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economics

Regulating the Poor is a Bad Idea

by D.J. McGuire

There was a time – dare I say, it might have been as late as two years ago – when I would have applauded the recent wave of states adding work requirements to Medicaid. I’m not sure where I would have exactly landed on the Food-boxes-for-Food-Stamps idea now ensconced in the president’s budget back then. Today, however, I think both are mistaken.

My reasoning stems from the current drive to automation in the economy. That may seem disconnected, but bear with me. Contrary to the assertions of most, I do not see an oncoming automation apocalypse as inevitable. Many have expressed concern about the tremendous drop in demand for labor that could come with automation – in other words, far fewer jobs for actual persons. Not nearly as many have discuss the ramifications on the other side of the coin, prices. Without a central bank insisting on inflation ad nauseam, prices would also fall as a result of automation, in many cases dramatically. The result could be a dramatic drop in the cost-of-living, ameliorating if not drowning out entirely the effect of automation on jobs. Keynesians of all stripes would revert to their last line of argumentative defense: the concept of “sticky prices”. However, the assumption behind this defense – that prices cannot be driven down without tremendous unemployment or wage cuts – is undone by the effects of automation. For automation switches the order of the process. Thus, prices need no longer be sticky – and in fact probably would not be sticky – because the wage effect on stickiness has already been taken out of the equation. In other words, automation would remove the greatest barrier to productivity driven deflation, the one thing that can ensure greater prosperity for all Americans.

However, in order for this to be as successful as it can be, we have to shift our mentality away from working for other people in favor of working for ourselves. The generations that follow us in the automated era are far more likely to be self-employed than employed by someone else – which means creating incentives that drive people to work for someone else instead of themselves are going in the wrong direction. They will need to be less risk-averse – which means the consequences of risk itself need to be reduced.

The work requirement for Medicaid is thus exactly the kind of perverse distortion of incentives we need to avoid. If anything, we need less regulation of the behavior of poor Americans – as they are more likely to engage in the entrepreneurship we need to advance the economy in the automated era if they are not forced to work for someone else for their health insurance. Likewise, the dynamism and flexibility that come with successfully launching a small business can’t mix with a one-size-fits-all food-delivery system (and this doesn’t even consider the vastly different diets required by different human beings.

For much of the 20th century, “welfare” was viewed – when it was perceived as effective – as a temporary system designed to push people back into the industrial workforce. In a post-industrial, automated economy, we need more self-employment, in which case the current welfare system – and the proposed changes by the Republicans – become the exact opposite of what is required.

As a conservative, I would lament the damage over-regulation would do the economic innovation and dynamism. I call myself a progressive conservative now, in part because I understand that over-regulation is just as dangerous when the regulated are poor Americans. The poor need fewer restrictions on the aid they receive (indeed, I would consider a Negative Income Tax or Universal Basic Income a dramatic improvement over the Rube-Goldberg-like welfare system we have now), not more.

I Guess I’m the Last Supply-Sider

by D.J. McGuire

There was a time when supply-side economics was a serious challenger to the Keynesian failures of the 1970s, and a necessary corrective to the assertion that Aggregate Demand was all that governments could change through policy. One of the supply-siders I admired as a graduate student was Stephen Moore.

Today, Moore revealed that the current GOP tax deform has nothing to do with supply-side economics – or any economic theory, for that matter – but rather for political retribution (Bloomberg).

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On the Republican Tax Deform

by D.J. McGuire

Taxes: the one issue where – as an economic conservative – I would be more sympathetic to my old party (the Republicans) than my new one (the Democrats). As I awaited the Republican tax reform plan, I even recommended Democrats find a way to work with the GOP to improve it.

Well, the plan was at last revealed today, and about the only link this fiasco has to actual tax reform was Congressman Brady quoted Ronald Reagan from 1986 (CNN).

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​ Ed Gillespie’s Fake Tax Cut

by D.J. McGuire (who lives and votes in Virginia)

As Virginia’s campaign for governor careens to its conclusion on November 7, I do believe I have managed to solve at least one mystery of Election 2017. Namely, what in the hell happened to Republican nominee Ed Gillespie‘s tax cut proposal?

The answer is: it was a mirage.

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A Day in the Life of Joe Republican, Fifteen Years On

by Cliff Dunn

Joe gets up at 5 a.m. now instead of 6 a.m. so he can make his first job. He takes a sip of bottled water rather than drinking from the tap: Maybe it’s because the planners in his state bungled their guesses at how much water they’d have over the long term (using flawed climate projections), because the local government botched their water sourcing, or because the local politicians spent years not being honest about how much their system truly cost.

Trump’s Trade War, Part II

by D.J. McGuire

The Trump Administration’s efforts to “renegotiate” the North American Free Trade Agreement (NAFTA) have now created so many hackles that the Chamber of Commerce stepped in.

That Trump is willing to risk a trade war to feed his lust for protectionism is not news (he’s already set off Canada and the United Kingdom), but when the Chamber of Commerce sounds the alarm about a Republican president, we’re in big trouble.

Was the New Deal Racist? Yes.

by D.J. McGuire

The more one looks at the actual policies enacted during the Roosevelt administration, the more one comes to the painful conclusion that FDR, whatever his intentions, allowed the government under his command to build a welfare state not for all, but for whites only. Perhaps I’m coming to this realization later than most who are younger (I’ll turn 45 next week), but I am painfully certain I’ve reached it faster than those who are my age or older.

Lindsey Graham’s Economic Illiteracy and Why It Dooms His Health Care Policy

by D.J. McGuire

As of this morning (the 25th), the Senior Senator from South Carolina is still pushing  for the woeful health care bill that bears his name. In his latest attempt to win over conservative critics, he exposes himself as being largely illiterate on the microeconomic reality behind health insurance and health care, providing yet another reason for Senators to vote down his bill.

Will the Democrats Continue to Go the Wrong Way on Economics?

by D.J. McGuire

The events of this week in Washington do not bode well for the Democratic Party. The combination of Democratic senators openly endorsing government monopoly health insurance and the Republican president making a move toward immigration reform, however small, puts the GOP in a better position to hold the Free Marketeers in 2018 and 2020.

The Week’s Advice for the Democrats: Hold Firm on Culture, Look for Openings From the Right on Economics

by D.J. McGuire

There has been a good deal of soul-searching within the Democratic Party about how to avoid repeating the 2014 and 2016 defeats. From what I can tell, most of those who (wisely) advise against careening leftward have recommended (not so wisely) downplaying “cultural” issues in an attempt to win back “working-class whites.” While I call myself a conservative Democrat, I have been advising largely the opposite – a move rightward on economic matters, not cultural ones. Events of the past week outside of the Senate health care votes have shown that to be the better approach.

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“Single Payer” Myths from Left and Right

by D.J. McGuire

Amidst the wailing, gnashing of teeth, celebrations, and everything in between because the United States Senate has – literally – voted to let itself keep voting on health insurance today, I thought it might be a good idea to address some of the problematic myths surrounding the “single-payer” idea.

To hear American social democrats tell it, “single payer” will at last slay the evil profit motive from health care and ensure better health for all. Republicans, by contrast, view it as a gateway drug to a Venezuelan dystopia.

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My Further Thoughts on Freer Markets and the Democratic Party

by D.J. McGuire

A couple of days after my post on where the modern center is for Democrats, many within the party seemed to confuse my preference for freer markets with support for “the Wall Street elite.” My previous post discussed neither Wall Street nor the economic “elite,” which clearly led a lot of folks on Facebook to assume I was an unadulterated fan of either. This post, I hope, will debunk those concerns.

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