How would you feel if the 401(k) savers were 'the rich', and 'the UAW members' the poor?

Would you want Robin Hood to come along and 'fix' things?

No, me neither. We should provide equal opportunities to be responsible, and then fight the temptation to reward/incent/subsidize irresponsibility.

UPDATE: Mark Perry and Art Laffer asking similar questions.

Don't get sick in NJ (unless Jay Webber succeeds)

The average national cost for a family health plan is $5,799, according to America's Health Insurance Plans, but in New Jersey that same plan costs $10,398 on average. The state's politicians have driven up these costs by forcing insurers to provide gold-plated coverage – even for such voluntary medical services as in vitro fertilization. New Jersey also follows New York and Massachusetts – two other high-cost states – in requiring so-called "guaranteed issue." That allows New Jersey residents to avoid buying health insurance until they get sick, which means they can avoid paying premiums until they need someone to pick up the bill.

This one-policy-fits-all system tends to cause the young and healthy to drop insurance, which only raises the cost of insurance for the sick, which in turn makes coverage unaffordable for ever more families. It's no accident that about 1.2 million people – one of every eight residents – is uninsured in the state.

Under Mr. Webber's choice proposal, New Jersey residents could buy policies chartered in more enlightened states. For example, a healthy 25-year-old male could buy a basic health plan in Kentucky that now sells for $960 a year, about one-sixth of the $5,880 it would cost him in New Jersey. Residents of Pennsylvania pay health premiums that are one-half to one-third as high as do Garden State policy-holders. A new study by the National Center for Policy Analysis estimates that the availability of lower cost plans would reduce by 25% the number of uninsured.

Opponents of interstate insurance say families would be pushed into bare-bones health plans. Not so. Families could still buy the more extensive coverage, but those with modest incomes would have options other than going uninsured. The goal of public policy shouldn't be to cover every medical procedure or doctor's visit, but to prevent families from catastrophic expenses due to a health problem that is no fault of their own.

New Jersey is turning into a microcosm of the national debate on health care. Democrats in Trenton are rallying behind a plan to require that every uninsured individual in New Jersey purchase health insurance from a new state-administered program. So a state that is already so broke that its politicians are contemplating mortgaging its highways might now add a $1.7 billion health subsidy.

The Webber proposal offers lower costs and more choices for consumers, while the Democratic plan mandates public coverage and no choice, while putting a new burden on taxpayers. This is the kind of debate the country should have this election year.

The Willie Sutton Theory

from Russell Roberts:

Those of us who favor smaller government tend to think of Milton Friedman's observation that you spend your own money on yourself pretty carefully. But you're pretty careless when you spend other people's money on other people. So even if politicians are motivated to correct market imperfections, they will tend to do it poorly. But in the Willie Sutton theory, politicians are really spending other people's money to benefit themselves--using that money to buy love, attention, campaign contributions and votes.

Hauser's Law

No matter what the tax rates have been, in postwar America tax revenues have remained at about 19.5% of GDP.

David Ranson observes:

What happens if we instead raise tax rates? Economists of all persuasions accept that a tax rate hike will reduce GDP, in which case Hauser's Law says it will also lower tax revenue. That's a highly inconvenient truth for redistributive tax policy, and it flies in the face of deeply felt beliefs about social justice. It would surely be unpopular today with those presidential candidates who plan to raise tax rates on the rich – if they knew about it.

Although Hauser's Law sounds like a restatement of the Laffer Curve (and Mr. Hauser did cite Arthur Laffer in his original article), it has independent validity. Because Mr. Laffer's curve is a theoretical insight, theoreticians find it easy to quibble with. Test cases, where the economy responds to a tax change, always lend themselves to many alternative explanations. Conventional economists, despite immense publicity, have yet to swallow the Laffer Curve. When it is mentioned at all by critics, it is often as an object of scorn.

Because Mr. Hauser's horizontal straight line is a simple fact, it is ultimately far more compelling. It also presents a major opportunity. It seems likely that the tax system could maintain a 19.5% yield with a top bracket even lower than 35%.

What makes Hauser's Law work? For supply-siders there is no mystery. As Mr. Hauser said: "Raising taxes encourages taxpayers to shift, hide and underreport income. . . . Higher taxes reduce the incentives to work, produce, invest and save, thereby dampening overall economic activity and job creation."

Putting it a different way, capital migrates away from regimes in which it is treated harshly, and toward regimes in which it is free to be invested profitably and safely. In this regard, the capital controlled by our richest citizens is especially tax-intolerant.

The economics of taxation will be moribund until economists accept and explain Hauser's Law. For progress to be made, they will have to face up to it, reconcile it with other facts, and incorporate it within the body of accepted knowledge. And if this requires overturning existing doctrine, then so be it.

Beggar thy neighbor (of carbon emission)

States and cities like California that haven't met the clean air guidelines have been losing factories and new businesses to places that can. So one way for greens and their political allies to create a "level playing field" is to make the clean air standards so unachievable that virtually all U.S. cities can't comply. It's a classic beggar-thy-neighbor political strategy.

And it punishes all of those cities that worked hard over the years to reach attainment, most of them far less affluent than Mr. Waxman's tony environs. That's the real story behind the phony ozone outrage he is staging on Tuesday. The Congressman from Beverly Hills is all for cleaning up the air – except in his own backyard.

Quotes of the day

A fine is a tax for doing wrong. A tax is a fine for doing well.--anon

We disapprove of state education. Then the socialists say that we are opposed to any education. We object to a state religion. Then the socialists say that we want no religion at all. We object to a state-enforced equality. Then they say that we are against equality. And so on, and so on. It is as if the socialists were to accuse us of not wanting persons to eat because we do not want the state to raise grain.--Frédéric Bastiat

Much of "journalism" these days seems to involve deciding what we shouldn't be told.--Glenn Reynolds

President Bush demonstrates leadership

with his threatened veto of the Farm Bill.

A post from yesterday, entitled "The Ridiculous Farm Bill".

The Ridiculous Farm Bill

taken down by Posner and Becker.

Taken down previously here, here, and here.

Quotes of the day

Liquidity is not a virtue in and of itself unless it produces a benefit to the real economy.--Yves Smith

Of course, I agree with Yves, but then I would replace "Liquidity" with "Government" and agree even more. Besides protecting individual rights and property, I think government should be tiny to non-existent. The sin of pouring liquidity into the economy in the short-term is miniscule compared with the distortionary subsidization and the unconstitutional regulation of markets over the past century.

Life sends the message, "I'd better not be poor. I'd better get rich. I'd better make more money than other people." Meanwhile, politics sends us the message, "Some people make more money than others. Some are rich while others are poor. We'd better close that 'income disparity gap.' It's not fair!"

Well, I am here to advocate for unfairness. I've got a 10-year-old at home. She's always saying, "That's not fair." When she says this, I say, "Honey, you're cute. That's not fair. Your family is pretty well off. That's not fair. You were born in America. That's not fair. Darling, you had better pray to God that things don't start getting fair for you." What we need is more income, even if it means a bigger income disparity gap.

Using politics to create fairness is a sin. Observe the Tenth Commandment. The first nine commandments concern theological principles and social law: Thou shalt not make graven images, steal, kill, et cetera. Fair enough. But then there's the tenth: "Thou shalt not covet thy neighbor's house. Thou shalt not covet thy neighbor's wife, nor his manservant, nor his maidservant, nor his ox, nor his ass, nor anything that is thy neighbor's."--P.J. O'Rourke (via Don Boudreaux)

And finally:

That's the spirit of America, as John Adams never quite said: may I advocate classical-liberal limited government, so that my son may advocate anarcho-capitalism, and that my grandson may plan to build new artificial countries in the ocean.--Brian Doherty, via Bryan Caplan

Quote of the day

"Need" now means wanting someone else's money. "Greed" means wanting to keep your own. "Compassion" is when a politician arranges the transfer.--Joseph Sobran, via Greg Mankiw

McCain understands that subsidies are bad, better than Obama does

I made this observation about the candidates' respective constitutional understanding here.

But when it comes to ethanol subsidation (which can increase death via higher global warming than gasoline, plus starvation due to crop diversions to ethanol away from feeding people), McCain looks like the better:

David Brooks reports:

In 2000, McCain ran for president and reiterated his longstanding opposition to ethanol subsidies. Though it crippled his chances in Iowa, he argued that ethanol was a wasteful giveaway. A recent study in the journal Science has shown that when you take all impacts into consideration, ethanol consumption increases greenhouse gas emissions compared with regular gasoline. Unlike, say, Barack Obama, McCain still opposes ethanol subsidies.

UPDATE: Megan McArdle nails it on Obama's economic advisors:

The differences between Obama's team and McCain are also stark, but in a different way: his advisors are more technocrat than Ideologue.

If Obama's team has a fault, it is that they spend far too much time saying "Don't listen to him--listen to us!"