to reduced revenue and that decreasing tax rates can promote growth and prosperity.

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Ronald Reagan proved this can work:

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The table above, which is based on data from the IRS’s Statistics of Income, shows what happened to tax collections from upper-income taxpayers between 1980 and 1988. Supply siders can be criticized for many things, especially their apparent disregard for the importance of limiting the size of government, but the IRS figures clearly show that lower tax rates were followed by more rich people, more taxable income, and more tax revenue. For those keeping score at home, that’s a perfect batting average for supply-side economics. – Dan Mitchell

The majority of tax rate hikes arrive via class-warfare policies, which aim to ‘tax the rich and give to the poor’. However, as I explained here, the geese that lay the golden eggs can fly accross the border.

The last defender of common sense

Its very sad to see modern UK politicians sleepwalking towards socialism. Nowadays, it doesn’t matter what party they are from, they are all leaning the same way. No one seems to have the guts anymore to stand up for capitalism, the very thing that brings wealth and prosperity to a nation. The last time a politician stood and defended these values was 1990.

Reaganomics vs obamanomics

Again, another great article from Dan Mitchell (CATO):

Both President Reagan and President Obama had to deal with serious economic dislocation upon taking office.

But they used radically different approaches to deal with the problems they inherited. Reagan sought to reduce the burden of government, whereas Obama viewed government as an engine of growth.

And here is the proof:

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Government shutdown, business as usual

Government shutdown, business as usual

Great obama parody – the welfare state

Great obama parody - the welfare state

Keynesian economics…with sharks!

Keynesian economics...with sharks!

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