Why is every non-employed person not eligible for unemployment benefits?

Every time a reasonable, rational person points out that extending unemployment benefits for 99 weeks creates an incentive for people to stay unemployed, she gets cries of outrage from the left: How dare she suggest that people might choose not to be formally employed?

This is non-sense.

The whole system is founded on the understanding that given the choice of being paid to do whatever one wants versus having to do what someone else wants, people will have an incentive to choose the former.

To convince people to do what you want done, you have to make them better off than doing whatever they want. Clearly, if they are actually getting paid about $400 to do whatever the heck they want to do, it is harder for you, the potential employer, to convince them to do what you want done.

Notwithstanding lifeguards in New York State who apply for unemployment benefits during winter months or Ph.D. students who do so in summer months because their teaching assistantship stipend only pays out when classes are in session, the law and the system do recognize the incentive issue to a certain extent.

That is why the self-employed are not eligible for unemployment benefits.

They do pay in to the system.

But, they cannot get unemployment benefits when they can't find work.

If the law and the system did not recognize the incentive problem inherent in paying people for not working, there would be no need for such a provision.

In that universe, every self-employed person could go to the unemployment office and say I could not find any paid work this week, and get a paycheck.

There is a reason we do not live in the same universe.

It is the same reason why extending unemployment benefits constantly cannot increase employment. And, in the long run, this perpetual taking from the people who work to give to people who do not, is bound to do significant harm to any economy.

The U.S. economy still has a chance to remain the driver of global growth.

I would like that chance to be materialized.

Say No! to extended unemployment benefits.

Say Yes! to not just maintaining the current income tax rates, but also federal income tax reform that involves reduction of tax brackets, widening the tax base, and getting rid of destructive subsidies such as the mortgage interest deduction, ethanol subsidies, caulk subsidies, clunker subsidies …

How many Democrats does it take NOT to change tax rates?

This ought to be a no-brainer, right?

If the Democrats do not take action, everyone's tax rates will go up, reducing everyone's disposable income, and causing more destruction in the economy.

To avoid such destruction, Mr. President and the Democrat party can put together a bill that says the federal income tax rates will remain the same for the next N years, whatever N they need.

They can then pass this bill without needing any Republicans to join their ranks.

But they won't.

Tell me again, who's really holding me hostage?

We'll let your tax rate go up unless you agree to pay our buddies with stocks in Government Motors, Big Green, Big Corn etc.

One would have to be an idiot to genuinely believe that this will somehow help grow the U.S. economy.

And, full of malevolent intent to push this poison.

Mr. President, you are not cutting estate taxes

The estate tax this year is 0%.

So, if one's parents built a business from the ground up and it now is worth a lot of money (at least on paper), one can inherit it with no tax liability if one's parents were to die before December 31, 2010.

New York Times, the President is agreeing not to raise federal income tax rates in return for a 35% estate tax.

That would mean, if one's parents built a business that is worth $10,000,000 on paper, one would have to find $3,500,000 to pay the tax liability before one could inherit the business. A business that is worth $10,000,000 will rarely have $3,500,000 cash in hand, which means it would be necessary to liquidate business assets upon the death of one's parents.

That is tantamount to destruction of the value of all the blood, sweat and tears as well as years of taxes that went into building that business.

So, Mr. President, please do not pretend that there is an estate tax cut involved by saying:

There are things in here that I don't like – namely the extension of the tax cuts for the wealthiest Americans and the wealthiest estates.

There is no cut in income tax rates. Under this deal income tax rates would remain the same.

And, the estate tax rate would increase by ∞% from 0% to 35%.

How about we consider a real federal income tax cut?

Why is there a government monopoly on vehicle registration?

The other day, I opened my Snapple® Diet Raspberry Ice Tea bottle to discover real fact #849 New York was the first state to require cars to have license plates.

License plates serve the purpose of identifying the owner a vehicle.

We take it as given that there is a government monopoly in issuing license plates.

But, does it have to be so?

Consider, for example, the case of internet domain registrars. Their databases allow one to identify the owner of an internet address. Domain names serve a similar function to license plates. Yet, domain registrars are private companies and the system seems to work well.

Is there any reason license plates could not be issued by private registrars? From the point of view of the end user, what is the difference between paying a private company for your car's registration and license plates versus paying a government?

If there were a single privately owned monopoly taking registrations and issuing license plates, there would indeed be precious little difference.

However, if many private companies could compete for the privilege of registering your vehicle and issuing you a license plate, your registration costs would go down. They would be determined by the lowest cost technology of maintaining a registration database and manufacturing new license plates rather than the government's budget process.

In an effort to keep your business, these companies would bundle extra goodies with your registration.

The requirement to register your vehicle would not have to be changed at all.

Think about it. When was the last time anyone paid $50 per year per domain to register a domain name?

Party like it is 1989

I am getting tired of the refrain about middle class tax cuts and tax cuts for the wealthy.

First, no matter how often I have said this before, it bears repeating: You are rich if you have a lot of wealth. Having high pre-tax income does not automatically make you rich, because wealth is what you can save out of that income. What you can save out of that income is limited by what you are left with after you have paid your taxes.

People who are already rich have little to fear from higher tax rates on their income. They have armies of accountants who can shape the future flow of income to minimize their tax liability.

People who would like to improve their living standards beyond mere existence are the people who will be most hurt by higher taxes on the fruits of their labor.

That aside, let's think for a little bit (I know, most people are not used to actually thinking about these things, so it might be hard, but, please try).

The Democrats and the press would like you to believe that somehow the federal income tax rates that were effective during the Clinton years are the one true tax schedule that must be brought back. Fortunately, you can find the federal income tax brackets in effect since 1913 courtesy of the Tax Foundation.

Note that tax rates apply to AGI income after all deductions, exemptions, deductions etc are taken out.

In 1989, before Bush Sr. broke his Read my lips: No new taxes promise by introducing a new tax bracket, there were only two tax brackets: For single individuals, first $18,550 ($32,718 in today's dollars) was subject to a 15% tax rate) and income above that was subject to a 28% tax rate.

That is the benchmark for simplicity. Every subsequent change introduced more brackets, more offsets and credits and subsidies and general tinkering.

Those rates coupled with a much more open trade policy enabled so much innovation that their cumulative effects were able to withstand Clinton tax increases.

You can basically trace back the IT revolution to a few key points. The primary one must be the historical accident of IBM choosing to use a fairly open architecture for its PC and license the operating system from Microsoft followed by a close second of a failure of companies such as Texas Instruments to get the government to enforce high tariffs on DRAM chips imported from Asian tigers.

However, regardless of these historical accidents, if the marginal tax rates of 70% on income above $108,300 (about $287,000 in today's dollars) had remained in effect, there would have been precious little incentive for smart and creative individuals to take the risks they took. Instead, they would have followed their friends into other safe occupations with large conglomerates like many others did in the previous decades.

Of course, if those rates had remained in effect, if U.S. chip companies had been able to prevent cheap imported microchips from Asian countries, we would never have known what benefits we would have missed from not having the Internet revolution.

No one in government and even people who were involved in these industries that have been engines of growth for the past two decades, could have known in 1980 where these innovations would have led us. The IT revolution was not destiny. It was fostered in an environment of high returns to innovation and entrepreneurship with availability of cheap, commodity hardware which allowed individuals to break free from the chains of giant corporations.

By the time Clinton enacted higher tax rates, the avalanche, the tidal wave, whatever you might want to call it, was already in motion. It wasn't that Clinton's tax regime generated economic growth. Rather, it was unable to stand in its way.

There is nothing inherently right about the Clinton tax regime. It cannot be the benchmark for deciding what should be done in the future.

The government's role in a properly functioning market economy is to enforce law and provide for national defense.

That is the kind of environment that grows the size of the pie for everyone instead providing incentives for people to fight over the size of their slice of a shrinking pie and waste resources in the process.

No matter what the outcome of the game that is being played among the president, the Democrats and the Republicans today, rest assured that there will be no cuts in tax rates for anyone.

The choice that is being forced on us is between continuing the current, complicated tax system versus keeping the current complicated tax system and enacting higher tax rates on some or all individuals, especially the ones who generate most of the innovation in the economy.

If we are supposed to choose some past tax rates as the benchmark by which all future decisions are to be evaluated, let's go back to the tax rates in effect in 1989.

Two simple brackets. No micro-managing individuals' choices with a tax credit for this, a tax subsidy for that, a deduction for some other special decision. Free and open trade with pretty much any country. That is a recipe for growth.

The evidence is there if you are not afraid to see it.

What happens when people are paid $1,200 - $1,600 a month not to work?

I do not have data to verify this, but it seems like the median maximum unemployment benefit among states seems to be around $390/week with the lowest amount in Mississippi ($230/week) and the highest amount being in Massachusetts ($628/week).

So, let's low ball it and say that the average unemployed person gets $350/week. That's $18,200 annually. This does not take into account any of the myriad other subsidies available to low income individuals from food stamps to child care credits etc.

Surely, that would not make you rich. But, given the choice between a job that will pay them, say, $25,000/year, in return for hours of work every day, and the possibility of making $18,200/year simply by existing (which leaves ample time for more enjoyable activities than work), a good number of individuals may (rationally) choose to wait to seriously consider working again.

According 2008 Tax Statistics from the IRS, the average tax collected from the 13,851,341 1040s filed with AGI between $100K–$200K is $16,903.

According to the Department of Labor, about 8 million people are currently receiving unemployment benefits. The annual amount of benefits paid (assuming, on average, $350/week) is equal to the total federal income tax collected from 8.6 million returns in the $100K–$200K AGI category.

Or, it is equivalent to 75% of total federal income tax collected from the 3.5 million returns in the $200K–$500K AGI category.

And, people are now claiming that taking more out of the pockets of people who work to pay people not to work is going to increase economic growth. Give me a break!

What if the government paid everyone?

Sometimes a little thought experiment is needed to understand simple issues.

At issue today is the size of the U.S. government. On one side of the issue are people who see no problem with the increasing footprint of government. On the other side are those of us who are alarmed by the implications of a bigger government.

Proponents of bigger government like to purport that every dollar collected by the government is a benefit and every dollar not collected by the government is a cost. They claim that maintaining the current tax rates instead of increasing them represents a cost to the economy.

So, let's imagine a world where everyone's entire income was determine and allocated by the government.

So, the government would take the entire pie and give everyone their "right" slices.

Let's leave aside, for a moment, the incentive effects of such an arrangement.

How would the government accomplish this?

Value in an economy is created by people expending time and effort to produce things and sell them at prices others are willing to pay. When I choose to pay a $1.50 for a cup of coffee, you know that I valued that cup of coffee at least as much as I paid for. You also know that the cost of producing that cup of coffee was less than $1.50. We are both better off. Value is created.

Now, if the government is going to determine the entire income of everyone, it must tax away that entire value. Then, it must determine the "right" amount of income for everyone and pay them.

Of course, this cannot happen magically: Some people must be employed by the government for the sole purpose of making sure every last cent of value is extracted from private citizens, and then distributed according to some rule that determines the "right" amount of income for everyone.

The government employees would also have to be paid.

But, they do not produce anything.

All they do is to take from some and give it to others, while keeping a portion for themselves.

So, the total amount taken from private citizens will be less than the total amount distributed back to them.

See, if I want to give Bob $100, I would just give Bob $100. I would have $100 less and Bob would have $100 more. I would be happier because, presumably, I gave Bob $100 because the happiness he derived from having an extra $100 was more valuable to me than the happiness I would have derived from doing other things with the $100. Bob, of course, is also better off because he has more money with which he can buy things he wants.

Now, if the government takes a $100 from me ... Well, they have to pay someone to do it. So, now, they have, say $75 dollars, which they give to Bob.

Notice that I am still $100 short. But, I am less happy than before.

Why? Simple: If I had wanted to give $25 to the government bureaucrat and $75 to Bob, I could have easily done so. However, in the absence of a law saying the government bureaucrat can take my money, I did not choose to do so. That means having to give the bureaucrat $25 and Bob $75 is worse from my perspective than just giving Bob $100.

Clearly, I do not derive any benefit from the $25 that went to the bureaucrat. I know this not because he is a bureaucrat, but because I had the option to give him $25 and chose not to do so.

I still derive happiness from the fact that Bob has $75 extra, but that is not as good as him having an extra $100. Bob is also less well off than if I had just been able to give him $100.

The government is a leaky bucket.

Taking from people who work and produce stuff to give to people who do not produce stuff cannot increase the total amount of resources in the economy.

Bigger government cannot make a nation wealthier.

If that were the case, we should all work for the government.

Finally, what determines the "right" amount everyone should have to live on?

Most proponents of redistribution have in mind some version of from each according to ability, to each according to need.

Such a system encourages people to overstate their needs and fall short of fully utilizing their abilities.

The evidence is before your very eyes if you choose to see it.