Richard J Grant

Published in The Tennessean , Sunday, April 24, 2011 by Richard J. Grant Most of us know what Charles Dickens meant when he wrote, "Annual income twenty pounds, annual expenditure nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pound ought and six, result misery." As individuals, we are quick to see the consequences of spending beyond our incomes. But the lesson is not so obvious when the government does the spending for us. Currently, the U.S. Government is spending about 25 percent of our Gross Domestic Product (GDP), which means that the federal government alone is spending a quarter of what we produce each year. But tax revenues won't keep up with this level of spending. Revenues have recently been below 15 percent of GDP and rarely reach 20 percent. The government is either unable or unwilling to do what is necessary to raise revenue to match its appetite for spending. Countries with higher percentages of government spending als...

A shortened version was published in The Tennessean , Sunday, April 17, 2011 The President’s speech misses the point by Richard J. Grant Last Wednesday, President Barack Obama delivered a televised speech that had been billed as a major policy statement on the budget. What listeners actually received was a campaign speech that played fast and loose with anything resembling fact but did reveal much about the Obama vision of America. The president attempted to contrast two different visions of America, his own versus one “championed by Republicans in the House of Representatives.” The latter was a reference to the Republican budget plan for Fiscal Year 2012 as presented the week before by Congressman Paul Ryan (R-WI), chairman of the Budget Committee. The Ryan plan would cut about $6 trillion (over 10 years) from the spending increases projected in the budget previously offered by the president. Even with $6 trillion of cuts, the Ryan plan would not achieve a balanced budget in 10 years....

April 7, 2011 The Ryan plan offers a serious benchmark for deficit reduction by Richard J. Grant During the entirety of 2010, Democrats held majorities in both houses of Congress. Nevertheless, they failed to pass a budget for the 2011 fiscal year. Then, earlier this year, when the newly elected Republican majority in the House of Representatives tried to remedy this by passing HR1, the Democrat-controlled Senate voted the bill down. Now we witness the spectacle of a series of continuing resolutions to keep the government funded for just a few weeks at a time, with a recurring threat of a government “shutdown.” HR1 was intended to reduce government spending closer to 2008 levels. Instead, the continuing resolutions have been bringing down spending a few billion dollars at a time. These cuts are helpful, but are a tiny percentage of the total budget, and will have a barely perceptible effect on the projected budget deficit of $1.65 trillion. With the FY2011 drama still playing out, Hous...

A shortened version was published in The Tennessean , Sunday, April 3, 2011 Speculators provide a service by Richard J. Grant French consumers import significantly more Libyan oil than do American consumers. Knowing this, many Americans believe that a disruption of Libyan oil production would not have much effect on our price of oil. It would appear that the French would bear the brunt of the sudden scarcity and the consequential price increases. That might be true in the very short term, but then what? As French consumers quickly bid up the price for remaining supplies of oil, their willingness to pay higher prices would attract supplies that might otherwise have gone to other parts of the world. That includes oil that might have come to us, whether produced in the US or abroad. A characteristic that oil shares with money is that both are fungible. This means that one...

Published in The Tennessean , Sunday, March 27, 2011 Health-care law promises more than it can deliver by Richard J. Grant William F. Buckley once asked, “Socialism has long since been discredited, but when did it get so creepy?” He was of course alluding to the term “creeping socialism,” which describes the gradual expansion of statist interventions and control over private lives and property. Historical attempts to create socialist societies have necessarily also tended toward totalitarian governance. Such governance always seems to imply the existence of a ruling elite that would decide what the rules would be and how they would be applied. Invariably, the rules were applied unevenly. The elites lived differently from the masses. When the state controls all production, then it also controls all employment. This gives a rather special meaning to the term “getting fired.” In a free society, if you can't get along with your employer, then you have the option of looking for a n...

Published in The Tennessean , Sunday, March 20, 2011 Reducing spending should be Congress' top priority by Richard J. Grant The continuing resolution just passed by Congress and signed by President Barack Obama will keep the federal government funded for another three weeks. It will also cut planned spending by $6 billion. But during the previous three weeks the national debt increased by more than $109 billion. At this rate of $6 billion every three weeks, it will take 825 weeks to reduce spending sufficiently to eliminate the deficit. That is 16 years. An increase in tax revenue will shorten the time, but if there is increased spending within entitlement programs, such as Social Security, Medicare and Medicaid, then it will take much longer. Expect entitlement spending to grow faster than revenue. House Republicans had originally proposed cutting about $100 billion, but Democrats control the Senate and seem to believe that cutting even $6 billion is too much. This means that the ...

Published in The Tennessean , Sunday, March 13, 2011 The "need" for unions isn't put into proper economic context by Richard J. Grant Some decades ago I went to work for a company that turned out to be a closed union shop. That meant that all non-management workers had to either join the union or not work for the company. The existence of a closed shop was not a manifestation of the exercise of workers’ natural rights: It was an outcome encouraged by the imposition of various labor laws upon workers and owners. The effect of these labor laws was to reduce the rights of both workers and owners while increasing the powers of those who wished to organize and lead trade unions. The effect of the closed-shop rules was not to empower individual workers but to grant monopoly powers to the union. Individual workers were denied the right to negotiate separately with the company owners. This meant that both the owners and individual workers had their individual rights to negotiate ...

Published in The Tennessean , Sunday, March 6, 2011 States press sovereignty by rejecting health reform by Richard J. Grant A law that is not enforced might as well not exist. We see this in property rights as well. An owner that fails to challenge those who use his property, whether land or trademark or any other form, over time risks losing control of that property. This is true for individuals, corporations, and sovereign states. The failure to live on or defend one's territory will result in its forfeiture to those who are willing and able to establish a presence there. The failure to enforce a law will lead people to believe that it will never be enforced and allow them eventually to forget that the law exists. In this regard, the U.S. Constitution is no different from any other law. The United States began as a decentralized federal republic within which the states retained sovereignty except for those powers specifically granted to the central government by the Constitution....

Published in The Tennessean , Sunday, February 27, 2011 Unions' real impact has been to impede progress by Richard J. Grant When consumers have a choice, they prefer to buy products that are produced by companies that are not held back by a unionized workforce. It's not that consumers inquire as to the company's relationship to a union, but they do select their purchases on the basis of lower price and higher quality. Companies that wish to please their customers will gravitate toward those jurisdictions that best allow them to do this. The purpose claimed for trade unions is to increase the wages and improve the working conditions of union members. They can never do this for every worker, but only for a few. This is because they can raise wages only by restricting the supply of labor to a particular employer; and that they can do only in the short-term. The real long-term effect of trade unions has been to jump out in front of the parade of economic progress and pretend th...

Published in The Tennessean , Sunday, February 20, 2011 Obama's promised "budget cuts" actually increase deficit by Richard J. Grant The total US national debt has now surpassed $14.1 trillion, which is about 95 percent of annual US economic output. The debt seems to be one of the few things that President Barack Obama is able to make grow, so he is going at it with gusto. His recently proposed budget calls for record spending and is projected to produce a deficit of more than $1.6 trillion. That will increase the total debt by more than 10 percent per year. Expect it to crack $15 trillion just in time for Labor Day. Before the budget was released, we were told that the “tough choices” had been made and to expect significant spending cuts. The storytellers wanted us to believe that the president had accepted fiscal conservatism, had moved to the center, and was now a well-triangulated moderate. Then the real news came out: The proposed budget would be greater than $3.7 tr...

Published in The Tennessean , Sunday, February 13, 2011 Social Security system a trap foisted on public by Richard J. Grant Among politicians, there is an old saying that “perception is reality.” This actually applies to any form of human action. People act upon what they believe to be true, which is not necessarily the same as what really is true. This does not protect them from unintended consequences. But from a politician's perspective, what counts is what voters believe at the time that they vote. This helps explain why government has a tendency to grow. Political leaders and administrators, whether elected or unelected, find it easier to gain the support of those who come to depend on them for income or protection. To hold power, and whatever personal satisfaction that brings, a politician must compete not only with other politicians, but also with the empowerment that each individual finds through personal liberty and a rich array of private alternatives in the pursuit of ha...

Published in The Tennessean , Sunday, February 6, 2011 Social Security deepens nation's deficit by Richard J. Grant In December 2010 without a Congressional tax compromise, tax rates would have risen significantly for incomes, dividends, and especially capital gains. Those who wanted these tax rates to rise cited the need for more tax revenue and saw foregone taxes as a “cost to government.” They rejected the warnings of “supply-side” economists who suggested that increased marginal tax rates would discourage economic activity and yield little, if any, new tax revenue. But part of their compromise was to reduce the employee portion of FICA tax payments by two percentage points for one year. The tax compromise also included an extension of unemployment benefits and increased spending on an array of special-interest projects. At a time of record-high budget deficits, support for the FICA rate reduction must have been based on political considerations, not genuine economic concerns. T...

Published in The Tennessean , Sunday, January 30, 2011 Innovation versus the Sputnik fallacy by Richard J. Grant In Lake Wobegon, are all the subsidies above average? Does everyone receive more in payments from the government than they pay in taxes? Lake Wobegon's above-average students would recognize immediately that it is impossible to receive such across-the-board subsidies from Lake Wobegon's government alone. The extra resources would necessarily come from outsiders, perhaps from a neighboring county. No doubt President Barack Obama had visions of America as one big Lake Wobegon when he warned us that, “This is our generation's Sputnik moment.” He fears that we might be falling behind in scientific research, noting that China has become “the home to the world's largest solar research facility and the world's fastest computer.” His solution is to subsidize innovation, whatever he imagines that to be. It is of course quite likely, if we send more research dollar...

Published in The Tennessean , Sunday, January 23, 2011 Healthy government protects citizens, their property by Richard J. Grant With the advent of personal computers, we heard talk of something called the “information society.” It is certainly true that this new technology enabled us to save, process, and communicate certain types of information more cheaply and efficiently than ever before. But a bigger truth is that we have always lived in an information society. Thousands of years ago, the acquisition and interpretation of information was no less important to the survival of our ancestors than it is to ours today. Knowledge of how to find food and to evade enemies and other threats has always been important. We have also benefited from the improvement and use of tools and the expanded production of consumer goods that this made possible. We see the still-evolving Internet as a great and complex innovation, which it is. A spinoff from Defense Department research, it took on a life of...

Published in The Tennessean , Sunday, January 16, 2011 Palin's character carries her through adversity by Richard J. Grant In autumn 2008, just before the elections, some colleagues asked whether or not I considered Sarah Palin qualified to be president. My reply was, “She doesn't have to be. She just has to be better qualified than Obama and Biden.” Was she better qualified? Two years later, a poll by Rasmussen Reports found that “52 percent of likely U.S. voters say their own views are closer to Sarah Palin’s than they are to President Obama’s.” This was reflected in the 2010 election results when voters rejected the president's big-government agenda by severely reducing his congressional support. Though few admit it, Sarah Palin has shaken up both parties. Character and ideas have consequences. It has not been lost on the political professionals that, after two years of observation, the American people show a greater affinity to the constitutional attitude of the hockey ...

Published in The Tennessean , Sunday, January 9, 2011 Charities should reconsider their support for the estate tax by Richard J. Grant After the recent tax debate, Congress chose to keep most of the major tax rates where they were in 2010. One rate that will be higher is the estate tax. But a more interesting fact is the source of some support for the estate tax. It is understandable that a benefactor and possible heirs would oppose the existence of an estate tax. It reduces their choices. Any after-tax uses to which they could put their wealth would also likely be available in the absence of the tax. A non-taxed estate could be bequeathed to any heir, which could include any relative, friend, organization, charity, or even a government treasury. It doesn't work the other way around. The estate tax takes from the estate a portion of any wealth that is not allocated to governmentally approved uses. Contributions to any organization that the government deems to be a “charity” would b...

Published in The Tennessean , Sunday, January 2, 2011 New year means time to repeal ‘euphemisms’ by Richard J. Grant At the beginning of each New Year, we like to believe that we can have a fresh start. And sometimes we really need one. The trouble with fresh starts is that they don't start from where we would like to be, they start from “here.” This year we start from where the 111th Congress left off. We must recover from two years of overdosing on a witches’ brew of one part Obama administration with two pinches of Democratic majorities. This year begins with one less pinch. Historians might one day characterize this political brew as “death by a thousand euphemisms.” The administration began with the “American Recovery and Reinvestment Act of 2009.” This particular act was an attempt to take credit for what would have happened had the act not been passed. As we often say about justice, recovery delayed is recovery denied. It is a trait of progressives to feel satisfied with the...

Published in The Tennessean , Sunday, December 19, 2010 No matter what Fed does, interest rates set to rise by Richard J. Grant When speaking of national budget deficits, one of the magic numbers that has somehow emerged as a benchmark is 3 percent of gross domestic product (GDP). The International Monetary Fund often recommends this benchmark; and the European Union requires current and prospective members to keep their deficits below 3 percent. Although 3 percent is way too high, let us not quibble. For the last couple of years the national budget deficit in the U.S. has been running around 10 percent. If we keep overspending at this rate, our national debt will increase by the size of our GDP every seven or eight years. Given that the total public debt outstanding is now more than 90 percent of GDP, the debt itself will double sooner. We might console ourselves with the fact that the government owes one third of its debt to itself. Government agencies (such as the Social Security Tr...

Published in The Tennessean , Sunday, December 12, 2010 We should cut, not increase, top income tax rates by Richard J. Grant Just as there seems to be a universal speed limit, the speed of light, there seems also to be a limit to the proportion of economic output that can be turned into tax revenue. With apologies to Einstein, if we were to accelerate a rocket, it would seem to shorten and grow heavier as we approached the speed of light. We would have to inject increasing amounts of energy for each mile per second that we eke out. Since the middle of the 20th century, the U.S. government has applied a wide range of top marginal income-tax rates, from 92 percent down to 28 percent. But so far, the level of tax revenue as a proportion of Gross Domestic Product (GDP) has not managed to break above the 20-percent level (though it did test that level at the peak of the tech boom). This is a historical observation, sometimes called “Hauser's Law,” after Kurt Hauser of the Hoover Instit...

Published in The Tennessean , Sunday, December 5, 2010 Lame ducks should not let tax rates rise by Richard J. Grant They say that a wounded animal is a dangerous animal. This would seem to apply also to a lame duck, as exemplified in our present lame-duck liberal Congress. Despite the recent electoral repudiation of big-government liberalism, Democrats continue to grasp for any fin du régime advantage that they might pull out in their last days as the majority. They continue to push the canard that their intended January tax-rate increases will affect only “the rich.” When they say “the rich” they really mean “high income earners,” but the needs of rabble-rousing demagogues will always trump language accuracy. It is difficult to find real economists who would support tax-rate increases at a time of weak economic recovery and high unemployment. Even those economists who believe that such tax-rate increases might increase tax revenue will, nevertheless, recognize the danger of dampening ...