Tom Mullen argues that Dickens and Hollywood got everything wrong about Scrooge.
As Butler Shaffer demonstrated in his brilliant defense of poor Ebenezer, Scrooge was an invaluable benefactor to English society before the events of Dickensâ€™ story. We are not given details of his business dealings other than they had something to do with finance. That Scrooge had been in business so many years and had amassed such wealth is enough for us to conclude he had made many more wise decisions on where to direct capital than unwise ones.
Who knows what housing, stores, railways or other benefits to society Scrooge had made possible through his wise judgment? How many thousands of jobs had he created? Dickens is unjustly silent on this. Whatever Scrooge had financed, we know it was something the public wanted or needed enough to pay for voluntarily. Thanks to Scrooge, however crusty his demeanor, the common people of London were far richer than they otherwise would have been without his services.
His only weakness seems to be sentimentality towards the whiny, presumably mediocre-at-best Bob Cratchett. We know Scrooge was paying Cratchett more than anyone else was willing to or Cratchett would surely have accepted a higher-paying job to put additional funds towards curing Tiny Tim. But we really donâ€™t have any evidence anyone else was willing to employ Cratchett at all, at any salary level. Still, we must defer to Scroogeâ€™s judgment on this and perhaps even laud him for finding a way to employ a substandard employee without jeopardizing the firm as a whole.
Thus, all was as well as it could have been on December 23. Scroogeâ€™s customers were happy, Bob Cratchett was at least employed, thanks to Scrooge, and Scrooge himself was as happy as he could be, considering the ingratitude with which his genius had been rewarded and all the panhandlers constantly shaking him down.
Everything changed on Christmas Eve, when Scrooge was terrorized â€“ there really is no other word for it â€“ by three time-traveling, left-wing apparitions. It wasnâ€™t enough to frighten an elderly man with the mere appearance of ghosts. They took him on a trip through time, scolding him for supposed mistakes made in the past and blaming him for the misfortunes of others in the present and future. And letâ€™s not forget the purpose of this psychological waterboarding. They are not, as Shaffer observes, pursuing Scroogeâ€™s happiness, but his money. They are William Graham Sumnerâ€™s A & B conspiring to force C to relieve the suffering of X. Politicians A & B use the polite coercion of legislation; the spirits make use of more direct and honest threats of violence.
Their plot was successful. Scrooge awoke from his night of terror obviously out of his senses and began making one poor financial decision after another. Perhaps buying the largest turkey in the local shop could be excused on Christmas Day. But then, without any evidence of improvement in performance, he raised Bob Cratchettâ€™s salary and promised to take on the Cratchett familyâ€™s medical expenses.
After that, we are told Scrooge was â€œtransformedâ€ completely, which we can only interpret to mean he no longer made the kind of decisions that had previously benefited so many. We are told Scroogeâ€™s subsequent behavior was so foolhardy that some people laughed at him. But even this wasnâ€™t enough to snap him out of the permanent delirium with which the spirits had inflicted him.
How many profitable ventures were never financed, both before and after Scrooge went out of business?
The story ends on that foreboding note. We are told Scrooge never again returned to the prudent decision-making that had brought on the supernatural terror attack on Christmas Eve. We have to assume the â€œtransformedâ€ Scrooge eventually went out of business, perhaps solely due to overpaying Cratchett, who is 50% of his labor force, perhaps due to the cumulative effect of the many unwise decisions we are told continued afterwards.
Not only was Tiny Timâ€™s medical care cut off, but the whole Cratchett family was rendered destitute and starving. As Scrooge had already been paying Cratchett more than anyone else was willing to, even before the imprudent raise, we have to assume Cratchett made less after Scrooge went out of business than he did at the beginning of the story, if he convinced anyone to employ him at all.
Worse even than the misfortune that befell Scrooge, Cratchett and Tiny Tim was the misfortune visited upon society as a whole. How many profitable ventures were never financed, both before and after Scrooge went out of business from investing with his heart instead of his head? How many future jobs were destroyed and children of unemployed fathers left sick and hungry?
Investors Business Daily cites a George Mason University Study of the compliance cost of federal regulations which finds that those costs are truly staggering.
Economists scratch their heads when asked to explain the economyâ€™s tepid growth over the past several years. A new study gives a possible answer: the growing, cumulative burden of federal regulations.
Under President Obama, annual GDP growth never once even hit 3%. Under Bush before him, there were only two years when growth topped 3%. But in the two decades before that, annual GDP growth was above 3% in all but six years.
Growth has been so anemic for so long, weâ€™re now being told that this is the â€œnew normal.â€ As the Bureau of Labor Statistics put it, â€œannual U.S. GDP growth exceeding 3% â€¦ is not expected to be attainable over the coming decade.â€ It lists everything as a cause, except for one thing: federal regulations.
Whenever a new regulation gets passed, the government puts out a cost analysis, which focuses on annual compliance costs. Thatâ€™s fine for a point in time. But these regulations donâ€™t go away. And every year more get added to the pile. The Code of Federal Regulations is now more than 81,000 pages long.
Whatâ€™s the cumulative impact of all these rules, EDIT3-regu-042616regulations and mandates over several decades? A new study by the Mercatus Center at George Mason University tries to get an answer, and what it found is mind-boggling.
The paper looked at regulations imposed since 1977 on 22 different industries, their actual growth, and what might have happened if all those regulations had not been imposed.
What it found is that if the regulatory state had remained frozen in place in 1980, the economy would have been $4 trillion â€” or 25% â€” bigger than it was in 2012. Thatâ€™s equal to almost $13,000 per person in that one year alone.
Looked at another way, if the economic growth lost to regulation in the U.S. were its own country, it would be the fourth largest economy in the world, as the nearby chart shows.
Johan Norberg notes that the Left loves to point out Sweden as a model of Socialism with Economic Prosperity. The problem is that all the prosperity is a legacy from an economic system which Socialism is determined to change.
Once upon a time I got interested in theories of economic development because I had studied a low-income country, poorer than Congo, with life expectancy half as long and infant mortality three times as high as the average developing country.
That country is my own country, Swedenâ€”less than 150 years ago.
At that time Sweden was incredibly poorâ€”and hungry. When there was a crop failure, my ancestors in northern Sweden, in Ã…ngermanland, had to mix bark into the bread because they were short of flour. Life in towns and cities was no easier. Overcrowding and a lack of health services, sanitation, and refuse disposal claimed lives every day. Well into the twentieth century, an ordinary Swedish working-class family with five children might have to live in one room and a kitchen, which doubled as a dining room and bedroom. Many people lodged with other families. Housing statistics from Stockholm show that in 1900, as many as 1,400 people could live in a building consisting of 200 one-room flats. In conditions like these it is little wonder that disease was rife. People had large numbers of children not only for lack of contraception, but also because of the risk that not many would survive for long.
As Vilhelm Moberg, our greatest author, observed when he wrote a history of the Swedish people: â€œOf all the wondrous adventures of the Swedish people, none is more remarkable and wonderful than this: that it survived all of them.â€1
But in one century, everything was changed. Sweden had the fastest economic and social development that its people had ever experienced, and one of the fastest the world had ever seen. Between 1850 and 1950 the average Swedish income multiplied eightfold, while population doubled. Infant mortality fell from 15 to 2 per cent, and average life expectancy rose an incredible 28 years. A poor peasant nation had become one of the worldâ€™s richest countries.
Many people abroad think that this was the triumph of the Swedish Social Democratic Party, which somehow found the perfect middle way, managing to tax, spend, and regulate Sweden into a more equitable distribution of wealthâ€”without hurting its productive capacity. And so Swedenâ€”a small country of nine million inhabitants in the north of Europeâ€”became a source of inspiration for people around the world who believe in government-led development and distribution.
But there is something wrong with this interpretation. In 1950, when Sweden was known worldwide as the great success story, taxes in Sweden were lower and the public sector smaller than in the rest of Europe and the United States. It was not until then that Swedish politicians started levying taxes and disbursing handouts on a large scale, that is, redistributing the wealth that businesses and workers had already created. Swedenâ€™s biggest social and economic successes took place when Sweden had a laissez-faire economy, and widely distributed wealth preceded the welfare state.
Chelsea German, at Cato, points to a demonstration of the argument for division of labor through marketplace exchange first advanced by Adam Smith:
What would life be like without exchange or trade? Recently, a man decided to make a sandwich from scratch. He grew the vegetables, gathered salt from seawater, milked a cow, turned the milk into cheese, pickled a cucumber in a jar, ground his own flour from wheat to make the bread, collected his own honey, and personally killed a chicken for its meat. This month, he published the results of his endeavor in an enlightening video: making a sandwich entirely by himself cost him 6 months of his life and set him back $1,500.
(It should be noted that he used air transportation to get to the ocean to gather salt. If he had taken it upon himself to learn to build and fly a plane, then his endeavor would have proved impossible).
The inefficiency of making even something as humble as a sandwich by oneself, without the benefits of market exchange, is simply mind-boggling. There was a time when everyone grew their own food and made their own clothes. It was a time of unimaginable poverty and labor without rest.
Scott Grannis calculates just how much economic growth we’ve lost, for some unknown reason, over the course of the last six years.
Real GDP growth in the first quarter was weaker than expected (0.2% vs. 1.0%), but it wasn’t much of a surprise. It’s now been almost six years that the economy has managed only meager growthâ€”about 2 Â¼% per year on average. As a result, by my calculations, real GDP is a little over 10% below its long-term trend potential. That’s more than $2 trillion in lost income every year, and it’s getting worse. …
The chart above compares the level of real GDP to a long-term trend growth rate of 3.1%. This confirms once again that we are stuck in the slowest recovery ever. It’s my belief that the persistence of slow growth is largely the result of bad policies, though demographics likely plays a part too. Corporate profits have been very strong, but business investment has been very weak. Without new investment and risk-taking, we are not going to see a pickup in productivity which is, at the end of the day, what drives stronger growth and higher living standards. Investment has been weak probably because marginal tax rates and regulatory burdens have increased significantly in the past six years. In a sense, and expansion of government has suffocated the private sector.
Things are not going to change much for the better until policies become more pro-growth.
Whether the persistence of relatively weak growth is a reason for the Fed to continue to keep short-term interest rates extraordinarily low is one of the key questions of our time. I don’t see how low interest rates stimulate investment or enhance productivity. Only private initiatives can do that.
On the bright side, if policies do become more favorable, there is tremendous upside potential to look forward to. Closing the GDP gap would be nothing short of exhilarating.
Douglas Holtz-Eakin attempts to calculate the impact of the 2010 Doddâ€“Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) on the growth of the economy.
What did Dodd-Frank do to the effective tax rate on banks? Consider, first, the burden of complying with the new regulations. The American Action Forumâ€™s analysis of the Federal Register indicates that the cumulative burden (including the market value of paperwork hours for compliance) is roughly $14.8 billion annually. Notice that after-tax income in the presence of the burden is:
[rL â€“ C â€“ Burden](1-tB)
where r is interest on loans (L), C is the cost of acquiring funds and other operations, and tB is the tax rate on banks. Suppose that instead of a burden, the same after-tax income was generated by simply raising the tax rate to tâ€™. Then, by definition:
[rL â€“ C â€“ Burden](1-tB) = [rL â€“ C](1-tâ€™)
[which] can be re-arranged to yield:
tâ€™ = tB + (1-tB)[Burden/(rL-C)]
To put some empirical meat on [this], the Federal Deposit Insurance Corporationâ€™s (FDIC) Quarterly Banking Profile (QBP) provides information on taxes ($67.5 billion) and net income ($151.2 billion) that permit one to compute an initial tax rate of 31 percent. Using the AAF burden data and (11) yields an increase to 37.8 percent from compliance burdens.
A similar approach can be used to transform the roughly 2 percentage point rise in the leverage ratio of the banking sector (from 7.5 to 9.5 percent) from 2008 to 2014 into a rise in the effective tax rate. The banking sector responded to Dodd-Frank by holding more equity capital, thus require it to have greater earnings to meet the market rate of return â€“ the same impact as raising taxes. In this case, the higher leverage ratio translates into a further increase in the effective tax rate to 40.3 percent, for a total rise of 9.2 percent.
Collecting results, the impact on economic growth is a decline in the per capital growth rate of 0.059 percentage points annually. Is this a big deal? Consider lowering the growth rate in the Congressional Budget Office baseline projections by exactly this amount between 2016 and 2025. The lower rate of economic growth translates into a total loss of $895 billion in GDP or $3,346 for every member of the working age (16 and older) population over those 10 years.
Hillary Clinton’s remarkable denial that corporations create jobs in the course of a campaign speech for Martha Coackley in Massachusetts last Friday produced sufficient mockery and loud guffaws that Hillary was yesterday at pains to revise and extend her remarks.
Hillary Clinton tried her best on Monday to walk back her controversial economic body-slam from a speech on Friday, explaining away her claim that it’s not ‘corporations and businesses that create jobs.’
The talking point three days later: ‘So-called trickle-down economics has failed. I short-handed this point the other day, so let me be absolutely clear about what I’ve been saying for a couple of decades.â€
â€œOur economy grows when businesses and entrepreneurs create good-paying jobs here in America and workers and families are empowered to build from the bottom up and the middle out â€“ not when we hand out tax breaks for corporations that outsource jobs or stash their profits overseas.’
But the damage has been done. Conservatives have a new rally cry â€“ ‘Donâ€™t let anybody tell you that itâ€™s, you know, corporations and businesses that create jobs,’ she said â€“ and campaign consultants will have a new advertisement drawn up if Clinton runs for president in 2016.
Alinsky-ite propagandists like Hillary decry the idea that limiting the percentage of a nation’s economic wealth confiscated and squandered by government leaves more capital available for investment and increases the likelihood that that nation’s economy will grow, and socialists smear the notion that a growing economy raises all boats by applying the derisive term “trickle-down economics.”
When people like Hillary sneer at the idea of capitalistic growth as “trickle-down economics,” they are, in fact, shamelessly denying the obvious history of their own country, the same history which Hillary herself lived through a significant piece of, right along with the rest of us.
Just compare the condition of a working-class family a hundred years ago with the condition of a similiarly-situated family today. In 1914, chances are that a working class family used an outhouse, lighted their home with a kerosene lamp, heated their home with the cookstove in the kitchen, owned no automobile, and (obviously) did not enjoy air-conditioning or computers. It’s actually pretty amazing all the stuff that has trickled down from the once-upon-a-time point when they either constituted fabulous luxuries available only to the rich, or were not yet even existing at all, to becoming routine features of the life of practically everyone.
It was remarked with a certain amount of bemusement, back in 1991, during the Los Angeles Rodney King riots, that, in America, when the poor riot, they leave air-conditioned homes, with computers and color televisions behind, and get in their cars to drive downtown in order to riot.
So-called “trickle-down economics” may not be as speedy in results as rubbing a magic lamp and making a wish, but that kind of economics really has, over just a few generations, made ordinary people richer in many ways than kings and emperors used to be.
The alternative to “trickle-down economics”, of course, is socialism. There are plenty of well-known examples as to just how effective in promoting general economic well-being all the best exemplars of Hillary Clinton’s preferred Robin Hood “Steal-from-the-rich-and-give-to-the-poor” economic philosophy have proven: Argentina, Cuba, North Korea, the late Soviet Union.
Appearing on Friday at a Boston rally in support of behind-9-points-in-the polls Democrat gubernatorial candidate Martha Coakley at the Park Plaza Hotel, Hillary Clinton dismissed the idea that businesses create jobs. I guess Hillary must simply be projecting her family’s life experience, that all wealth is derived from politics, onto universal reality.