The Free Market & Taxes

High tax rates are a part of the Left's desire to control the American economy. This essay explores why that is a bad idea and why we must elect politicians who will seek to control us less. Its our freedom.

The Obama Administration has seized control over much of the American economy. Health care is to be centrally administered, even though the administration admits costs will probably increase. Some companies will be considered too big to fail, thus they will always face the prospect of government taking away their independence. We the People will always face the prospect of bearing heavy financial burdens in order to bail out some failed business or a failed homeowner because the politicians wish to influence the economy.

The Left insists on government control of the natural economy despite history showing clearly how utterly government fails at that. Governments screw up. The free economy creates more wealth for everybody. Government only consume, so governments can only allocate poverty. Humans will always seek to escape misery. The pity for America is the present rush into it.

But what if American Leftists may genuinely think the free economy needs to be tamed under government control? Let me suggest a rhetorical question for those Leftists, to give them some insight into a good understanding of the economic importance of the free market.

Which is better for the environment -- A wild lion left to freely roam the savanna, or for the lion to be locked up in a zoo? Why?

The answer is Humans cannot fit a lion into a zoo without doing some harm to the environment, and great harm to the lion. Human understanding is inferior to the natural world.

So it is with natural economics. An economist will tell you we understand a great deal about how economy works. But its certain we are no nearer to controlling the economy than we are to controlling the weather. Nevertheless, some Leftist economists smugly insist they know how to control economy. Their hubris is a clue they don't have the answers.

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More fun

The U.S. is in recession. Still.

Consumer spending and economic activity is down due to uncertainty about government policy. This uncertainty perpetuates the recession and perpetuates high unemployment.

The Bush tax cuts will expire Dec. 31, 2010. The "Democratic" Party controlled Congress will use the only tool they like: Higher taxes. Income taxes will increase:

35% bracket which will increase to 39.6%
33% bracket which will increase to 36%
28% bracket which will increase to 31%
25% bracket which will increase to 28%
10% and 15% will all pay 15%

No matter your income tax bracket:

Capital gains tax will increase from 15% to 20%
Dividends tax will increase from 15% to 39.6%

If your taxes will increase, the economy will decline.

The Democrats in control of Congress ought to abandon their desire to control the economy and let the poor beast recover. They will blather on about fairness and planning, but expect them to screw up. Its the Democrats --- its what they do.

Marxism and the free market – a short explanation

Marxism and the free market – a short explanation

The theoretical difference between Marxism and the free market.

(Note: An economic theory has to include a theory of value or price. Why do things have the value the do? Why are you willing to pay a a few bucks for a gallon of gasoline, but only a few pennies for a gallon of water? After all, you can live without a gallon of gasoline, although it would be a bother. You must have water in order to live.)

Marxist theory says the value of a product comes from the amount of labor expended in making the product. If I grow tomatoes and you grow corn, under Marxism we both exert ourselves equally and the value of our product is the same. Karl gets a little vague on how this is known. The value of the product is equal to the input of labor. Presumably we sweated the same amount under the noonday sun.

Since product value equals labor under Marxism, the only way the price of a product can be different from the sum of the effort expended in making it, is if the taskmaster somehow alienates some labor from the laborer by paying less in wages than the price of the product. According to Marx, profit is alienation of labor from its value.

The shortcoming of Marxist theory of value is pretty obvious. If a ditch digger uses his hands to dig, under Marxist economics, he would output the same value of ditch as someone using a shovel. The guy using his hands is certain to expend more effort than the guy with the shovel. How do bleeding fingers produce equally valuable ditch?

Marx explained the guy with the shovel was releasing the 'congealed labor' in the shovel. Karl realized that was a stupid explanation, but it was the best he ever published. He could never explain why anyone would invent a shovel.  He fudged by saying it was the pressure of the capitalist effort to solve the problem of production, a sentence full of words but very little useful thought.

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In the free market, for example, lets say I grow tomatoes, and you grow corn. We will both have a poor diet if we don't figure something out. So I exchange some of my tomatoes for some of your corn. Because we traded, we are both better nourished. Without any additional labor, other than the small amount of effort to make the actual trade, we both profit. In the free market, exchange is the source of profit.

The free market model assumes we both have enough intelligence to trade with some care. Neither one of us trades away all we have for a morsel of the other's product. After a trade or two, we learn a pretty close approximation of what the market price is. As the trading world is wide, we start trading with other people. Some of them make plows and shovels. We both become better farmers because we use tools from people who don't farm. In the free market, invention and specialization occurs naturally.

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The free market assumes invention and specialization because people like to do what they are good at. Marxism lacks an explanation of why invention and specialization occur, since all labor is uniform. Thus a Marxist society requires directors to point society to some goal. You've heard of five year plans, Obama's czars, etc.

The actual function of directors in Marxist society is to require the people line up to socialist goals, and punish society both toward the achievement of those goals and for failure to achieve those goals.

To compare to the free market, in the free society, a person suffers only if he makes a mistake interacting with the market.

In Marxist socialism, the whole people must suffer pain all the time. The directors become oppressors of the people.