Tuesday, May 06, 2008


Last night, I read an online article by Walt Williams, Economics Professor at George Mason University. I enjoyed learning about taxes on cigarettes and the unintended consequences. Due to very high taxes, a carton of cigarettes cost $160 in New York, compared to $35 in North Carolina. Of course, under such circumstances, large quantities of cigarettes are purchased in North Carolina and consumed in New York. This story could easily be about how high taxes do not produce nearly as much revenue as politicians like to suggest, but there is a more important story, indeed, a tragic story to be told.

It seems that organized groups have made a "business" out of smuggling cigarettes to New York. A number of the smugglers are known to be of Pakistani, Lebanese or Syrian descent. It is also known that some of the profits are used to support terrorist groups such as al-Qaeda and Hezbollah. Once again, American "tax dollars" are being used to support those who kill Americans when they can. Americans engage in the age old practice of shooting ourselves in the foot.


When the US Congress passed an energy bill a couple of years ago, the bill expanded the mandates for ethanol. During the legislative process, the bill was stripped of provisions that would have allowed drilling in ANWAR and along the continental shelf of Americas mainland. Yes, by passing this bill we shot ourselves in both feet at the same time. In this case, we also shot and killed a large number of poor people. The poorest of people in the world struggle to buy food. The ethanol bill caused both food and energy prices to soar.

In this election year, bills have been introduced in both the house and senate to scale back the mandatory use of corn based ethanol and to authorize the aforementioned drilling. Since the congress is under the control of democrats who support ethanol and who oppose drilling, it appears unlikely that these bills will come to a vote. On the other hand, the people desire for congress to do something. Between now and the election, the congress is supposed to once again complete a budget and fund said budget. Once again, the public faces high automatic tax increases unless their is yet another AMT patch. A loud cry out from the public could possible cause the congress to reach a beneficial compromise.


One of the great ironies about America is that while its birth was largely a reaction to "unfair" Tariffs imposed by the British, Alexander Hamilton caused the new born America great pain though his support of Tariffs. The Tariff Act of 1789 raised revenues for the new government at the great expense of a series of political fights that have lasted off and on ever since. A quick reading of US economic and political history shows us that most of the great political battles in America have been fought over the taxing of trade. One can make compelling cases that tariff laws were the seeds that grew into the Civil War and the Great Depression. Yes, America is a great country that routinely inflicts wounds upon itself.


In a story told by David R. Kamerschen, Professor of Economics at the University of Georgian, the Conservative Colloquium Web Site offers us a comical look at the US tax structure.

The story goes that 10 men routinely went for beer each day after work and they paid according to the rules of the US tax code. They bought $100 worth of beer. The four guys with the lowest salaries drank free. The 5th guy paid $1, the 6th $3, the 7th $7,the 8th $12, the 9th $18 and the man with the highest income paid $59 of the $100 total. One evening, when the TV news was all about how tough times have gotten, the bartender, a benevolent sort, decided to give $20 back to this group of valued customers.

Over the next couple of hours the men argued over how to split the $20. The four who had paid nothing thought the easy and fair thing to do would be for each man to take $2. The other 6 men objected because this would mean that four men would have been paid for drinking beer. Ultimately, to the displeasure of the 4, the higher salaried 6 voted to refund in round numbers and in proportion to the amounts paid. The first 4 men did not receive a refund. The man who paid $1 got it back. The $3 payer got back $1, the $7 payer got back $2, the $12 payer got back $3, the $18 payer got back $4 and the $59 payer got back $9.

The next day, the 10th guy overheard a discussion between the "low salaried six". The 5th and the 6th man upon reflection decided it was unfair that they got back one dollar each while the richest man got back 9 times as much. The bottom four agreed that the system was totally unfair. They decided they would go drinking again that night with the hope that there would be another refund. If the 6 stuck together, they would all get $2 back. The only problem with this plan was that the 10th man decided to drink somewhere else.

The rebate the 10th man received was less than 16% of the price he had paid whereas the 5th man got back 100% of his payment. Even after the rebate, the wealthiest man paid for half the beer consumed. I think it was C.S. Lewis who once said something about taking care not to get blindsided by the tyranny of the majority. Our government was carefully crafted as a republic.

In another posting, I believe on the Cafe Hayek blog, a fellow tells about how his 10 year old daughter sometimes whines about fairness. The blogger tells her that it is unfair that she is cute, it is unfair that she is from a relatively well to do family, it is unfair that she was born in America. He suggest to her that she had better hope to continue to be treated unfairly. He concludes with the hope that she will continue to receive a small but growing piece of a very large pie than to share a very small piece of pie that shrinks each year.


Wikipedia has a media myth-buster web site. The AP wire service provides an easy whipping boy. The AP is out to make America "the bad guy". For more than 30 years, religious fanatics in the Middle East have supported the strategy of strapping suicidal-homicidal bombs on the willing. Women, children and innocent non-combatants have been routinely included in the list of acceptable targets. In a recent story, the AP wrote about the AC-130U gunships deployed by the US in Iraq. The story implied that these powerful weapons are like the ones used in Vietnam to indiscriminately saturate large areas with bullets.

War is a horrible thing. One must always question the sanity of sending some to die in order to save others. The AC-130U is a very sophisticated weapon. It has electronic sensors, scanners, fire control systems and navigation systems. The plane is in effect a massive flying computer. The systems are built to identify and to strike only combatants. The terrorist routinely hide in the middle of women and children.

I think it is safe to say, that in every war ever fought, there has been collateral damage and deaths. The AP and other "news" organizations, including ABC seem to hunt for the scandalous story. The story about the accidents that happen.

The purposeful slaughter of innocents has to be confronted. It would help if American "news" organizations were not so eager to shoot off the feet of Americans.


It appears that the progress toward peace has stalled again. Economics, politics, war and peace are all joined at the hip. The US Congress needs to stop fighting US businesses and piling on costs to the American consumer. Exxon paid 30 billion dollars in taxes last quarter. The record earnings of 10.5 billion should be a source of pride and inspiration for all who love economic and political freedom. We should invite Exxon and all other oil companies to pay even more taxes and to make even more profits while helping to lower the cost of fuel for all Americans and even all citizens of the world. America has trillions of barrels of oil resources. Included, in the bill before the Senate, is the provision to cancel the moratorium on development of oil shale in Colorado and Wyoming. The path to peace is paved through the economic strength of those who love freedom. NO MORE SHOOTING OURSELVES IN THE FEET!