Jay Reding.com

David Bernstein notes that the effect of the Obama tax plan would be to raise marginal tax rates above 50% and in some states it could be as high as 60%.

Obama is playing to his liberal type by exploiting the politics of envy to try and “soak the rich,” but in terms of actual policy, to do so would be economic suicide. It would encourage people to either A:) work less and be less productive or B:) shield their assets from taxation. (Or perhaps a combination of the two….)

The fact is that $250,000 is hardly filthy rich these days. The people that Obama will hurt with this punitive taxation will be the small business owners that employ 50% of the American workforce. They will be less inclined to grow their businesses and less inclined to hire new workers—because the marginal utility of the extra work just went down dramatically. If the benefit of working 10% harder is a 2% increase in income after Uncle Sam takes his bite, it makes little sense to work harder. Because of that, we lose the benefits of that extra labor.

The bottom line is this: it will become much more difficult for people in the middle class to move up the socioeconomic ladder. For Warren Buffet or Bill Gates, an army of lawyers and accountants can shield income while the boss pats themselves on the back for their “social responsibility.” For the average owner of a small flower shop or coffee house who can’t afford those kind of tax shelters, it means that moving to that next level is more of a curse than a blessing. For an economy that is based on the promise of upward mobility, such punitive taxation is anathema.

Obama’s plans make no economic sense. Instead of shoring up entitlements, he would dramatically expand them. For all of the talk about how McCain is a clone of Bush, Obama seems to want to take the worst policy ideas of the Bush Administration (Medicare Part D, steel tariffs, more government spending) and do more of it.

Obama is running as a doctrinaire Michael Dukakis-style tax and spend liberal. Even though this is unquestionably a Democratic year, a lot of voters will be smart enough to see that Sen. Obama seems to want to punish those with the audacity to hope to build themselves up economically.

The Washington Post has an article on how high oil prices are “stumping” the experts. The massive rise in oil prices to $130+/barrel does represent an unprecedented rise in oil costs. However, it shouldn’t be a surprise. The world is facing a “perfect storm” of factors: China and the rest of Asia are still growing, OPEC is either unwilling or unable to pump more (and the good money is on the latter—the Saudis may have been overstating their own reserved for some time), and countries are subsidizing gas prices—and subsidies invariably distort markets and raise prices.

Of course, the Democrats have their own culprits. Of course, the Democrats are wrong. They blame the oil companies for raising prices. They do look suspicious, given their skyrocketing profits. The problems with that theory is that those profits are not out of line for the amount of oil they sell. The other problem is that they can’t invest in new projects. Normally they would reinvest those profits into expanding their new capacity. But bad public policy prevents them from doing that: most of America’s coastal waters are off-limits to new oil development, and domestic development in places like ANWR are also forbidden.

Congress is once again asking for the impossible, and behaving petulantly when they don’t hear what they want. On one hand, they want the U.S. to limit carbon emissions—but then they demand cheap gas.

The world doesn’t work that way. We’re running out of cheap gas, and it’s a question of whether we hit the peak in 2030, 2050, or some other point. If we want cheap gas, we have to drill in places like ANWR and off-shore, and we’d better accept that we’ll produce more carbon emissions. If we want to keep ANWR into the untouched pestilential wasteland that it is and keep carbon emissions down, then consumers better get ready to have an arm and a leg ready the next time they buy gas for their cars or pay their heating bills.

As always, Congress’ economic illiteracy is hurting American interests. The laws of supply and demand are just that—laws. There is a relatively stagnant supply of oil and more people are using it. That means the costs will go up, and they’ll go up not only to cover the current costs of oil, but also the future costs.

If the goal really is to reduce the price of oil, we can’t sit on our own reserves. A smart public policy would be to open ANWR and offshore sites to development instead of relying on dangerous and unstable places like the Middle East or Venezuela for our oil while simultaneously creating tax credits and awards for developing clean fuel technologies—because sooner or later we will enter a post-oil economy and the longer we can cushion the shocks the better positioned we’ll be.

Our current strategy, however, won’t work. We can’t keep messing around with the market through oil taxes, byzantine requirements for the blending of fuels, and a stubborn insistence on not allowing more infrastructure like refineries.

As they say, you can’t have your cake and eat it too. The problem is that lesson most of us learned in first grade seems to be forgotten the second a politician walks into the halls of Congress.

Jerry Pournelle has a suggestion for how we can make this country energy independent:

As to whether American ingenuity can use that technology to help win us energy independence, I have to say it again: cheap energy will cause a boom. The only cheap energy I know of is nuclear. Three Hundred Billion bucks in nuclear power will do wonders for the economy. We build 100 1000 MegaWatt nuclear power plants — they will cost no more than 2 billion each and my guess is that the average cost will be closer to 1 billion each (that is the first one costs about 20 billion and the 100th costs about 800 million). The rest of the money goes to prizes and X projects to convert electricity into mobility.

But he ends on a more somber note:

Of course we won’t do that.

Even though some in the environmental movement have embraced nuclear energy as a way of reducing CO2, the kneejerk reactionaries are still numerous enough to prevent any real progress. The fact that the government horrendously mishandled the regulation of nuclear plants and stifled the chance at making the industry viable didn’t help either. We could have been energy independent right now had we done things right in the 60s and 70s.

Meanwhile, France gets 70% of their energy from nuclear sources, reprocesses their waste, and is far less dependent on Saudi shieks or Venezuelan strongmen for their fuel. Their nuclear plants were build around common plans so that there was little duplication of effort, and spare parts could be made in batches rather than having every reactor be a largely unique design.

A smart politician would be pushing for a new Manhattan Project—the United States getting 25% of our electricity from clean nuclear reactors by 2020. A program that offsets the strain on the electrical grid from electric vehicles by building more capacity from nuclear power. A program to speed the development of safe pebble-bed reactors that won’t be capable of spreading radiation and doesn’t pose a threat from the proliferation of nuclear materials.

We can do those things, but all it takes is the political will to push them through. Sadly, it seems like our political leadership is decidedly lacking in will. Glenn Reynolds is right, we do have a lack of faith in our political leadership, and that comes because politicians are too willing to push for burning more of our food stocks than leading us into the 21st Century. We can do better, but we can’t do that if our political class is more interested in jockeying for power than pushing this country forward.

The Christian Science Monitor has the fascinating story of a man who did an experiment starting out with $25 in his pocket and ten months later had a job, an apartment, and a modest savings. His experiences suggest that the standard view of upward mobility and poverty in America may need revision:

During his first 70 days in Charleston, Shepard lived in a shelter and received food stamps. He also made new friends, finding work as a day laborer, which led to a steady job with a moving company.

Ten months into the experiment, he decided to quit after learning of an illness in his family. But by then he had moved into an apartment, bought a pickup truck, and had saved close to $5,000.

The effort, he says, was inspired after reading “Nickel and Dimed,” in which author Barbara Ehrenreich takes on a series of low-paying jobs. Unlike Ms. Ehrenreich, who chronicled the difficulty of advancing beyond the ranks of the working poor, Shepard found he was able to successfully climb out of his self-imposed poverty.

He tells his story in “Scratch Beginnings: Me, $25, and the Search for the American Dream.” The book, he says, is a testament to what ordinary Americans can achieve.

Shepard had it easier than most people in poverty—he hadn’t run up debt, he wasn’t chemically dependent and he had the benefit of an education. Yet he also demonstrated quite clearly that it’s possible to lift oneself out of poverty without extensive government subsidies. While he did use foot stamps and other welfare programs, eventually he ended up self-sufficient.

What this story also highlights is how much of poverty in America is based on social factors rather than economic ones. The conventional wisdom is that poverty can be “cured” through government intervention—yet studies have shown that poverty is most strongly linked to social factors. As a nation, we could eliminate nearly two thirds of our poverty problem by ensuring that every American graduated high school, stayed off drugs and did not have children out of wedlock.

The big problem is that the government can’t force people to do those things. However, if we start treating poverty as a largely societal problem rather than a problem of resource allocation, we can start making headway against poverty in America. The welfare reform initiatives of the 1990s worked precisely because they subsidized positive social factors&dmash;encouraging people to work rather than remaining on the dole. In order to really help America’s poor, we need to look at the problem not as something that can be bought away with taxpayer dollars, but as an symptom of a larger cause. Our society devalues hard work, entrepreneurialism and the family. Yet those values are the values that lift people out of poverty. We cannot just keep throwing money at the problem and expect it to go away—but we can give people the societal support they need to change their own lives around.

While there are certainly people who are poor for other reasons, the vast majority of poverty is social. Shepard’s story serves as a reminder that “Nickled and Dimed” doesn’t represent the totality of life as a poor person in America. It is possible to get ahead in America, even starting from virtually nothing. If we care about lifting people out of poverty, we have to understand how people can do it rather than merely focusing on the potential (and in the case of Ms. Ehrenreich’s experiment, largely artifical) roadblocks along the way. Shepard is an inspiration to those trying to get by in America today, and if more people in poverty followed his example we could make real headway in reducing poverty in this country in the next few years.

The Wall Street Journal has an interesting piece on the failure of California’s attempt at universal health care and what it means for the rest of the nation. It is interesting to see how many of these plans have failed to pass or ended up being scrapped due to cost overruns. If universal health care was such a great thing and so economically compelling, it’s hard to see why so many states would be having such a hard time making it work. The reason why is simple: universal health care doesn’t actually work in the real world:

Like collapses in Illinois, Wisconsin and Pennsylvania, this one crumpled because of the costs, which are always much higher than anticipated. The truth teller was state Senate President Pro Tem Don Perata, who thought to ask about the price tag of a major new entitlement amid what’s already a $14.5 billion budget shortfall.

An independent analysis confirmed the plan would be far more expensive than proponents admitted. Even under the most favorable assumptions, spending would outpace revenue by $354 million after two years, and likely $3.9 billion or more. “A situation that I thought was bad,” Mr. Perata noted, “in fact was worse.”

This reveals that liberal health-care politics is increasingly the art of the impossible: You can’t make coverage “universal” while at the same time keeping costs in check — at least without prohibitive tax increases. Lowering cost and increasing access, in other words, are separate and irreconcilable issues.

Universal health care has a basic and fatal flaw, you can’t simultaneously reduce the cost of a service and increase access to it. If you have universal access, you have to find a way of paying for people to get that access, which raises costs. If you want to keep costs down you can only economize so far before you have to restrict access. Universal health care is a bit like a perpetual motion machine—it would be wonderful in theory, but it can’t actually exist in reality.

What inevitably ends up happening is that governments cut costs first—which requires them to cut off access. This is how Britain’s NHS and the Canadian system work. You end up either waiting in line or having a government bureaucrat deny your request for treatment. That’s why the healthcare systems in those countries are having such trouble managing costs without drastically cutting back on services—and why both are more and more turning to private agencies to provide services they cannot.

The failure of the California plan isn’t a shock—people support universal health care in theory, but when confronted with the fact that there’s no such thing as “free” health care most people balk at the price. A further sign that the support for universal care is theoretical comes from evidence that most Americans are satisfied with their current health care coverage. When confronted with a plan that forces people to change their coverage—and not necessarily for the better—it’s not surprising that the theoretical support for universal coverage ends up losing to the desire not to lose what people already have.

Universal health care is not the only solution, and already there are better solutions out there. In fact, of all the possible solutions, universal health care is almost certainly the least advantageous. Corporations love it because it passes on the costs to the federal government—turning it into a corporate welfare transfer payment. Bureaucrats love it because it gives them more power, as it would with politicians. However, it’s hard to see where the groundswell of demand for universal health care really is. If there was such a groundswell, a liberal state like California wouldn’t be balking at the price.

The failure of California’s initiative demonstrates why universal health care simply doesn’t work. The laws of economics and human behavior go against it, and those factors can’t be legislated away. You can’t square the circle of trying to simultaneously lower costs and increase access without throwing a ton of money at the problem and continuing to throw more and more money at it until the system collapses. If even California legislators can learn that principle, hopefully Congress can as well.