Richard J Grant

Published in The Tennessean , Sunday, August 19, 2012 and Forbes with archives by Richard J. Grant President Barack Obama is apparently something of a contrarian investor: He likes to invest against the market consensus. Unfortunately for us, however, he tends to bring a somewhat regal attitude to his work and, when “investing” our money, has exhibited a reverse Midas touch. In this, he has already distinguished himself from his chief rival for the presidency, Gov. Mitt Romney. Perhaps it is not a fair comparison. Government is not a business and cannot be run as if it were. But what the president needs to ...keep reading Richard J. Grant is a Professor of Finance and Economics at Lipscomb University and a Senior Fellow at the Beacon Center of Tennessee . His column appears on Sundays. E-mail messages received at: rjg@richardjgrant.com Follow me on Twitter @RichardJGrant1 Copyright © Richard J Grant 2012

Published in The Tennessean , Sunday, August 12, 2012 and Forbes with archives . by Richard J. Grant You don't have to pay federal income tax. There are several ways legally to avoid paying, but the catch is that they all entail doing things differently than you would have in the absence of such a tax. When, during an election campaign, a candidate is accused of not having paid income taxes during some past period, the only relevant question is whether ... keep reading Richard J. Grant is a Professor of Finance and Economics at Lipscomb University and a Senior Fellow at the Beacon Center of Tennessee . His column appears on Sundays. E-mail messages received at: rjg@richardjgrant.com Follow me on Twitter @RichardJGrant1 Copyright © Richard J Grant 2012

Published in The Tennessean , Sunday, August 5, 2012 and Forbes with archives . by Richard J. Grant President Barack Obama’s recent “you didn’t build that” monologue continues to trouble many people, and for good reason. Although the obvious political purpose of the speech was to diminish the past achievements of his electoral rival, Gov. Mitt Romney, the president managed to insult and diminish not only the achievements, but also the aspirations, of millions of other Americans. But there was something missing from the president’s remarks. ... keep reading  Richard J. Grant is a Professor of Finance and Economics at Lipscomb University and a Senior Fellow at the Beacon Center of Tennessee . His column appears on Sundays. E-mail messages received at: rjg@richardjgrant.com Follow me on Twitter @RichardJGrant1 Copyright © Richard J Grant 2012

Published in The Tennessean , Sunday, July 29, 2012 and Forbes with archives . by Richard J. Grant It is often said in philosophy-of-science discussions that “if it explains everything, it explains nothing.” This reminds us of the most-used word to explain everything economic: “greed.” As British Chancellor of the Exchequer George Osborne described allegations of interest-rate index manipulation, “Through 2005, 2006 and early 2007 we see evidence of systematic greed at the expense of financial integrity and stability.” We note in passing that the dates mentioned are conveniently before the current chancellor assumed office in 2010, but we are still waiting for any solid evidence that whatever actions the bankers took to manipulate the London Interbank Offered Rate (LIBOR) had more than a microscopic effect on the markets. This is not to say that LIBOR could not be manipulated: if anything, we should be amazed that  ... keep reading Richard J. Grant is a Professo...

Published in   The Tennessean , Sunday, July 22, 2012   and   Forbes   with   archives .    by Richard J. Grant Just as one drop of blood (real or imagined) made Elizabeth Warren a Cherokee for a while, she also believes that receiving $1 of benefit from government spending makes each of us a child of government forever. Last fall, at the beginning of her senatorial campaign (challenging Sen. Scott Brown in Massachusetts), she pooh-poohed charges of “class warfare” by assuring a group of supporters: “There is nobody in this country who got rich on his own — nobody.” Sound familiar? President Barack Obama seemed at the time to be sharing the same scriptwriter and, in case we forgot, last weekend he reminded us: “If you’ve got a business — you didn’t build that. Somebody else made that happen.” An unduly charitable interpretation of these words would take it that the president and Ms. Warren have noticed that most of life, including commerce, c...

Published in   The Tennessean , Sunday, July 15, 2012   and   Forbes   with   archives . by Richard J. Grant     The key to understanding the Patient Protection and Affordable Care Act (PPACA) is not whether the provision formerly known as the “individual mandate” is now a penalty or a tax but what burden it imposes. The act’s remaining political support depends on a failure to recognize the incidence and magnitude of the total burden imposed on people by the whole act. From the beginning, support for federal government intrusion into medical care depended on the belief that we could get something for nothing. The reigning mythology is that “health care is different” and that a government bureaucracy can and must protect us from that multitude of professionals and “evil corporations” that offer medical-related products and services. Not understood is that the same freedom to trade and enter into contracts that has yielded fine service and rap...

Published in The Tennessean, Sunday, July 8, 2012 and Forbes with archives . by Richard J. Grant Although the Affordable Care Act contains many new taxes that will soon come into effect, most recent attention has been focused on whether or not the individual mandate provision within the act constitutes a tax. The Supreme Court has recently ruled, in NFIB v. Sebelius, that what the legislation calls a “penalty” can be construed for constitutional purposes to be a tax. This leaves open the question of what kind of tax it is. The closest that the court came to a clear statement was that it was a tax on “not obtaining health insurance.” But this appears to tax inactivity, which suggests that it contains the same defect as the use of Commerce Clause powers to regulate inactivity. To overcome this objection, the court insists that “the Constitution does not guarantee that individuals may avoid taxation through inactivity.” But the first and only example it gives is that o...

Published in   The Tennessean , Sunday, July 1, 2012   and   Forbes   with   archives . by Richard J. Grant The good thing about reading bad judicial decisions is that they get better toward the end. The bad thing is that the ending, the dissent, doesn’t count — though it might be used by future judges to help them think more clearly about how the law really should be understood. Such describes last week’s U.S. Supreme Court decision in the case of National Federation of Independent Business v. Sebelius, which served to uphold the 2010 health-care reform with the Orwellian name, the Patient Protection and Affordable Care Act. On the eve of the decision, most observers thought it obvious that part or the entirety of the act would be found incompatible with the Constitution. As it turned out, four of the justices concluded that the act “exceeds federal power both in mandating the purchase of health insurance and in denying nonconsenting States a...

Published in The Tennessean , Sunday, June 24, 2012 and Forbes with archives. by Richard J. Grant The mayor of a major Southeastern city recently asked for and got a substantial increase in property tax rates. The hoped-for revenue from the tax increase implies a transfer of $100 million from taxpayers to the local government. The mobilization of substantial public opposition to the tax increase tells us that many taxpayers felt that they could better use that money themselves and that the city government should make better use of the money that it already receives. But a majority of council members saw things differently. None of this is unusual. Different people are guided by different standards, and they also perceive costs differently. In this case, the relevant costs were those perceived by the city officials. They responded to the incentives that they face. Their decisions suggest that they imagine the world, or at least the city, being made better by redistributing the ...

Published in The Tennessean , Sunday, June 17, 2012 and Forbes with archives . by Richard J. Grant When unemployment rates are high, it is not difficult to find the real reasons. Once in a blue moon, we might have no other explanation than that it was a perfect storm of random events, such as technological breakthroughs or social transitions. But in a free society there is no enforced barrier to each person’s adaptation to changing circumstances. In the face of entrepreneurial innovation and energy, any such perfect storm would quickly disperse. The key phrase here is “free society.” Societies with chronically high unemployment tend to be those with governmentally induced disincentives to work or hire. Only government has the systematic power to thwart our natural proclivity to adapt and improve. Only government can subject all industries simultaneously to the effects of its macro policies, such as rising or falling interest rates, the general burden of taxation, the moral ...

Published in The Tennessean , Sunday, June 10, 2012 and Forbes with archives . by Richard J. Grant During much of the past four years, the conventional political narrative seemed to assume that Newton's First Law of Motion applies to the economy. The repeated insinuation was that, “An economy in recession will remain in recession unless acted upon by the outside force of government.” Such a belief on the part of the electorate serves well a president who takes office near the end of a recession. Even if that new president does nothing and manages not to create too much uncertainty, economic activity will recover naturally. The new president would then be associated with the recovery. But to be sure that political credit redounds to the president, a few innocuous policy actions – call it “stimulus” – could be enacted. That is what President Barack Obama threw away. Instead of doing as little harm as possible, or removing the already existing policies and regulations t...

Published in The Tennessean , Sunday, June 3, 2012 and Forbes with archives . by Richard J. Grant    When things have been done a particular way for a long time, it is often difficult to imagine them being done any other way. This was evident in the apparent amazement that a private company might be capable of successfully launching a spacecraft capable of docking with the International Space Station.     The private company, Space Exploration Technologies Corporation (SpaceX), has now done just that. This is a great achievement for any organization, even for government agencies, which until now had an apparent monopoly on such missions. Clearly the founder and chief executive of SpaceX, Elon Musk, was able to imagine that things could be different. He also had the wherewithal and the will to succeed. The United States government, now burdened by other political priorities and the debt that it has used to finance them, seems to have lost that will. By out...

Published in The Tennessean, Sunday, May 27, 2012 and Forbes with archives .    by Richard J. Grant     Listening to the pundits debate over which presidential candidate would be best at “creating jobs” is a distraction. From a governmental perspective, job creation is at best a passive activity. Otherwise, government intervention destroys jobs and wealth. When Republican presidential candidate Mitt Romney claimed that his business activities created up to 100,000 jobs, it was relatively easy to see what he meant. As a result of business decisions in which he was involved, the affected businesses grew such that, at some point in time, their operations employed 100,000 people. But most business startups fail; and if they must fail, then the sooner the better. Pursuit of an unworkable idea uses up more resources than it is worth. Losses are society’s way of saying, “We would rather you not do this.” There are better ways to use your time and resources. Amo...

Published in The Tennessean , Sunday, May 20, 2012 and Forbes with archives . by Richard J. Grant Athens was not built in a day. Whatever its geographical advantages and disadvantages throughout the centuries, the attitudes and decisions of its citizens have played no small part in its fate to the present day. Although we might wish to look fondly on Greek contributions to philosophy and culture, recent political choices have wrought economic and cultural consequences that have made the word “Greece” synonymous with “failure.” As if to demonstrate that there are no Third World countries, but only Third World governments, recent Greek governments have raised expectations and spent far more than they are capable of collecting as tax revenue. The corruption and economic stagnation that accompany the growth of any government’s reach and power, untempered by respect for private property rights, now threaten all those foolish enough to promise bailout money. Many of the same people...

Published in The Tennessean , Sunday, May 13, 2012 and Forbes with archives . by Richard J. Grant A reader asks why people believe that “the printing of money by the U.S. government is such a bad idea.” It seems to her that it would not cause inflation “in a society that is glutted with goods, services, capacity and unemployed people as is America today.” Let us set aside for a moment the question of how you can inflate without causing inflation and what it means to be “glutted with goods” in a world of scarcity. She asks a very important question: “What if the government simply created new money to buy things such as disaster relief or infrastructure repair or research to benefit society?” She is not alone in believing that no one would be hurt by this. On the surface, it really does appear that “no one would have to borrow it, lend it, or be taxed to pay it back.” We can skip over the roundabout process through which federal government spending is financed by issuing Treas...

Published in The Tennessean , Sunday, May 6, 2012 and Forbes with archives . by Richard J. Grant It is not incorrect to use the word “austerity” to describe an economic policy that places limits on, or cuts, government spending. But it can be misleading. An austere government is strictly frugal and avoids spending on programs that are viewed as nonessential. That is not the same as, nor does it lead to, an austere economy or standard of living. The best demonstration of this is to note that those governments now embarking on what they call “austerity programs” were not good examples of austerity before now. As with any family, those who made bad decisions in the past have less control over the choices available to them in the future. Those who lacked the discipline to work and save (and to invest wisely) in the past will have fewer resources with which to be frivolous in the future. This applies to governments as surely as it applies to families. A government that continues...

Published in The Tennessean, Sunday, April 29, 2012 and Forbes with archives . by Richard J. Grant Just as most new regulations are “needed” to correct the damage caused by previous regulations, attempts to enforce such regulations often lead to a worsening of practice. City laws to regulate private transportation services and to enforce price fixing are an example of unnecessary laws that lead to even worse government intrusions. Municipal agencies looking for reasons to exist love regulations such as the ordinance passed in Nashville two years ago that requires limousine operators to charge their customers a minimum price of $45 per trip. Now inspectors from Nashville's Metropolitan Transportation Licensing Commission (MTLC) have an excuse for running sting operations to catch those limousine operators that have the audacity to charge their customers lower prices. But the MTLC inspectors have been operating above their station. Last week, Metro Nashville's poli...