Simple Math From the Other Half

Every once in a while, it is interesting (scary?) to peek over and see how the other half thinks (well, hopefully it is not quite half).

Somehow, this post was recently stumbled upon. It defines seeing is believing, and other concepts such as the pot calling the kettle black ("idiot", "dolt", etc.).

Okay, there is some semblance of an intelligent point: There is hypocrisy in a Republican leader of the 2001-2006 era calling for spending restraint.

But from there it loses all semblance of rational thought. The post claims a simple formula for GDP: C+I+E+G = GDP. It is seemingly discernable from the text that a higher GDP is a desirable goal - an assumption that this site will always make. The post continues to cross off terms from the equation. To paraphrase: C(onsumption) is in the tank, I(nvestment) is weak, E(xports) are out. That leaves G. Thus, if GDP is to rise, the only way to do it is to increase G. If you do not want a depression, you must make G stand for ginormous.

If the teachers' union were really interested in increasing school funding, they need merely present the post to the taxpayers (this half). In all fairness, the simple math is correct, the logic (or lack thereof) is what boggles the mind.

G cannot be created out of thin air. Dollars added to G are taken from C and I. So what, pray tell, are those in control of G to do to increase GDP? Lower taxes and C + I will increase! Even if one thought that the change in G would be equal to the change in C + I (which empirically and logically it would not), which is preferred: a dollar of G, or a dollar of C + I???

Scary...

Where in the Constitution is a Bailout of the Auto Industry Described?

An astute reader might have expected an economic attack of the proposed automotive industry bailout. Though the truly shrewd would also understand that some issues are actually precepts, needing little in the way of explanation. Congressman Jared Polis (D, CO) stated in today's Wall Street Journal, "Any pretension of a government bailout being a good deal for taxpayers should be abandoned for the insincere (or perhaps ignorant) rhetoric that it is." Really, what more needs to be said?

Nonetheless, even sans a team of legal experts, it is somewhat interesting to delve into the Constitutionality of the bailout. One might argue the Preamble says it all ("in order to...promote the general welfare"). Perhaps more explicitly, Article 1, Section 8 spells out the powers of the Congress ("The Congress shall have the power to...provide for the...general welfare of the United States"). These two references seem to be the closest the Constitution comes to touching on the auto industry. The definition of "welfare" is vague at best, and open to wild interpretation at worst (with the current Congress clearer in the latter camp).

This, of course, begs the question of how exactly bailing out the auto industry promotes the general welfare of the United States. It is barely debatable whether it even promotes the welfare of the auto industry itself. The answer is that it simply does not.

As a side note (though of great importance nonetheless), Congressman Polis' piece was a suggestion to cut capital gains taxes on investments in the auto industry. He is correct in theory, but wrong in practice. Government should not be determinative in the allocation of capital. Thus, the solution is to simply eliminate all capital gains taxes.

Socialized Medicine Part 857

Yesterday on the "Ask the Governor" show that is regularly hosted by Jim and Margery on WTKK in Boston, MA Governor Deval Patrick made a comment regarding healthcare that required at least five Advil.

A caller had been taking care of three foster children. She complained to the Governor that the assistance they were receiving from the state was insufficient. But it lacked relative to what the deadbeat, drug addicted parents were receiving. As in, she was not complaining as much about her lack of assistance - more so the lack of relative assistance. She then touched a nerve. She mentioned health insurance.

Governor Patrick quickly chimed in, (paraphrasing) "Now, you're not suggesting that they shouldn't be receiving health insurance, but rather that you should be".

Of course not! Who would even conceive of suggesting that the government should not provide healthcare to such people???

A Simple Plan

Front page headline in today's WSJ: U.S. Eyes Plan to Lift Home Sales.

From the text of the article: The Treasury has struggled for months to come up with a plan that would ease the strains on borrowers without appearing to bail out homeowners and lenders.

A simple plan: FLAT TAX

Happy Thanksgiving

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The "People" Own Your Liver

British May Ban Happy Hour

When you don't pay for something, it isn't really yours. The same is true for healthcare. In a socialized healthcare system, the "people" collectively pay. This presents the slippery slope of control - over behavior that is.

Smoking is not healthy. But when the "people" are paying to treat smoking related illness, their desire to ban smoking increases. Same goes for drinking, McDonald's, lack of exercise, etc. There is a direct relationship between directness of purchasing and control over related behavior. Go ahead and have the government pay for healthcare, but be ready for society to then regulate each and every behavior that has an impact on your health.

Healthcare: It is the Cost! It is the Cost! It is the Cost!

Governor Phil Bredesen wrote a piece in the Nov 22 Wall Street Journal titled, "What Tennessee Is Doing About Health Insurance." His basic premise is that the government needs to make sure that everyone has a Chevy of a healthplan, rather than a few people having a Caddy and "letting the rest walk."

Aside from the obvious (that the reason there is more than one kind of car on the market is that one size does not fit all), the Governor does himself a major disservice in citing a particular example to make his case. Dottie Landry was uninsured back in 2000. She got sick from a tick bite to the tune of $9,000. She put it on credit cards and paid it off over the next few years. Fast forward to 2007. Dottie was bitten by a dog, the treatment of which cost $4,000. But thankfully, she was on the Governor's healthcare plan: CoverTN. Thus, most of the 4k tab was picked up by the taxpayer.

The temptation is to end the blog entry right here. After all, just as the sky is blue, the problem with healthcare is NOT that many people are sans insurance- it is the cost! Instead of addressing the REAL problem back in 2000 - which is that the $9 grand bill is absurd, the Governor pinned the problem on the fact that Dottie actually had to pay for it herself. A consumer-driven healthcare system in which most participants are responsible for their own healthcare expenses (including major medical insurance) is the only remedy for ridiculously escalating costs. Spreading the bill amongst taxpayers has only served to exacerbate the problem.

The Government as Investor

No, this entry is not about the bailout - as ridiculous as it might be. Nor is it about the government looking to take over 401(k)s (as criminally ridiculous as that might be). However, the basis comes from a quote regarding the possible 401(k) Argentina-style debacle. It comes courtesy of Representative George Miller (D, CA). During a hearing on 401(k)s, Rep. Miller commented on the indirect subsidy caused by the non-taxation of the retirement accounts: "We have to start to think about it in Congress...whether or not we want to continue to invest that $80 billion for a policy that's not generating what we now say it should."

Invest! It is an Advil-necessecitating concept. The Government invests when it does not tax. It is the same insane thought process that leads to the Road to Serfdom-esque concept that every dollar actually belongs to the Government, and any dollar left in your pocket is a gift.

George Miller went from San Francisco State to law school at UC-Davis. He then was a legislative assistant in the California Senate, and then into the House where he has served for over 30 years. It is truly scary that the investment line of reasoning can pervade our Government and survive there for three decades. It is no wonder that Rep. Miller is a champion of Indian gaming. I suppose it is prefereable for the public to invest their money into the slot machines and at the craps tables than into a 401(k).

The Official Modern Economic Freedom 2008 Election Scorecard

If it is a fill-in-the-blank electoral map you are looking for, you have come to the wrong place. This scorecard is not to be penciled in as states are declared each hour tomorrow night. You can expect nothing less from Modern Economic Freedom than a careful winnowing down to what really matters.

A few weeks ago, a good friend pointed out that a candidate’s position on an issue is what has been most recently stated. Fair enough. And thankfully Obama wrote about his economic plan in today’s Wall Street Journal. This is the essence of the MEF Scorecard: What will Obama actually do once elected, and what will be the effects.

The Official Modern Economic Freedom 2008 Election Scorecard

There are various Obama quotes on different topics (in italics), followed by MEF commentary. After each point, fill in what happened after the election.

Tax Cuts
I’ll give a tax break to 95% of workers and their families. If you work, pay taxes, and make less than $200,000, you’ll get a tax cut.

• Which is it: 95% of workers, or those who work AND pay taxes?
• What is Obama’s Clintonian definition of “cut”?

If you make more than $250,000, you’ll still pay taxes at a lower rate than in the 1990s

• Does that include his plan to raise the cap on payroll taxes?
• For most of the 1990’s the top marginal tax rate was 39.6% - so the Obama rate will presumably be lower than that.
• Presumably, if you make between $200k and $250k you will experience no change in taxes.

-and capital gains and dividend taxes one-third lower than they were under Ronald Reagan

• The rate is currently 15%. It was lowered from 28% to 20% in 1997.
• In 1981, the rate was 23.7%, from 1982-1986 it was 20% (with a 60% exclusion), and in 1987/88 it was 28%.
• Even assuming the 28% rate, one-third lower would mean a rate of 18.5%
• Obama said on April 17, 2008: I would look at raising the capital gains tax for purposes of fairness.

Job Creation
We’ll create two million new jobs by rebuilding our crumbling infrastructure and laying broadband lines that reach every corner of the country

• Is he referring to jobs that come about from the economic growth enabled by an improved infrastructure, or simply the government hiring two million people on a temporary basis?

I’ll invest $15 billion a year over the next decade in renewable energy, creating five million new, green jobs

• Conversely, the cap gains tax could be eliminated, encouraging private enterprise to invest in renewable energy.
• The tally is seven million new jobs from these two policies (none noted from economic growth)

Health Care
My plan will make health care affordable and accessible for every American

• Health care is currently accessible to all, and affordable to few.

If you already have health insurance, the only change you’ll see under my plan is lower premiums.

• LAUGHTER

If you don’t, you’ll be able to get the same kind of plan that members of Congress get for themselves

• For free???
• Again, anyone can “get” the same kind of plan – but very few can afford it. What is Obama going to do to reduce the cost of health care?

Selected Data
Item 2008 2000 1992 1980

Dow 9,325 10,971 3,226 924
CPI 4.9% 3.5% 3.0% 12.6%
10-yr US Treasury 4.0% 5.8% 6.8% 12.5%
Unemployment 6.1% 3.9% 7.6% 7.5%

Barrel of Oil $68 $33 $21

Unions, Workers Should Favor Repeal of MA Income Tax

(Vote Yes on Question 1)

Massachusetts voters have the opportunity to repeal the state income tax in the upcoming election. In the simplest of terms, it is a choice between sending tax dollars to Beacon Hill to spend, or to keep them in a taxpayer’s pocket. More broadly, lowering income taxes by definition increases take-home wages, spurs economic growth, and creates jobs. The loudest opponent of Question 1 is the unions. This vehement opposition could be the most puzzling aspect of the 2008 election. Unions and workers should actually be firmly in favor of Question 1, and eliminating the state income tax.

The basic goal of a union is to maximize the compensation of its members. A union provides a means of collective bargaining to enhance the ability of workers to increase their wages and benefits. The mistaken logic in the decision of union leaders to oppose Question 1 is that by limiting the pool of resources of the state government, the amount of money available for compensation will be lower, and jobs will be scarcer. This line of thinking is counter to simple economics.

First, and easiest to understand, is the direct increase in compensation which results from eliminating the state income tax. Massachusetts currently taxes income at 5.3%. By eliminating this tax, a worker will receive a raise of more than 5.3%. This is a permanent raise (well, as long as the income tax is not subsequently re-enacted). Most negotiators would be pleased to walk away from the table locking in that level of a permanent raise. Especially given the current economic difficulties, this kind of an increase to take home pay is significant, and cannot be dismissed.

Nor can the impact on the state economy be ignored. Massachusetts has lagged the rest of the country in growth and job creation. The unemployment rate is only dampened down by the fact that we have seen an out-migration of population (as in, those without jobs simply leave the state). A lower income tax, empirically and logically, leads to economic growth. Economic growth is what leads to job creation. Economic growth and job creation lead to higher compensation and a higher standard of living. With one ballot issue, unions and workers will have not only directly given themselves a raise of over 5%, but also enabled an economic environment that promotes growth and job creation and thus further increases in wages.

However, the argument is made that by denying funds to the state government, jobs for teachers, fire fighters, and policemen will become scarcer. Again, this line of reasoning ignores basic economic principles. Efficiency is created when spending is sourced from the lowest common denominator. In other words, hiring for local jobs is best done at the local level. The current system sends tax dollars to Beacon Hill, which then in turn disperses it to municipalities. Yet this occurs only through a filter of mandates, restrictions, guidelines, and of course special and powerful interests. Waste, by definition, clogs the system. Yes, local taxes (generally in the form of property) will go up. Yet given the inefficiencies of the current system, they will go up by less than the reduction in income taxes. Jobs that are based at the local level and that are also funded at the local level are more secure jobs, and are thus more effectively compensated jobs. With a lower income tax burden, local residents will be more open to increased local expenditures. Further, with the increased economic growth that results from eliminating the state income tax, other sources of revenue will increase at both the state and local level (more spending will lead to more sales tax revenue while higher demand for housing and commerce will increase property tax revenue).

Union members and workers need to carefully consider their position on eliminating the state income tax. A yes vote on question 1 is, by definition, in complete lock-step with the goal of a union: to maximize the compensation of workers. Eliminating the state income tax will cause a direct increase of after-tax income by more than 5%, at a time when it is especially needed. It will promote economic growth and thus job creation and higher wages. It will force more efficiency and shift hiring to the local level, eliminating the waste that comes from bureaucratic decision-making. Eliminating the state income tax will be an enormous benefit to union members and workers in the state of Massachusetts for a long, long time.

Markets (and Economy) Tanking Is Now On Obama

The Director of Common Sense has finally acquiesced and allowed the release of important statistical information: Since Obama entered the race, there is nearly a 90% negative correlation between the S&P Total Return Index and Obama Presidential Contracts (on InTrade). This means that as Obama rises, the market tanks.

That information was withheld until now because in the Director's words the argument is "specious". However, two issues compelled the release. First, Obama's lead is now dominant. He is trading above 80 (predicting a near-certain victory), and he has a substantial lead in the important state-by-state polls. Second, markets are forward looking. They are not mired in the blame game of Bush, Fannie/Freddie, CRA, Barney Frank, sub-prime, Greenspan, etc. They have moved past that. They are, as they have always been, the net present value of expected future cash flows.

And therein lies the rub. The expectations are for malaise, and the brand of economic woes that come hand in hand with socialistic, anti-growth, high tax, more government policies (please excuse the redundancies). As the stock market opening bell approaches, the futures are calling for a substantial decline - that on top of already being down roughly 20% this month (and potentially making October 2008 the worst month on record for the S&P). Now it is firmly on Obama.

It is on Obama because the argument has been settled by history and logic. Again, the markets care not about how we got here. They tell a story about where we are going. The path that Obama plans to lead us down is one of economic disaster. Amazingly, that path has been gone down before. Periods of government control via taxation and spending and programs lead to economic downturns (see 1930's, 1970s). Periods of government reduction lead to economic growth and job creation (see 1960s, 1980s).

The future course is clear to see, and the markets are showing the way. Obama wins the election and Democrats strengthen their majority. Income tax rates go up. Taxes on investment go up (capital gains, dividends, interest). Wealth is redistributed. Less people actually pay any taxes at all, thus making it more difficult to fix the problem. Social security transforms further into welfare. Health care is socialized. The economy suffers. There is no growth. No job creation. And then there is no more wealth to redistribute.

At that point, which is quite possibly a decade into the future (if history is any indication), we might restore rationality.

Instead of suffering, why not simply reject Obamanomics?

Spreading the Wealth IS Good

Hold on to your hats loyal Modern Economic Freedom readers, this post might perplex at first.
A few days ago, Obama said, "When you spread the wealth around, it's good for everybody."

So here's the shocker: He was absolutely correct.

Yes, you are at the correct site. There has been no fundamental shift to socialism here.

The key word in the statement is "YOU". Of course, Obama meant the big G (government). But what we all know is that "you" means "you the people". If Joe the Plumber, with his knew found fame, spreads the wealth around, of his own volition, it is good for everyone.

Spreading the wealth is simply the backbone of any economy. In many ways, it actually defines an economy. It is the exchange of goods and services amongst a population. Spreading the wealth is a necessity. It is the prerequisite for economic growth, and thus job creation and rising incomes.

Again, that is based on the incredibly important assumption that "you" means "you the people". There are numerous ways that wealth can be spread around. One person can buy something from another person. One person might also hire another person to perform a service. That would be "you the people" spreading the wealth and helping the economy.

The big G that Obama meant can also spread the wealth. That is when government taxes one person and distributes it to another person. Certainly there are some cases where this is desirable. But those aren't the cases that are "good for everybody" - those are the cases where necessity compels collective action, and we aspire for those to be rare.

Of course, there is a good way that the big G can spread the wealth. Since it already accounts for a major portion of the wealth of the country, it can actually give it back to the people to do the spreading. Clearly spreading the wealth by "you the people" is the best way to spur economic growth. If government feels the need to get involved and assist the process, the one time-tested method that is empirically and logically proven to work is the reduction of taxes on income and investment. Now THAT would be good for everybody.

Ferberize the Markets

Fittingly, the second blog entry on the (defeated?) bailout continues the parenting allusion. The markets, of course, are the children. They are youth replete with raw emotion in need of parental guidance. And oh the painful decisions of parenthood. How to train a child up so you will not be training for life?

Many parents are familiar with Dr. Ferber's famous book on solving sleeping problems. The issue is well known: A young child cries out in the night. Instinct tells the parent to rush in and solve whatever ails. But all that really does is stop the crying - temporarily. Everybody wakes in the night, and several times at that. People simply learn to fall back asleep. They learn it so well that most of the time they do not even realize they have woken up at all. Young children need to be Ferberized.

Ferber's method is generally referred to as letting the child "cry it out", though it is not as cruel as that sounds. It involves a series of gradually increasing wait times before entering a child's room and giving gentle reassurances that everything is okay, thus allowing a return to normal sleep. Over time, and usually it is a matter of days as opposed to weeks or months, the child has learned to go back to sleep solo.

There is no doubt the markets are crying out right now. But like a homeowner in an unaffordable house, coddling is not the answer (especially in the form of $700b of taxpayer cash). The House is seemingly taking a stand for what is right - regardless of the middle of the night wailing.

Homeowners Will be Hurt by Bailout

Assume for a brief moment that politicians in Washington genuinely care about homeowners. Is the best way to show affection to lavish cash?

It is a conundrum for the parents out there. You want the best for your child - but at what cost? Most parents try to avoid spoiling their children. In one sense of the term, it is to imbue an appreciation for what they have, possibly with a dash of the concept that hard work is a requirement for rewards. But a more literal definition of "spoil" is to ruin - to flaw. A child that is given too often does not appreciate how to get, and over time becomes impaired.

So it is with the mortgage market and homeownership. It is simply harmful to assist in the retention of an unaffordable home. The result is squeezing more money out of those who can ill afford it to prolong the unsustainable. At it's core, this credit crisis is about a housing boom in which people bought more house than they could afford based on the twin siren songs of a bubbling market and near-zero interest rates. Important pillars of a stable housing market had gone, most notably buying based on monthly income relative to monthly payments.

Housing had simply become unaffordable. The rate of price increase had far outpaced that of income, creating a massive distortion. Instead of allowing this important relationship to normalize, the government proposes to exacerbate the problem. Bailing out a homeowner who simply bought more house than they could afford will end up harming them - in addition to the negative impact on the public in general who is footing the bill.

For all those politicians who are falling over themselves trying to help out, there is one simple method, time-tested and near guaranteed for success: lower taxes.

Four Weddings and a Friedman's Law

In Free to Choose, Milton Friedman described a simple classification of spending. This led to what can loosely be defined as “Friedman’s Law” - The further away actual consumers are from actual spending the less efficient a market will be.

Friedman placed spending into one of four categories. In essence, he created a matrix. On one side is whose money is being spent (yours or someone else’s), and on the other is on whom the money is spent (you or someone else). Thus, the first category is you spending your money on yourself. The second is you spending your money on someone else. The third is you spending someone else’s money on yourself. And finally, the fourth category is you spending someone else’s money on someone else.

A colleague suggested a stellar real-world example to illustrate the various categories: weddings. Imagine a couple getting married. Spending via the first category provides the most efficient wedding. The couple spends their own money on their own wedding. They will most likely be concerned with how each penny is spent, and spend it on the exact wedding they want. Many times, they might decide not to have a wedding at all. They could choose simply to fly to Las Vegas or go to the local justice of the peace.

The second category is a bit less efficient, but not dramatically so. In this “traditional” category, one (or both) of the couple’s parents decides to make them a wedding. The parents will most likely be frugal with their money, but yet spend it on aspects of the wedding that the couple might not choose themselves. This might simply be having the wedding at all. Whereas the couple on their own might decide it is not worth it, having someone else pay might mean a wedding party takes place. The money might be spent carefully, but the value of the money is not necessarily maximized.

In the third category, the parents simply tell the couple they will pay for the wedding. There might be a specific dollar amount, but the premise is still the same – the incentive to economize is decreased. However, it is not quite a total loss of efficiency as the couple will most likely get good value for the money by spending it on the aspects of the wedding most important to them.

The last category is the least efficient. A wedding planner is hired to make a wedding. Other than a potential total budget number, the wedding planner is not incented to spend wisely. Further, aside from some potential consultations, it is unlikely that the money will be spent to maximize the value to the couple. The wedding planner might be influenced by kickbacks and other external economic drivers. Their ultimate goal is likely to end up on reality television, and the best means is to spend as much money as possible on as lavish a reception as can be conceived.

Friedman’s Law can, of course, be applied to any industry. An industry dominated by category three or four spending is likely to be wrought with inefficiencies and saddled with excessively high prices. Three prime examples are health care, higher education, and auto body repair. In all three, the consumer is rarely directly paying for the goods and services received, and also not necessarily choosing which goods and services are received.

As it applies to government spending…

Michael Corleone to Fan and Fred: My offer is this. Nothing.

Ah, if only Michael Corleone were in charge at the Treasury. Then Fannie and Freddie would be getting exactly what they deserved from the government: Nothing.

Since when did nationalizing any industry, let alone one as significant as housing, make prudent economic sense? It simply is abhorrent to the concept of economic freedom and limited government.

For many years, numerous constituencies have raked in exorbitant sums of money due to the implicit government guarantee of Fannie and Freddie debt. Here is how it worked: Fannie and Freddie bought mortgages from banks. In order to pay for the mortgages, they borrowed money from the marketplace. Because the markets (correctly) assumed that the federal government would back the debt, Fannie and Freddie were able to borrow at extremely favorable terms.

The problem is - the government never charged Fannie and Freddie for this insurance. Well, not explicitly at least. Thus, the taxpayers gave a gift to Fannie and Freddie in the form of theoretical insurance. Fannie and Freddie monetized this to the benefit of private shareholders, executives, and those in Washington who received contributions. Now, taxpayers are picking up the tab.

Of course, the question to ask is - why bail out Fannie and Freddie? Why not simply give them nothing, and let them fend for themselves as virtually every other private enterprise is doing at this very moment? Why give yet another gift to the holders of Fannie and Freddie debt, while so many other holders of credit are getting skewered?

What the public is told is a garbage story about keeping the housing market stable. As far as anyone knows, the housing market has been in a free fall. The bubble has long since burst. What will stabilize the housing market is when prices correct enough such that they reflect the realities of what people can actually afford - not some Fed-induced haze of housing euphoria.

Another excuse being doled out is protecting some large bond holders. No where in the prospectus of Fannie or Freddie debt is the United States Government listed as a guarantor. If the Chinese government assumed that, well - whose fault is that? One might also argue that Goldman Sachs should have read the prospectii, but they probably didn't need to.

The bottom line, though, is that bailing out Fannie and Freddie is simply wrong. It is wrong to put the burden on taxpayers who did not take the excessive risks that two private companies decided to take and profit from.

Michael Corleone concluded the exchange by asking the Senator to put up the money personally. The public should be asking the same of all those in Washington who have been at the receiving end of Fannie and Freddie's largesse, including Paulson himself.

Seven Days of Paid Sick Days

Obama favors requiring employers to allow for a minimum of seven paid sick days. There are so many things wrong - where to even being? First of all, under what explanation of the Federal government does it have the right to mandate such a thing (theoretically, practically, logically)? Does Obama look at the European/socialist model and say, "I like that, let's emulate it"? It boggles the mind.

Yes, of course, it's great in theory. Most economic notions on the left have a kind-hearted rationale. But it simply doesn't work. Why not 10 paid sick days, and 30 paid vacation days? Why not 20 and 50? In fact, why not free health care for all? Oh wait, he thinks he can deliver that too.

Oooo Barracuda! But What About the Economy?

There is no question Governor Palin knocked the cover off the ball last night.

But if there is a bone to be picked it is the lack of discussion of economic issues. By essentially ignoring the economy, one might be left with the impression that she was ceded that ground. Why not talk about healthcare? Obama wants universal healthcare - socialized medicine. She should have attacked that as simply wrong. Why not talk about inflation? Any and all of Obama's policies will only exacerbate the problem. She can show real concern for what is happening to the average American household. These are important issues, and Obama is simply going to make things much worse than they already are. That needs to be addressed.

Tax Cuts: Pure Economics

I recently partook of the Massachusetts tax free holiday. The 5% sales tax was removed, and Massachusetts residents went shopping.

"It's as much a psychological thing as it is economic," House Minority Leader Bradley H. Jones Jr. said.

No it is not! Is it any wonder Bay State Republicans are in the minority? It is quite simple: Prices go down, demand goes up. Take away a 5% sales tax, and the price of goods purchsed goes down. There is no feeling about it, it is not mental. Your receipt reads a number that does not include a 5% tax. There are real, actual extra dollars in your pocket. I wonder if he meant that by having extra dollars in your pocket, you feel good!

Politicians in Massachusetts are loath to admit that cutting taxes has a tangible economic benefit. Why? Question 1 looms in November. Eliminating the state income tax WILL have an enormous economic impact. Lower income taxes mean more actual dollars in residents' pockets. It is that simple. It will increase economic growth, it will create jobs, it will increase after-tax income. That will make Massachusetts residents happier. Maybe it is as much psychology.

Federal Government Should Also Stay out of Higher Education

Congress recently passed the Higher Education Opportunity Act in an attempt to address the skyrocketing cost of higher education.

If the federal government stopped meddling, maybe costs would come down. When customers generally do not directly pay for services they receive, costs go up. This is true of healthcare, auto body repair and other pseudo-socialized industries.

There is a direct link between the skyrocketing cost of higher education and the degree to which the myriad of subsidies has replaced actual payments by students and families.

A college degree is not required to understand that.

Director of Common Sense Blasts Housing Bill

My Director of Common Sense said that there is no reason an auto, private equity handout should be in a HOUSING bill. And further, he was wondering what any bill was doing being more than five pages - let alone 675.

I was on the verge of letting him go because a Director of Common Sense should have ended the logic debate at: The federal government has no business intervening in the housing market.

David Sukoff Named Senior Economic Advisor to the Ogonowski for Senate Campaign

Ogonowski for Senate