Wednesday, February 27, 2019

Corporate Tax Incentives: Capitalism or Socialism?

(first published in North State Journal 2/20/19)

The withdrawal of Amazon from Long Island City, New York after massive opposition from the left-wing of the local Democratic party has unveiled at least one thing on which left-wing socialists can agree with right-wing conservatives:

Corporate tax incentives are bad.

Congresswoman Alexandria Ocasio-Cortez, now the titular leader of the National Democratic Party,  tweet-gloated after hearing about Amazon’s withdrawal: “Can everyday people come together and effectively organize against creeping overreach of one of the world’s biggest corporations? Yes, they can.”

Amazon will not be hiring 25,000 people in Queens, many of which would have been in AOC’s congressional district. The average salary was expected to be $150,000 per job.

State and local governments of New York offered $3 billion in tax abatements and subsidies to Amazon. Future tax payments to New York governments from 25,000 new jobs was expected to be in the range of $20 billion or more which looked like a pretty good deal to Governor Cuomo and Mayor De Blasio who were counting on those revenues to expand government programs.

It was a good deal if you support government co-mingling with private enterprise, that is.

AOC’s argument against the incentives was that the money could be better spent on the direct needs of people in New York instead of helping a wealthy corporation make more money. She thought $3 billion in incentives was cash paid directly to Amazon instead of phasing-in over a number of years in lower tax payments.

Many conservatives must be silently high-fiving AOC and her comrades for defeating the Amazon deal. “After all”, they say, “why does government recruit companies with taxpayer money? Keep taxes and regulations low, build an educated workforce and they will come.”

What are corporate incentives: capitalism or socialism?

Eric Shiffer, a New York businessman blurred the argument when he said: 
“[Ocasio-Cortez] is a rat poison to the heartbeat of capitalism…(F)or her to be celebrating the lost jobs, thousands of construction and blue collar jobs that come from building [Amazon’s] headquarters, as well as executive jobs and corporate jobs, steps on the throat of what keeps democracy alive — capitalism, not socialism.”
“Rat poison to the heartbeat of capitalism”? Will democracy and private enterprise die unless government intervenes to recruit companies such as Amazon with taxpayer money?

Most of the time, the damage to free enterprise comes when government tries to do things better left to the private sector.

Are corporate tax incentives one of them?

In 1992, when Southern states were hemorrhaging tens of thousands of textile jobs, BMW received $130 million in tax incentives from South Carolina that transformed the 30-mile I-85 corridor between Greenville and Spartanburg from Textile Mill Central to Leipzig South.
61,500 South Carolinians work in the auto manufacturing industry today.

In 1993, Alabama offered the then-unbelievable amount of $250 million in incentives to Mercedes-Benz to build a plant in Vance to replace textile jobs in their state. The North Carolina congressional delegation, Governor and NCGA were aghast at such an outlandish proposal compared to what North Carolina offered.

40,000 Alabamians work in the auto industry today.

North Carolina still has no appreciable employment related to the automobile industry 23 years later.

AOC might have won the battle to stop Amazon from going to New York City. Some state will win the war by offering $3 billion or more and 25,000 Amazon jobs will go there instead.

We live in a Mutually Assured Destruction (MAD) system of state economic competition whether we like it or not. Until voters who don’t like politicians using their tax money to entice companies to locate in their state vote them out of office nationwide, the Amazons of the world will pick and choose where they will locate next and hire 25,000 North Carolinians, Texans or North Dakotans.

They won’t be Yankees in Queens, New York. That is for sure.

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My Health Care Is Too Expensive!

(first published in North State Journal 2/27/19)

One of the most interesting things about health care debates is how everyone believes they are “paying too much for health care!”

In reality, 98% of all Americans pay far less than the full actuarial cost of health care for them and their families. The only people who pay the full amount are 7.5 million self-employed who do not benefit from any subsidy on the ACA exchanges and who pay for their individual health plans straight-up every month.

Everyone else has their health care subsidized by someone else, be it their employer that pays 82% of employee health care costs on average each month or the taxpayer who pays 100% of Medicaid for poor citizens at the state and federal level; at least 85% of all Medicare costs for senior citizens and whatever subsidy is available for ACA-eligible applicants.

The wonder is how no one outside of the individual market seems to know how lucky they are when it comes to paying for health care in America.

The attached chart is a very simplified comparison of what Americans enrolled in different plans pay each month for their health care. It does not take into account the myriad of options of coverage or the vast differential in deductibles or co-payments each person has to pay before getting full reimbursement coverage.

74 million poor people pay zero for their health care coverage in Medicaid since they do not make enough to be able to pay for it in the first place.  State employees in North Carolina only recently started paying any monthly premiums at all in that $3.7 billion annual program that is paid by state tax dollars but now pay $50/month for full individual coverage.

The average employee of a company, university or large institution of any sort pays approximately $120/month for their share of health care premium cost coverage. 44 million seniors over age 65 on Medicare pay $135/month for basic Part B physician coverage (Medicare Advantage adds to that base) and receive Part A Hospital coverage for free essentially since those benefits are paid for by current payroll tax deductions from every wage-earner in America.

A federal employee pays $243/month for health care insurance despite internet memes that assert federal workers and Congressmen get “free health care for life!” which is false.

The only people in the American economy who pay the full freight of the actuarial average cost of health care of over $7000/person/year are the people who are self-employed or who work in small businesses that do not provide health care benefits.

They pay at least $600/month for an individual plan. Up to $2400/month in some cases for a couple.

When health care costs go up 5%, an employee of a large corporation might see an increase of $5 in withholding for their health care coverage in each monthly paycheck. $60 per year.

A person on an individual plan would see an increase of $360/year by comparison.

Most Americans have a pretty good deal when it comes to health care coverage. As long as “someone else” keeps paying for most of the monthly premium, that is.

If people were forced to pay 75% of the real cost of their insurance coverage, we would see a massive revolution in how health care is delivered and paid for overnight.

The future unpaid-for liability of close to $100 trillion for all entitlements is enough to bankrupt America. Add in $33 billion in unfunded liability for the North Carolina state retiree health plan and it becomes pretty evident that we have a ticking time bomb on our hands that we, the living generation, have to fix before handing it off to our children and grandchildren.

Moving away from “other people paying for my health insurance coverage” to a more patient-based system is one step towards forcing discipline in the health care industry.

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Wednesday, February 13, 2019

Oligarchicide—The Far Left Attack On Wealth

Morehead-Cain Foundation
Duke Medical Center

(first published in North State Journal 2/13/19)

After the Peloponnesian War, the Spartans dismantled the Athenian democracy and replaced it with a group of wealthy oligarchs called the Thirty Tyrants.

Congresswoman Alexandria Ocasio-Cortez and her colleagues in the current Socialist Democratic Party of America must think our Founders replaced a monarchy with Oligarchs 230 years ago.

In the view of many in the rapidly-drifting-to-the-extreme-far-left-socialist Democratic Party, our country is run by wealthy people who are “immoral” simply because they have wealth and others do not.

They think we would be better off without any wealthy people. “Oligarchicide” it would be called if we got rid of them all.

How “immoral” can wealthy people be?

  • James Buchanan Duke built an international tobacco empire in Durham. Hundreds of thousands of North Carolinians were employed over the past century either in the tobacco-growing industry or in manufacturing centers around the state. The Dukes started Duke Power, now Duke Energy, which is the largest energy company in America today.

    With his wealth, he and the Duke family endowed Duke University which spawned the internationally-acclaimed Duke Medical Center and something called “Krzyzewskiville”. They established the Duke Endowment which funds Davidson College, Furman and Johnson C. Smith University and a myriad of charitable organizations across the Carolinas.

  • John Motley Morehead III studied chemistry at UNC-Chapel Hill. He started the Union Carbide Company after figuring out a way to manufacture acetylene gas for industrial use. Not only have tens of thousands of people worked at Union Carbide over the past century, he gave much of his wealth to start the Morehead Foundation at Chapel Hill, endowed the Morehead (now Morehead-Cain) Scholarship program and built the Morehead Planetarium and various other buildings on campus for everyone to use.

Had both Mr. Duke and Mr. Morehead been George Bailey and been granted a wish to see what life would have been like in North Carolina had they never been born, they would have seen a rural state that would have been far poorer, less educated and unhealthier longer than it was.

Both men had a “gift” for business just as a doctor has a gift to help people get well, a respected judge has a gift of distributing justice fairly or Zion Williamson has the gift of slam-dunking for the Duke Blue Devils.

All gifted people who do well make us all better off in the long-run by doing what they do well.
John Antonio Pascarella, Hayek Visiting Scholar at the Clemson Institute for the Study of Capitalism calls such a gift for business the “Money-Making Art”:
“The Greek word usually translated as "business" is chrēmatistikē (money-making art). The art of chrēmata could be translated as "money," or "property," but literally means "useful things". That would mean the money-making art should more properly be understood as “the art of useful things”.  
This fits the Greek root of the word — chrē — which means "use or need."  That would be the clearest way to understand the natural root of money-making, which for Aristotle is a limited part of what we broadly call "economics."

James B. Duke and John Motley Morehead did not know they would one day be fabulously wealthy as a result of their vision, hard work and determination. No one does. No one would go through all the trials and frustrations of starting and running a business if they thought they would be subject to the heavy-handed coercive force of government under control of socialists such as AOC who would confiscate the fruits of their ingenuity and invention to the tune of 70% or more.

The extremism of today’s left-wing socialist Democrats should be roundly derided by sound-thinking Democrats, Independents and Republicans everywhere. What they want is not American at all in terms of philosophy, practicality or ethos.

The confiscatory nature of their proposals would be truly tyrannical in practice.

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Wednesday, February 6, 2019

The Lizard Brain of a Conservative

The Lizard Brain Part of A Conservative
(first published in North State Journal 2/6/19)

Springtime brings new sessions of Congress and the NC state legislature. Budgets have to be cobbled together. Spending priorities get set for the year. Appropriations are made later to conform with budget instructions.

Liberals must go crazy trying to understand the brains of conservatives during these times. “How can they possibly not support expanding Medicaid, spending more on public education, affordable housing and environmental protection every single year?” they must fret about while wringing their hands.

Liberals think fiscal conservatives have lizard brains. Lizards don’t have the capacity for deep rational or emotional thought. They eat, sleep, try to avoid being eaten themselves, reproduce and slither in and out of rocks all day long.

Liberals think conservatives are cold-hearted, mean-spirited and simply callous to the needs of others.

When it comes to government budgets, true fiscal conservatives do think in simple terms, however it is not cruel.

It is balanced.
“Whatever is being spent in total today is enough to ask taxpayers to fund out of their pockets. If someone wants to expand a program or spend money on a new initiative, they are obligated to say what taxes they will raise or what other existing program they will cut to pay for it first.”
That is how PAYGO (Pay-As-You-Go) started in the Budget Enforcement Act passed by Congress in 1990. PAYGO was the most successful budgeting tool ever in the history of this country until President Bush 43 and the Republicans essentially neutered it in 2003.

We had the only 4 balanced budgets in our lifetime from 1998-2001 as a result of BEA. Had PAYGO remained fully in force, we would not be in the fiscal maelstrom we are in today.

At the state level, lizard-brained conservatives don’t mind spending the entire annual state budget on one program be it Medicaid, public education, public safety or transportation, the Four Horsemen of every state budget, as long as all other programs are cut and eliminated and no new higher taxes are imposed on state taxpayers.

Whatever the total amount of government spending is today, lizard brains want to hold the line on more government spending. They prefer to eliminate programs that don’t work and spend that money on another priority.

Better yet, return those savings to the taxpayer in the form of tax cuts or refunds. Lizard brains believe people spend their own money more wisely than government bureaucrats and elected officials can anyway.

In the view of lizard-brain conservatives, all liberals want to do is to keep every existing government program fully funded and then add on more new government spending for whatever they want to spend your money on next.

At the federal level, the only program liberals ever want to cut is in defense spending. Defense and construction of roads are two federal programs explicitly mentioned in the Constitution so lizard brains at least have the constitutional mandate argument to rely on in both cases.

If you are an elected official, here’s how to engineer universal goodwill among all voters but especially the Unaffiliated voters whom now represent 34% of all voters in North Carolina:

  • Set aside one entire year for legislative oversight and conduct a truly bipartisan effort to clear out every government program that has out-lived its usefulness or is not achieving its stated goals.

To my knowledge, over the past 40 years, there has been only 1 federal program that was voted out of existence. The Federal Helium Reserve. It began in 1925 to provide helium for a new-fangled thing called a dirigible. It was privatized in 1996 and presumed dead only to have Congress re-authorize it in 2013.

Even dead federal programs come back to life like Lazarus.

Liberals: If you want to expand Medicaid and continue to increase spending on public education, help lizard brain conservatives find the way to pay for them first. Not after the fact.

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