Thursday, February 26, 2009

The Folly of "Community Service"

During his address to Congress this week, President Obama indicated that in exchange for a year of community service he would have the federal government provide financial assistance to people struggling to pay for college or other educational choices.

What nonsense.

First, this form of social engineering - government picking winners and losers based on government's judgment on what is good for America - is economically inefficient and morally lacking in legitimacy.

Let's say you are a student majoring in chemical engineering with a desire to leave school in four years and then pursue a paying job making environmentally-friendly fertilizers for some large corporation. You have decided - pursuant to your self-interest - that you would be able to best serve your fellowman in this fashion. Yet, to President Obama, this service - that might ultimately lead to less pollution from farm runoff - is not a form of "community service" because you got paid and your company is a profit-seeker.

To Mr. Obama, you would only qualify for greater tuition tax credits or direct taxpayer aid if you took your degree and then "volunteered" to help farmers in Alabama or Africa learn more about low-impact agriculture. By volunteering you have stepped into a morally superior (to the socialist) form of community service. One untouched by Adam Smith's treatise on self-love.

Since when did government officials become the final arbiters of what is moral or good? Why is your love of self - and money for your services - that leads to improving the lives of your fellow man a less noble pursuit than doing something for no money? Why does Mr. Obama get to say who deserves a tax break and who does not? When did government become the best judge of where engineers or accountants or hairdressers spend their time?

Community service is a wonderful thing, if pursued without the arm of government using the tax code to reward or punish. Community service can also come with a paycheck and profits.

Perhaps President Obama would serve our communities best by allocating his time to things that government is supposed to do rather than lecturing us on what we should be doing.

Tuesday, February 24, 2009

When Journalists are bad for the economy...

Earlier this week, NBC News political reporter, Chuck Todd appeared to discuss President Obama's budget - and his plans to raise the top income tax rate from 35% to 39.6%. Mr. Todd stated that - as a matter of fact - that this tax increase would lead to greater revenue and help reduce the deficit.

There are very few major universities that require or even encourage journalism majors to take an economics class. This is a shameful oversight that has helped spawn an entire wave of economic illiteracy that keeps viewers and readers in the dark when it comes to what economic policies work.

Mr. Todd would be well served to examine the long history of cuts - and increases - in marginal income tax rates before he states that tax hikes will lead to greater tax revenues. With a bare minimum of research he would be able to see that individuals react in a dynamic fashion to changes in taxes. That is to say that we will not see the most productive Americans say, "Oh, dear, I must now send the IRS 39.6% of my earnings."

We will see those Americans respond to the negative incentives of higher marginal tax rates by altering their behavior in ways that either lead to less revenue or a slowdown in the growth of income tax collections.
This week, Orlando Sentinel business columnist, Jim Stratton claimed that the U.S. economy was suffering the worst downturn since the Great Depression. Mr. Stratton is doing a great disservice to the readers of the Sentinel by ignoring, or being ingnorant of the fact that in 1980 the U.S. endured an unemployment rate of over 10% while the rate of inflation was over 13%. This "misery index" of over 23% is far greater than today where we have an unemployment rate of 7.6% and an inflation rate that is near 0% due to the decline in the demand for most goods and services.
Our nation relies heavily on "experts" in print and on television to inform us. Some, like ABC's John Stossel do a wonderful job explaining economics. It would behoove most of the other "experts" to avoid contributing to the disease of economic illiteracy.