Marian L. Tupy
Readers of Matt Ridley’s The Rational Optimist and Ronald Bailey’s columns in the Reason magazine will not be surprised to hear that the rate of population growth is slowing—dramatically—throughout the world. Jeff Wise’s article in the Slate magazine, “About that Overpopulation Problem,” revisits that familiar territory and makes some interesting points. Ultimately, however, Wise fails to appreciate the real reasons for the fall in population growth rate.
First, the good news. As Wise notes, “[The] rate of global population growth has slowed. And it’s expected to keep slowing. Indeed, according to experts’ best estimates, the total population of Earth will stop growing within the lifespan of people alive today. And then it will fall… the long-dreaded resource shortage may turn out not to be a problem at all.”
“For hundreds of thousands of years,” Wise’s article continues, “in order for humanity to survive things like epidemics and wars and famine, birthrates had to be very high. Eventually, thanks to technology, death rates started to fall in Europe and in North America, and the population size soared. In time, though, birthrates fell as well, and the population leveled out.”
Why might that be? “The reason,” Wise avers, “for the implacability of demographic transition can be expressed in one word: education. One of the first things that countries do when they start to develop is educate their young people, including girls. That dramatically improves the size and quality of the workforce. But it also introduces an opportunity cost for having babies.”
True enough, better education is a by-product of development, but where does development come from?
For that we have to look to Ronald Bailey. As he writes, “In 2002, Seth Norton, a business economics professor at Wheaton College in Illinois, published a remarkably interesting study on the inverse relationship between prosperity and fertility. Norton compared fertility rates of over 100 countries with their index rankings for economic freedom and another index for the rule of law. ‘Fertility rate is highest for those countries that have little economic freedom and little respect for the rule of law,’ wrote Norton. ‘The relationship is a powerful one. Fertility rates are more than twice as high in countries with low levels of economic freedom and the rule of law compared to countries with high levels of those measures.’”
And, “Economic freedom and the rule of law produce prosperity which dramatically lowers child mortality which, in turn, reduces the incentive to bear more children. In addition, along with increased prosperity comes more education for women, opening up more productive opportunities for them in the cash economy. This increases the opportunity costs for staying at home to rear children. Educating children to meet the productive challenges of growing economies also becomes more expensive and time consuming.”
So, education is a proximate cause of population growth slowdown. The ultimate cause, however, rests with economic freedom and resulting prosperity.
View full post on Cato @ Liberty
Daniel J. Mitchell
No tax system is good for growth, of course, but the negative impact of taxation can be reduced by lowering marginal tax rate(s), eliminating double taxation of saving and investment, and getting rid of loopholes that encourage people to make decisions for tax reasons even if they don’t make economic sense.
While the general public is quite sympathetic to tax reform and would like to de-fang the IRS, there are three main pockets of resistance.
- The class-warfare crowd is opposed to the flat tax for ideological reasons. They want high tax rates and punitive double taxation – even if the government winds up collecting less money.
- The lobbyists and special interest groups also are opposed to tax reform, along with the politicians that they cultivate. The tax code is a major source of political corruption, after all, and there would be a lot fewer opportunities to game the system and swap loopholes for political support if the 72,000 page tax code was tossed in a dumpster.
- Beneficiaries of certain tax preferences such as the mortgage interest deduction, the charitable deduction, and the state and local tax deduction are worried about tax reform, either because they are taxpayers who utilize the preferences or because they represent interest groups that benefit because the government has tilted the playing field.
This post is designed to allay the fears of this third group, specifically the folks who worry that tax reform might be bad news for charities.
The Wall Street Journal today published a pro-con debate on the charitable deduction. As you might expect, my role is to argue in favor of a simple and fair system that would eliminate all tax preferences.
Here’s some of what I wrote on the charitable deduction, beginning with the key point that economic growth is key because the biggest determinants of charitable giving are disposable income and net wealth.
…the best way to help charities is to boost economic growth, which leaves people with more money to donate. And I think the best way to do that is to replace our current system with a simple and fair flat tax. …I don’t think there’s a compelling argument for the charitable deduction. …Over the decades, there have been major changes in tax rates and thus major changes in the tax treatment of charitable contributions. At some points, there has been a big tax advantage to giving, at others much less. Yet charitable giving tends to hover around 2% of U.S. gross domestic product, no matter what the incentive.
The final sentence in the above excerpt is key. The value of a tax deduction is determined by the tax rate. So in 1980, when the top tax rate was 70 percent, it only cost 30 cents to give $1 to charity. By 1988, though, the top tax rate was down to 28 percent, which means that the cost of giving $1 had jumped to 72 cents.
Some may wonder whether the example I just cited is appropriate since it focuses on the tax rate (and therefore the value of the tax deduction) for upper-income taxpayers.
But there’s a good reason for that choice. The charitable deduction overwhelmingly goes to the rich.
Upper-income households are the biggest beneficiaries of the deduction, with those making more than $100,000 per year taking 81% of the deduction even though they account for just 13.5% of all U.S. tax returns. The data are even more skewed for households with more than $200,000 of income. They account for fewer than 3% of all tax returns, yet they take 55% of all charitable deductions.
I’m not against rich people, or against them lowering their tax liabilities. But I do want a tax system that generates more prosperity because that’s good news for the entire economy – including the nonprofit sector.
Speaking of which, I think tax-deductible groups will become better and more efficient without the deduction.
Charities, meanwhile, get fatter and lazier because of that dynamic. Think of all the exposés in recent years about charities that devote an overwhelming share of their budgets to administrative costs and marketing expenses. No system will create perfect nonprofit groups, but cutting back or cutting out the deduction would break the cycle of inefficiency that now exists.
…more than 80% of those who itemized their tax returns in 2009 claimed the charitable deduction and were responsible for more than 76% of all individual contributions to charitable organizations.
That’s all fine and well. What she’s basically saying is that almost all rich people itemize and those rich people get the lion’s share of the benefit from the deduction.
But that’s not the key issue. What matters is whether the deduction makes a big difference for the amount that people contribute. Diana addresses that point.
According to a 2010 Indiana University survey, more than two-thirds of high-net-worth donors said they would decrease their giving if they did not receive a deduction for donations.
I don’t put complete faith in public opinion data, but let’s assume that this poll is a completely accurate snapshot of how rich people think they would react. But let’s balance that off with the real-world evidence from the 1980s, which shows that rich people gave more money in the 1980s after Reagan cut tax rates and dramatically lowered the value of the tax deduction.
I’m not saying the lower tax rates caused the increase in giving, but I am saying that the lower tax rates and other reforms helped boost the economy. And I’m saying that rich people gave more to charity because they had more income and more wealth.
I also can’t resist a comment about this excerpt.
Finally, there’s another important consideration. The charitable deduction is unique in that it’s a government incentive to sacrifice on behalf of the commonweal. Unlike incentives to save for retirement or buy a home, it encourages behavior for which a taxpayer gets no direct, personal, tangible benefit.
Huh?!? Diana’s entire article is based on the notion that people need to be bribed in order to contribute, yet she simultaneously says that taxpayers get “no direct, personal, tangible benefit.”
Let me close by tying this debate to the fiscal cliff negotiations. There is some discussion of capping itemized deductions as a way of extracting more money from the rich. That creates a bit of a quandary. Here’s something else I wrote for my part of the debate.
I don’t want to give more revenue to Washington. That’s like putting blood in the water with hungry sharks around. But if politicians are going to extract more money from the private sector anyway, reducing or eliminating the deduction is much less damaging to growth than imposing higher marginal tax rates.
That being said, that type of change – while not as bad for the economy – probably would have a negative impact on charitable giving.
My argument is that real tax reform can benefit the nonprofit sector because the loss of the deduction is more than offset by the pro-growth impact of lower tax rates, less double taxation, etc.
But if all politicians are doing is limiting the deduction as part of a money grab, then nonprofits get some pain and no gain.
Incidentally, this is why the nonprofit community should join the rest of us in fighting against an ever-climbing burden of government spending. If we don’t rein in Leviathan, it’s just a matter of time before politicians get rid of the deduction as part of a relentless search for more revenue.
I think it would be better for nonprofits – and for the rest of us – if we limit the size and scope of government and enact a tax system that produces the kind of prosperity that is beneficial for all sectors of the economy.
View full post on Cato @ Liberty
False prosperity through debt – 4 out of 10 Americans have less than $500. The dangers of building a consumption based nation.
Posted by mybudget360 in banks, debt, Employment, government, savings, wall street
If most Americans had to choose between saving and spending, they would decide to join the spending team. Americans are so drawn to spending that they will even purchase items they cannot afford. Another recent survey found that 40 percent of Americans have less than $500 saved. This aligns with a survey we found last year stating one out of every three Americans has nearly no savings. How is it possible that in the most prosperous nation in the world that we have an addiction to spending but also financing this spending through incredibly high levels of debt? We are reaching a level of peak debt for our nation and it is understandable that we cannot continue on this path. Of course platitudes and lip service abound but a national debt of over $16 trillion reflects a nation willing to go into massive debt to keep the dance going for a few more hours.
Financing a generation on debt
One of the more telling charts is looking at household debt versus the actual personal savings rate:
From 1950 to the early 1980s, Americans were saving roughly 10 percent of their income. Keep in mind this also occurred during a period where companies offered generous retirement plans and pensions. However, starting in the 1980s Americans started spending more of what they earned and financing much of their consumption. You can see this by looking at the blue line above. The party must have seemed like it would never end. Household debt went from the $1 trillion range in the 1970s all the way up to over $14 trillion at our recent peak.
Financing this misadventure must have appeared like a good idea to many. Buying houses people couldn’t afford and financing cars that many clearly could not sustain. As a nation we are hyper-consumers. This generation long obsession is reflected in how our government spends. We want it all but really don’t want to pay for it. The bill came due in the 2000s and this is why we now find our nation moving backwards and many households are struggling to get by. The major difference this time is that households have taken their austerity pill while the connected banks have taken on trillions of dollars of bailouts and continue to make money by socializing their defeats and privatizing their ill-gotten gains.
We are running incredible deficits:
This is a generational pattern here since this started in the 1970s. The reason the US is able to do this is the gains that have occurred over time. The foundation is strong but is getting eroded. You can gamble more after being hot for many years. Many Americans are now seeing the hidden costs to all of this in the form of household incomes going back to 1995 levels, 46 million Americans on food stamps, and the rising cost of many items. In other words the bill is coming due.
There is a false sense of prosperity that comes from confusing access to debt with actual wealth. No, the real wealth in this country is largely aggregated in a few hands. These surveys showing that Americans barely have enough to get by with one missed paycheck show a deeper issue at hand. Many are being pushed into a low wage capitalism system. Spending this much via banking bailouts, gifts to the too big to fail banks, and the Fed making it cheaper for people to borrow simply pushes the bill out further into the future.
Spending money you do not have is not a wise financial decision. If you pause for a second and think about it there is logic behind this. Yet voodoo finance and other nonsense has convinced many in the public to be like zombie hamsters and continue spending even if they are unable to support this with their declining disposable income. The media for the most part is like a Valium pill keeping people calm enough with their reality TV and iPhones to stay occupied. Otherwise people would realize that something is awry when half your country is nearly broke.
Statistics: Posted by yoda — Sun Oct 21, 2012 3:28 pm
View full post on opinions.caduceusx.com
Some provinces suffering because of oil sands prosperity: NDP’s Thomas Mulcair
Derek Abma, Postmedia News May 5, 2012 –
OTTAWA — NDP leader Thomas Mulcair said Saturday that, because of the way it raises the value of the Canadian dollar, other parts of the country are paying a price for the prosperity enjoyed by natural resource sectors such as the oil sands in Alberta.
“It’s by definition the ‘Dutch disease,’ ” Mulcair said Saturday on the CBC Radio show, The House.
The “Dutch disease” is a reference to what happened to the Netherlands economy in the 1960s after vast deposits of natural gas were discovered in the nearby North Sea. The resulting rise in its currency was thought to have caused the collapse of the Dutch manufacturing sector, and Mulcair said the same thing is happening in Canada.
“The Canadian dollar’s being held artificially high, which is fine if you’re going to Walt Disney World, (but) not so good if you want to sell your manufactured product because the American clients, most of the time, can no longer afford to buy it.”
The Canadian dollar has traded higher or close to parity with the U.S. dollar for most of this year and last.
Mulcair cited Ontario, Quebec and New Brunswick as some of the places affected by the high loonie.
“We’ve hollowed out the manufacturing sector. In six years since the Conservatives have arrived, we’ve lost 500,000 good-paying manufacturing jobs.”
Mulcair also discussed the need for the “internalization of the environmental costs” of oil sands and other natural resources development and making the “polluter pay.”
He said he’s not against oil sands development, but said it should be carried out in a sustainable manner.
There was some reference to an article Mulcair wrote for Policy Options magazine, which was published just prior to his winning the NDP leadership race in March. In it, he proposed a “comprehensive cap-and-trade plan that would be based on the principle that polluters pay.”
He rejected the notion, brought up by the show’s host, Evan Solomon, that he was using the oil sands as a “wedge issue” that pits other parts of the country against Alberta.
“This is a question that we have to address across the board because we are such a resource-rich country,” Mulcair said. “We’ve got to learn how to add value here, to stop shipping raw logs, to stop shipping raw bitumen.”
However, Alberta Environment Minister Diana McQueen, who was also on the show, said Mulcair was being divisive in his treatment of the oil sands.
She called it “old-style politics; trying to pit one part of the country against another. . . . It really is disheartening to see such divisive comments coming from a federal leader, and I’d certainly invite the honourable leader to come out and meet with us. I’m not sure that he’s done that. I’m not sure if he’s actually visited the oil sands.”
Statistics: Posted by yoda — Sat May 05, 2012 12:54 pm
View full post on opinions.caduceusx.com
Institutions — not geography, culture, or other factors — explain why some nations succeed and others fail. So says Daron Acemoglu in an ambitious new book drawing evidence from thousands of years of human history and from societies as diverse as those of the Inca Empire, 17th century England, and contemporary Botswana. Inclusive political and economic institutions, influenced by critical junctures in history, produce virtuous cycles that reinforce pluralism in the market and in politics.
View full post on Libertarianism.org